In 2000-2001 the debt-to-GDP ratio was around 55%.
In response to the COVID-19 pandemic, the federal government increased its spending by $4.3 trillion,
sending the debt-to-GDP ratio well above 120%.
The debt-to-GDP ratio can be reduced in three ways:
1) Fiscal austerity (i.e., spending cuts, tax increases or both)
2) Negative real return on bonds (i.e., a nominal interest rate that is less than the inflation rate)
3) Economic growth (i.e., GDP growing faster than debt)
However, the debt limit must be increased to pay for last year's appropriation bills or the US defaults.
Analogous to spending wild with a credit card and then having to pay the bill.
There is an agreement finally.
McCarthy said the House will vote Wednesday, which would then send the bill to the Senate.
Once the bill reaches the Senate, where Democrats have the majority, the pace of action will largely depend on whether any senators try to hold up the bill, possibly with amendment votes. That could tie up the legislation for a few days.
The debt ceiling lifted until 2025....after the 2024 presidential election.
A cap on non-defense spending. Republicans want it for 10 years, they got 2 years.
The same level in 2024 and a 1% increase in 2025.
Democrats got expanded benefits for veterans, homeless people and young people aging out of foster care.
These would expire in 2030
Democrats get increases to funding for low-income students, money for loan forgiveness, cancer research, etc.
Republicans get $30 billion in unused COVID funds rescinded. This reduces the money that Biden had gotten for IRS agents to be able to go after tax cheats by about $10 billion.
Republicans get faster review time on environmental reviews of some energy projects.
Republicans get an increase in work requirements for food stamp recipients, to 54 by 2025,
but the provision expires, bringing the maximum age back down to age 49 five years later, in 2030.
The agreement will fully fund medical care for veterans at the levels included in Biden’s proposed 2024 budget, including a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards.