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Debt Ceiling Deal Q&A

Posted on June 2, 2023January 13, 2026 by Aaron Hedlund

After a whirlwind period of tense negotiations, the House of Representatives and White House agreed this week on raising the debt ceiling and pairing it with reforms to spending, work requirements, and permitting. The Senate passed the bill and sent it to the President’s desk today. As is commonly the case with bills passed under a divided government, nobody is completely satisfied, and there is considerable confusion about what the deal actually does as well as what it means for the average person. Following are answers to some of the most common questions about the deal.

What is the debt ceiling, and what would have happened had we not raised it?

The debt ceiling (or debt limit) is a legal limit on how much money the U.S. government is authorized to borrow. Once the country reaches this limit, the Treasury is not permitted to issue more debt.

Can we simply not raise the debt limit?

The Congressional Budget Office (CBO) projects that the federal government will run a deficit of more than $1.5 trillion in 2023 alone, with spending amounting to $6.4 trillion and revenue coming in at $4.8 trillion. Of the $6.4 trillion in spending, $4 trillion is for mandatory programs that operate without Congress needing to regularly reauthorize them (e.g., Social Security and Medicare), $1.7 trillion is discretionary spending, and $660 billion goes to interest payments. Balancing the budget and eliminating the deficit in one fell swoop would require essentially zeroing out discretionary spending or making instant, draconian cuts to mandatory programs. Given the deep fiscal hole that the federal government has put the country in, there was no real alternative to raising the debt ceiling.

If both sides agreed that the debt ceiling had to be raised, what were the negotiations about?

Historically, occasions when the government has reached the debt ceiling have produced negotiated agreements that both raise the ceiling and limit spending, as was the case with the Budget Control Act of 2011 during the Obama-Biden Administration. However, this time around, the White House insisted for months that it would not negotiate on any spending reforms as part of raising the debt ceiling.

Given the unsustainable fiscal path that the United States is on, the White House was essentially sending the message that the only way to avert a debt crisis now (by raising the debt ceiling) was to cement the current spending trajectory in place—and thereby increase the chance of a debt crisis down the road. The House of Representatives disagreed with this false choice between a debt crisis today and a debt crisis later and instead passed the Limit, Save, and Grow Act, which simultaneously raised the debt ceiling and slowed the trajectory of spending, among other reforms. Passage of this bill forced the White House to the table, abandoning its no-negotiations stance on spending reforms.

What is contained in the debt ceiling deal?

The debt ceiling deal contains a number of elements. First, it raises the debt ceiling through the end of 2024 and it establishes spending caps for fiscal years 2024 and 2025 that limit the growth of spending to 1% with tough enforcement provisions during the appropriations process, which is when Congress formally makes detailed, program-level spending decisions. In addition, the bill prescribes a 1% cap on spending growth through 2029. By way of comparison, the CBO projected an 8.1% jump in discretionary spending between 2024 and 2025, followed by average annual increases of 2.8% through 2033.

Besides affecting topline spending, the debt ceiling bill rescinds certain COVID-19 and IRS funds, expands work requirements for food stamps and welfare, and implements energy-permitting reforms to reduce delays from excessive and unresponsive bureaucracy.

What is the overall effect?

The CBO projects $1.5 trillion lower spending growth (or in Washington, DC parlance: cuts) because of the deal. Without the deal, discretionary spending would have risen from $1.7 trillion in 2023 to $2.4 trillion in 2033, whereas now the projection is for $2.2 trillion in discretionary spending in 2033.

To give further perspective, the figure below plots three different projections for the path of discretionary spending as a percentage of the country’s annual economic output. The blue dots are CBO projections made in fall 2019 under the previous administration and before COVID-19. The orange dots are CBO projections from this May, but before the debt ceiling deal. The red arrow showing the upward shift from the blue dots to the orange dots represents the persistent increase in discretionary spending under the current administration’s policy plans. The gray set of dots represent discretionary spending under the debt ceiling deal, with the green arrow showing the reduction relative to what was slated to occur before the deal.

