If elected, will Vice President Kamala Harris or former President Donald Trump have to face a ‘fiscal armageddon’ in America’s future? It’s not out of the realm of possibility.
On the latest episode of Capitol Gains, Yahoo Finance’s Rachelle Akuffo, Washington Correspondent Ben Werschkul, and Senior Columnist Rick Newman are joined by Rachel Snyderman, Managing Director of Economic Policy from the Bipartisan Policy Center, to discuss the importance of the national debt limit, budget, and its real impact over everyday americans.
“We have a cash flow problem in this country,” says Snyderman. “We are spending more money than we are bringing in revenue and that is going to be part of the mathematical challenge that next year presents.”
Lawmakers will have to contend with the federal debt limit being reinstated on January 2, 2025, as well as operating under a budget that is a continuing resolution from last year. What this means is the government is being funded at last year’s funding levels, so they cannot invest in new priorities and essential services needed for next year’s federal budget. Snyderman also says on top of all of this, everything is slamming up against the expiration of tax cuts, the Tax Cuts and Jobs Act.
“Many of us in the fiscal policy world are calling this the next fiscal cliff,” she says. “Chairman Smith calls this a ‘Super Bowl of tax’ and others call this a ‘fiscal armageddon.’”
Snyderman says when it comes to what’s in the line in November, “fiscal policy and tax policy [are] squarely front and center.”
To find out more, listen to the full episode of Capitol Gains here.
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This post was written by Lauren Pokedoff.
Video Transcript
I want to ask you about another um uh fight coming up next year.
It is the debt limit.
If folks don’t know, the bipartisan Policy Center does really great work on, on sort of projecting what the debt limit goes and that’s going to be right around the corner, right on January 1st, curious if you could talk about how you guys see that playing out essentially, are we safe until the summer on that?
But also is a split is a split election where where different parties are in control.
Is that bad or worse for the debt women?
So it’s a great question to, to start with then because also to, you know, as they said, they would noted that next year is going to be kind of the year of fiscal and tax policy.
That’s exactly right.
You know, we have several must act deadlines that policymakers are going to have to um contend with starting out right out of the gate in January 2nd when the federal debt limit will be reinstated.
This was actually suspended in June of 2023.
Um And as we have seen all too frequently over the past 10 years in particular every other year or so.
Um lawmakers are consistently kind of hitting up against this federal debt limit and deciding what to do.
Now, of course, this, as you note, the Treasury Department does have some tools and it is at its disposal to essentially kind of give lawmakers time to act, um that could potentially carry them, you know, some uh you know, further into 2025 that length of time, however, is not yet known for several reasons.
Of course, at the beginning of the year starts the tax season.
So we’ll be looking at what tax revenues are gonna be coming in, um, like come starting from January through the remainder of the year.
But we’re also in a period right now of when the government spends a lot of money.
Um, we are also seeing, of course, the federal support that’s needed to support communities across the country that are dealing with natural disasters.
So, you know, we have a cash flow problem in this country, right?
We are, we’re spending more money than we are bringing in in revenues.
And of course, uh that is gonna, uh that is going to be part of the mathematical uh challenge that that next year presents.
Um But soon after having to deal with the debt limit or very much in parallel lawmakers are gonna have to also contend with the budget process.
Uh Right now we’re operating under a continuing resolution.
So the government is being funded essentially at last year’s funding levels.
We’re not able to invest in new priorities and um essential services that are needed for, for next year’s uh federal budget.
We’re gonna have that same fight next fall and then of course, slamming up against all of that then is the expiration of um, the tax cuts and Jobs Act and, and these tax provisions.
So, you know, many of our, many of us in, in the fiscal policy world are calling this the next fiscal cliff.
Um, you know, kind of attuned to 2010 and 2012.
And we saw with the expiration of the Bush tax cuts in that debate, but it’s, you know, also we’ve seen, um, uh, Chairman Smith called this the Super Bowl of Tax and, and others call this Fiscal Armageddon.
So again, you know, when we think about what’s on the line in November fiscal policy and tax policy squarely front and center.