The government needs more than $2 trillion in additional borrowing authority to pay its bills through the end of next year.
The Biden negotiators met again behind closed doors Wednesday as part of an accelerated schedule aimed at producing an agreement by the Fourth of July break.
Motion graphic: A guide to understanding the federal debt
The long-term budget outlook
Hours before the meeting, the nonpartisan Congressional Budget Office painted a dire picture of nation’s budget outlook, warning that the portion of the debt held by outside investors will exceed the size of the entire U.S. economy by 2021 — and nearly twice its size within 25 years — without major cuts to federal health and retirement programs or steep tax increases.
According to the CBO report, policymakers would have to come up with immediate and permanent savings of well more than $7 trillion over the next decade just to keep the debt at its current level of about 69 percent of GDP through 2035. Paying down the debt would require even more dramatic changes.
Over the long term, the CBO said, the debt will be driven by a projected explosion in spending linked entirely to Social Security, Medicare and Medicaid, as well as “insurance subsidies” that are intended to help cover the uninsured under President Obama’s new health-care law.
Tax collections could keep pace with those costs if Congress permitted tax cuts passed during the George W. Bush administration to expire on schedule in 2012 and allowed the alternative minimum tax to hit millions of additional households. But under current tax policies, the CBO said, revenue would barely cover the cost of the health and retirement programs by 2035.
Along with their competing demands, Democrats and Republicans continued to snipe at each other.
“It almost makes you wonder if they are trying to slow down the economic recovery for political gain,” Sen. Charles E. Schumer (D-N.Y.) told reporters, referring to Republicans’ cold reception to a payroll tax cut.
Republicans shot back that Democrats’ push for new stimulus is a sign that they want to find a way to use the debt talks to spend more.
“It’s a band-aid on a problem,” said Sen. Lindsey O. Graham (R-S.C.). “I want to get to the cancer — the cancer is that the institution is out of control.”