As the figure makes clear, the debt ceiling deal essentially takes discretionary spending halfway back to the path it was set to follow before COVID-19 and the change in administration.

Figure 1: Discretionary spending as a percentage of GDP. Source: Congressional Budget Office, Show-Me Institute calculations.

How should Missourians view this deal?

The United States faces a profound and troubling fiscal situation with its unsustainable spending levels, not to mention slow economic growth, declining productivity, and inflation that remains much too high. It is important to recognize that the country has a spending problem, not a revenue problem. Federal revenues are currently above historical average, but the reason deficits are so large is that spending as a share of GDP is higher than it has ever been over the past century except during peak COVID-19 and World War II. The debt ceiling bill does not fully reverse the spending increases of the past two years, but it represents a step in the right direction, especially compared to the White House’s previous no-negotiations spending stance.

Taking a step back, whereas the debt ceiling debate focused on discretionary spending, the vast majority of federal spending goes to mandatory programs, chiefly entitlements. The CBO projects that, absent reforms, federal spending will rise from 23.7% of GDP in 2023 to over 30% by 2053, annual deficits will more than double to over 11% of GDP, and the national debt will balloon to almost 200% of GDP. In this scenario, interest payments on the debt would triple as a share of the economy and would represent the single largest spending item for the U.S. government. Even this scenario is rosy in that it assumes an infinite willingness among investors to buy U.S. debt regardless of how dire the fiscal picture becomes—a rather implausible assumption that America would be wise not to test.

Going forward, much work remains to be done to right-size government and revitalize economic growth so that Americans can enjoy a more prosperous future free from the risk of steep tax hikes, crippling inflation, debt crises, and adversarial foreign governments buying up large quantities of government debt. The debt ceiling deal is by no means a cure to the country’s current fiscal ills, but it’s one step in the right direction, and the starting point for a much-needed national conversation.

Costly AND Outdated. Where Do We Sign Up?

Posted on June 1, 2023January 13, 2026 by Randal O'Toole

The Bi-State Development Agency, commonly known now as Metro, is once again proposing to expand the MetroLink light rail system in St. Louis. At this time, Metro is proposing to build a north–south connector route along Jefferson Avenue in St. Louis City, with plans to eventually connect it up to North St. Louis County.

Is this plan going to be a positive step forward for the St. Louis area? No, not at all. It will be a wasteful doubling down on a failed strategy to force feed light rail into a metropolitan area that would be far better served by an improved bus system from a transportation, financial, and social perspective.

In a forthcoming paper for the Show-Me Institute, Randal O’Toole will discuss how addressing transit issues in St. Louis by expanding MetroLink is a fool’s errand, and an extremely expensive one at that. Metro’s total transit ridership in 2019 was less than it was in 1993, before MetroLink even opened. The pandemic only exacerbated this problem, with fewer jobs and workers in downtown than before. Jobs are spread out throughout the metropolitan area, and buses are well equipped to connect workers to changing jobs, students to new schools, and sports fans to games. (We can admit MetroLink does a good job with the sports teams for some—but that is hardly a justification for expanding the entire wasteful system.)

Metro would better serve our region by spending its tax money on an effective bus system, including bus rapid transit for high-volume areas, instead of expanding a costly, inefficient, and unwieldy fixed-route light-rail system that fails in its primary purpose—serving St. Louis transit users.

Kansas City Leaders Need to Get a Handle on Crime Situation—Now

Posted on June 1, 2023January 13, 2026 by Patrick Ishmael

Frequent Show-Me Institute readers are likely familiar with our analysts’ concerns about violent crime in St. Louis, but many of those critiques apply to the state’s largest city, Kansas City, as well. The City of Fountains is presently on pace to blow by last year’s homicide count of 171 killings, which was the city’s second highest on record. It appears Kansas City officials finally believe something has to be done about the murder problem—possibly because the Royals are hinting that they might leave the city entirely.

