U.S. politics has a wide-reaching impact not just on the U.S. and its economy but across the world too. Our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...
The debt ceiling negotiations were long and ever-changing. In the end, the United States will make good on its debts, but lawmakers compromised on the national budget.
The debt ceiling drama is over, at least for the next year and a half, now that Congress has agreed to suspend Uncle Sam’s borrowing limit until January 2025, avoiding a calamitous default. But to get that bill across the finish line, lawmakers agreed to a slew of spending caps that will affect numerous federal government programs.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Nondefense discretionary spending will be flat for the 2024 fiscal year, which starts Oct. 1 and increases by only 1% the following fiscal year. That is, effectively, a budget cut, since the rate of inflation is expected to be higher going forward. Defense spending will increase by 3.3%, with a smaller increase scheduled for 2025. Veterans’ healthcare will remain fully funded.
No budget caps are set in stone after 2025, just a non-enforceable target to limit spending to 1% growth until 2030, which future Congresses can and, if past is precedent, likely will ignore. Congressional Budget Office projections show that these measures will reduce federal budget deficits by $1.5 trillion over the next decade (the current debt: $31.8 trillion), but only if lawmakers also follow the nonbinding spending caps.
Also included: Incentives for Congress to pass all 12 annual spending bills, a feat not accomplished since the 1990s. Failure to do so during the next two years would result in an automatic 1%, across-the-board discretionary spending cut. The goal is to get lawmakers out of the habit of passing continuing resolutions, cobbled together at the last minute to keep the federal government funded.
As for specific spending cuts, the IRS was a major target. The legislation rescinds $1.4 billion in funding from the $80 billion Congress allocated to the agency in 2022. A handshake deal not written into the bill aims to take another $20 billion from IRS over the next two years, the money going to other nondefense programs. Roughly $30 billion in unspent COVID relief money will also be clawed back, including funds allocated to federal health agencies and pandemic-era aid programs.
Other provisions of note: Streamlining the environmental review process for energy projects, such as pipelines. The bill will also expedite the review process of a natural gas pipeline in Appalachia, at the behest of Sen. Joe Manchin (D-WV). Ending a COVID-era pause to student loan payments by the end of summer, though a pending Supreme Court case could make that deadline even sooner. Phasing in broader work requirements for many adults on food stamps, though this provision will expire in 2030 and already includes many exemptions.
As with any congressional compromise, most lawmakers are disappointed by the deal in some way.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Read more
- How the Debt Ceiling Impacts Your Finances
- The Debt Ceiling Will be Averted
- Debt Ceiling Crisis: What the Experts Are Saying
-
Thanksgiving 2024: How Grocery Taxes Impact Your Holiday Food BudgetFood Prices Some families are navigating high food prices influencing what’s on the table this Thanksgiving.
-
9 Year-End Money Moves to Make NowBoost your retirement savings, lower your taxes and get the most out of your health insurance.
-
Start-ups Trying to (Profitably) Solve the World’s Hardest ProblemsThe Letter More investors are interested in companies working on breakthrough science to tackle huge societal challenges. The field of deep tech has major tailwinds, too.
-
The Big Questions for AR’s FutureThe Letter As Meta shows off a flashy AR prototype, Microsoft quietly stops supporting its own AR headset. The two companies highlight the promise and peril of AR.
-
China's Economy Faces Darkening OutlookThe Letter What the slowdown in China means for U.S. businesses.
-
Should We Worry About the Slowing U.S. EconomyThe Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
-
Kiplinger Special: How Businesses Should Budget for 2025Kiplinger Forecasts From fuel to AI software subscriptions, here's what you can expect to pay next year.
-
Intel Braces for an Even Tougher Road AheadThe Kiplinger Letter Amid a long, costly turnaround, Intel resets expectations again. Its new woes raise questions about U.S. industrial policy and global chip competition.
-
Kiplinger Special: The Long-Term Future of the U.S. Economy
The Kiplinger Letter Kiplinger's report into what it will take the U.S. to maintain a healthy economic growth rate.
-
Chinese E-Tailers Are Surging in the U.S. Market: The Kiplinger LetterThe Kiplinger Letter Low costs and cheap shipping enable Temu and others to grab market share.
