How the Fiscal Responsibility Act of 2023 Affects CBO's Projections of Federal Debt V. 1

1 Avi Lerner, et al., How the Fiscal Responsibility Act of 2023 Affects CBO's Projections of Federal Debt 1 (June 9, 2023)

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n June 3, President Biden signed into
law the Fiscal Responsibility Act of 2023
(FRA, Public Law 118-5), which sus-
pends the limit on federal debt through
January 1, 2025, and makes a number of changes that
affect federal spending and revenues. The Congressional
Budget Office provided an assessment of the budgetary
effects of that act in a letter dated May 30.1

This report builds on that earlier assessment by showing
how those budgetary effects change projections of federal
debt.2 Specifically, the $1.5 trillion reduction in pro-
jected deficits estimated to result from the FRA over the
next 10 years reduces projected federal debt held by the
public in 2033 by about 3 percent, from $46.7 trillion
(or 119 percent of gross domestic product, or GDP) to
$45.2 trillion (or 115 percent of GDP).

Key Budgetary Provisions in the Law
In addition to suspending the debt limit, the law
includes many other provisions that affect spending and
revenues, including provisions that do the following:

1. Congressional Budget Office, letter to the Honorable
Kevin McCarthy providing CBO's estimate of the budgetary
effects of H.R. 3746, the Fiscal Responsibility Act of 2023
(May 30, 2023), www.cbo.gov/publication/59225.
2. The projections presented in this report do not constitute a
new release of CBO's baseline budget projections, the most
recent of which were published in Congressional Budget Office,
An Update to the Budget Outlook: 2023 to 2033 (May 2023),
www.cbo.gov/publication/59096. CBO's budget baseline is a set
of projections of revenues, spending, deficits, and debt indicating
what the federal budget would look like in the current year
and over the next 10 years if existing laws governing taxes and
spending generally remained unchanged. Preparing new baseline
projections would involve a more comprehensive assessment of
the budget outlook.

Impose caps on most discretionary funding (that is,
funding that is subject to the appropriation process)
for 2024 and 2025,
Rescind certain unobligated funds provided in
response to the coronavirus pandemic,
Modify work requirements for recipients of
Supplemental Nutrition Assistance Program benefits
and Temporary Assistance for Needy Families, and
Rescind certain funds provided to the Internal
Revenue Service.

The Law's Effect on
Projections of Budget Deficits
In its May 30 letter, CBO reported that the Fiscal
Responsibility Act would reduce its projections of budget
deficits by about $1.5 trillion over the 2024-2033 period
relative to the baseline budget projections that CBO
published on May 12, 2023.3 Most of that reduction
in deficits stems from the assumption that the statutory
caps in the FRA will limit discretionary funding in 2024
and 2025.4 Not only will those caps affect spending in
2024 and 2025, but they also affect CBO's projections
of discretionary spending in 2026 and beyond because
of the way that the agency is required to project fund-
ing in those years. In CBO's projections, discretionary
funding in a future year generally is based on the amount

3. CBO has not undertaken a dynamic analysis of P.L. 118-5;
such an analysis would account for the budgetary effects of
resulting changes in the total output of the economy and in
other key economic variables. Other legislation enacted between
March 30, 2023 (when CBO finalized the baseline projections
that it published in May), and June 3, 2023 (when the FRA was
enacted), did not have significant budgetary effects.
4. P.L. 118-5 also establishes annual funding limits from 2026
through 2029 that can be enforced using the Congress's
procedures for considering budgetary legislation. The effects of
those limits are not included in this analysis.

Notes: Unless this report indicates otherwise, all years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the
calendar year in which they end. Numbers in the text and tables may not add up to totals because of rounding.

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