US debt ceiling focus on 'discretionary depending' means cuts ahead

Washington: The central pillar of any debt-ceiling agreement between President Joe Biden and House Republican Kevin McCarthy is shaping up to be "discretionary spending" - the chunk of the United States' roughly $6 trillion annual federal budget that is set annually by Congress.

Talks are fluid as Biden and McCarthy work towards a deal to raise the $31.4 trillion debt ceiling and avoid a default as soon as June 1. But cuts to social security and medicare programs that eat up most of the US budget are already off the table.

US DISCRETIONARY BUDGET


Congress sets funding levels for discretionary spending every year, which powers a wide swath of military and domestic programs.

In 2022, discretionary spending reached $1.7 trillion, accounting for 27% of the overall $6.27 trillion spent, say federal figures.

DISCRETIONARY CUTS

Biden and Democrats have offered to hold discretionary spending flat from FY23, a cut from Biden's 2024 budget, and then cap spending in future years. House Republicans passed a plan last month that would save $3.2 trillion by capping growth at 1% annually for 10 years.

Republicans say they will not accept a deal unless it results in the government spending less money than it did in the last fiscal year, and are pushing for cuts to 2022 levels. Both sides are also at odds over how long any spending caps should last, with Republicans now offering caps for six years, and the White House only two.

Negotiators are avoiding the main driver of US debt: rising retirement and health costs.

The Social Security pension program is projected to increase by 67% by 2032, and the Medicare health program for seniors will nearly double in cost during that period, says Congressional Budget Office. Together, these programs account for roughly 37% of current federal spending.