And what’s being done? Judging from the latest press conference held by the police chief and mayor yesterday, not much:

The Violent Crime Reduction Initiative first unveiled at a news conference in mid-May and doubled down on by officials Wednesday after the latest spike in violence involves what’s described as an aggressive collaboration between police and a host of other groups, who have ventured into some of the poorest neighborhoods to knock on doors, offering social services, and promising enhanced city services to further spread the gospel of crime prevention.

Several community activists and those working with KCPD say the new strategy encourages more collaboration between police and local organizations. But they also say it’s not all that new of a concept. Others are even less optimistic, pointing to a fractured relationship between police and the community, and a focus on criminals instead of the underlying causes of violence. [Emphasis mine]

With continuing attempts at defunding the police, city leaders have done a bang-up job of making Kansas City less safe. While I’m as big a booster as any of my hometown, it’s become increasingly isolated from the rest of the state in its effort to adopt California’s prerogatives rather than Missouri’s.

Like most things involving human interactions, Kansas City’s crime problem is complex. But it shouldn’t take, or appear to take, a professional sports team considering a new home in a neighboring city and county for Kansas City officials to get serious about their most fundamental charge of public safety. Sure, it may be more fun as a government official to show up to parades and wear construction helmets at groundbreakings, but the hard work of governing is far more mundane—and far more important—than waving a pennant during winning years and taking credit by proxy for the athletes assembled by the city’s professional sports franchises.

Kansas City officials need to get back to basics—not just to keep the Royals, but because it’s what they owe all their citizens. We’ll see if it’s too late to keep the baseball team, but to hear the governor talk about it, it’s possible that cake is already baked.

Reading Alone

Posted on May 31, 2023January 13, 2026 by David Stokes

The St. Louis County library system has announced it is making social workers available at several libraries as a standard part of library services. This may sound like a beneficial program or, at worst, a harmless—if slightly wasteful—one. I don’t think it is. I think it is a clear example of a much larger problem.

The county library announced Wednesday that the social workers will provide free assistance to connect people with resources and referrals regarding things like child care, health care, parenting resources, housing, food insecurity, substance abuse and jobs.

People used to have neighbors, fellow church members, extended family, or more to help them get through difficult situations. Simply put, you had a community. Now, apparently, you book an appointment at the local library with an “expert” who will likely do very little beyond helping people fill out government paperwork.

I am not just a middle-aged man complaining here. (Well, perhaps I am, but I have some citations.) The changes to our culture in this respect were famously documented in the book, Bowling Alone by Robert Putnam. He tells the story of the decline of social interaction (otherwise known as social capital) through the lens of bowling leagues, which not long ago were a ubiquitous pastime for Americans and have now gone the way of the rotary phone. We spend so much time alone interacting with technology that most people, especially those in younger generations, have no desire to join an organization like the Rotary Club. When I speak at service clubs or other groups, I—age 51—am usually the youngest person there.

So why should anyone care how or if people choose to interact? We should care because it matters for our society. According to economist Isabel Sawhill, “many researchers have found that [greater] social capital is associated with higher economic growth rates, better health outcomes, and more stable democracies.”

The absence of social capital has serious harms. One of those harms for people who don’t have community to rely upon in difficult times is dependency on government. The Obama Administration had Julia, the Biden Administration has Linda. (I don’t even want to guess what type of fictional female character Trump might have created.) Julia and Linda are the fictional characters used in cartoon storylines to joyfully describe how liberal policies will take care of these women and their children (men are never around) from cradle to grave. From child tax credits to free preschool, free community college, Medicaid, Medicare, and scores of other programs, the story depicts a person dependent on government for their entire lives. But that is the all-too-real alternative for people who lack the vital social connections to weather the tougher parts of life.

Interviews with people who have had their residences taken for highway projects, urban renewal, etc., often show that the most devastating part of the process was the loss of community. Everything else can be replaced—but not the sense of belonging to a group of people who cared about you. Churches, neighborhoods, and social groups used to be the charitable foundation of our country. But as those institutions have declined, government is left as the only option when aid is needed. As any political machine hack will tell you, as bad as the service may be, at least it’s something. Too many people are willing to give up too much in exchange for that governmental “something.”

Obviously, the St. Louis County library didn’t cause any of this. Libraries can be a part of building more social capital, among many other wonderful attributes. The social problems I have described require a change to our society, and one that government should only have a minimal role in. But having a taxpayer-funded organization use tax dollars (and private grants, to be fair) to help more people access what will mostly be (let’s not deny the obvious) other tax-funded government services isn’t the answer.

Legislature Might Look at Indy 500 Winner for Inspiration

Posted on May 31, 2023January 13, 2026 by Patrick Ishmael

I’ve let my feelings be known about how the 2023 legislative session went: poorly. A handful of bills that I favor passed, including one to keep men out of women’s sports. A long-discussed Interstate 70 expansion got the green light, albeit with a less-than-optimal funding approach. Beyond those items, the list of legislative failures is loooong, with no expanded school choice or transparency in education near the top.

But failure needn’t be permanent, as racecar driver Josef Newgarden showed this past weekend. While being a professional racer is an achievement in itself, Newgarden had been hounded by his inability to take the Indianapolis 500 checkered flag in his 11 attempts. But this year, on his 12th attempt, Newgarden found the winner’s circle. It was a relief compounded by years and years of frustration.

“It is mentally draining to be here for weeks and just to know that you really only have one opportunity, and it comes down to today, and that’s the day you’ve got to be perfect and great and everything has got to work out.

“So you spend all this time and effort, and it’s really just a mental grind to work through that. The more you’ve been here, the more it’s not worked out, the more that grind really starts to gnaw at you.

“I don’t necessarily subscribe to the fact that if you don’t win the 500 your career is a failure, but I think a lot of people really view this race and this championship with that lens, that the 500 stands alone – and that if you’re not able to capture one, then the career really is a failure in a lot of ways.

“I’ll be honest, it’s annoying. It’s been terrible,” said Newgarden, which also happens to describe the Missouri Legislature to a T. It has been terrible, despite the potential to do great things in the last couple years, getting close to the podium . . . but not quite to the winner’s circle.

In 2023, legislators crashed spectacularly and didn’t finish. Here’s to hoping their attempt in 2024 is, finally, victorious.

A New Normal in the Housing Market with Mark A. Calabria

Posted on May 26, 2023January 13, 2026 by Susan Pendergrass

Susan Pendergrass speaks with Mark A. Calabria about new mortgage regulations designed to increase equity in home ownership, if today’s housing market has echoes of the pre-2008 market, what higher interest rates for longer could mean for first-time home buyers, and more.

Mark A. Calabria is a senior advisor to the Cato Institute. He provides strategic input and direction on the federal economic policymaking process. He previously served as director of financial regulation at the Cato Institute, where he cofounded Cato’s Center for Monetary and Financial Alternatives.

Find Mark’s latest book “Shelter from the Storm: How a COVID Mortgage Meltdown Was Averted” here: amzn.to/3ODhPVH

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Produced by Show-Me Opportunity

Hunting and Fishing Fees May Be Going up in Missouri

Posted on May 26, 2023January 13, 2026 by Patrick Ishmael

Are higher fees coming to Missouri for huntin’ and fishin’ (but fortunately not for lovin’ every day)? Maybe. The Missouri Department of Conservation (MDC) has granted initial approval for a fee increase to hunting and fishing permits, so hold on to those pocketbooks, sportsmen (and women):

MDC director Sara Parker Pauley said in the statement that, in the past 20 years, permit prices have remained stagnant despite costs for goods and services drastically increasing.

“In early 2003, the price of a resident firearms deer permit was $17 and the cost of a gallon of unleaded gas was $1.42,” said Pauley. “Jump ahead two decades to May 2023 when the cost of a resident firearms deer permit is still $17 while the cost of a gallon of gas is about $3.30. That cost increase really adds up considering MDC purchased nearly 908,000 gallons of gas in 2022 to run vehicles and equipment.”

Pauley added that, on average, most resident hunting and fishing permit prices would be adjusted by roughly $1. [Emphasis mine]

That seems like a pretty reasonable fee for the service provided by the state, which facilitates (among other things) fish hatcheries and shooting ranges. And the concept of a fee is consistent with my general principle that the folks who enjoy a government service should be the ones to pay for it, like a gas tax for building and maintaining roads.

But it’s also worth keeping in mind that conservation in Missouri also receives funding from a dedicated sales tax. The fact that hunting and fishing permitting costs haven’t risen in two decades is probably less a testament to MDC fiscal management and more a result of the department more or less swimming in money.

The MDC has so much money, in fact, that there was even talk on the floor of the Senate this year of abolishing the fees entirely in light of the department’s budgetary largesse. (As expected of most things in the Senate, nothing came of that conversation, but it did waste about 15 minutes of floor time. So there’s that.)

My stance on hunting regulations was probably best captured in my 2016 letter to the St. Louis Post-Dispatch, “Keep government out of the way of deer hunters,” wherein I extolled the importance of sportsmen (and women) in controlling wild animal populations and ensuring barriers to their entry into that market, like fees, were as low as possible. Fortunately, Missouri’s permit costs are not extravagant and promise not to become extravagant in the future if recent reports are to be believed. But it’s probably a good idea for legislators to reexamine how the MDC is funded in general—with either a fee or a sales tax, but maybe not both.

30 Car Break-ins, Fewer Airbnb, and More MoLeg

Posted on May 25, 2023January 13, 2026 by David Stokes

David Stokes, Patrick Ishmael, and Avery Frank join Zach Lawhorn to put a bow on the legislative session, discuss new restrictions on short-term rentals, and calls to increase security in downtown St. Louis following a rash of car break-ins around Busch Stadium.

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Produced by Show-Me Opportunity

“The Kansas City Royals of North Kansas City”?

Posted on May 25, 2023January 13, 2026 by Patrick Ishmael

With the expiration of the leases for the Kansas City Chiefs and Kansas City Royals creeping ever closer, there’s been a lot of talk about where the teams might build their next stadiums—and how much local taxpayers will end up subsidizing them. My position, and that of many of our staff, is pretty clear: Missouri taxpayers shouldn’t be subsidizing professional sports.

Well, I have some bad news. On Friday, word broke that the Royals have been talking with North Kansas City and Clay County officials for a ballpark development, and those talks have gotten fairly serious. According to two county commissioners and the mayor of North Kansas City:

Over the past few months leaders from Clay County and the City of North Kansas City have had conversations with the Kansas City Royals about the possibility of developing a new baseball stadium and adjacent ballpark district in North Kansas City. This plan would include commercial, residential development and entertainment experiences adjacent to the stadium, complementing the amazing businesses and entertainment options that already exist in downtown North Kansas City today. We look forward to continuing our work with the Royals and have additional meetings scheduled with them.

The Royals confirmed in a recent media report that they are considering a location in North Kansas City. We think it is important that we communicate our efforts with the community, and the reason we plan to work with the Royals on behalf of our respective jurisdictions to select a North Kansas City site for the planned new stadium. Although no agreement has been reached by either Clay County or North Kansas City to take action on, we are striving to lay the groundwork necessary for a plan that is positive for the city, the county and our entire community.

A vote on a countywide tax for the stadium could come as early as this November, a quick turnaround for such a seemingly late-breaking project. Apart from the expected taxpayer subsidy, the potential North Kansas City sites have a few advantages, including no Kansas City earnings tax (and so instant raises for Royals employees) and a more stable crime situation than Kansas City, which just had its 88th murder of 2023, including seven murders in just the last four days as of this writing.

I expected both the Chiefs and Royals would remain in the region but thought that the Chiefs were the most likely to head to Kansas or some other non-Kansas City, Missouri jurisdiction. Friday’s news upends that assumption, with both teams leaving Kansas City’s boundaries now a legitimate possibility. No taxpayers should subsidize the Chiefs or Royals, but if Kansas City lucks out and gets to enjoy the teams without having to line their pockets, all the better.

And to North Kansas City and Clay County, I’ll just say this: Really? C’mon now.

Really?

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