The debt limit is where Washington keeps staging its fiscal theater, but the actual drivers of the deficit sit elsewhere.
The debt limit is where Washington keeps staging its fiscal theater, but the actual drivers of the deficit sit elsewhere.
I have spent 30 years underwriting risk as a private credit manager, sizing up whether borrowers can actually answer for what they owe before I lend them money. Congress has another opportunity to answer for its spending.
On August 16, reporting confirmed that Senator John Barrasso (R., Wyo.) and Representative Greg Steube (R., Fla.) introduced companion bills in their respective houses called the Dollar-for-Dollar Deficit Reduction Acts, requiring that any future increase or suspension of the debt limit be matched by spending cuts of equal or greater size, phased over the current fiscal year and the next ten. Two days later, on August 18, the U.S. government debt crossed $40 trillion for the first time in the nation’s history. While Barrasso and Steube have the right instinct, they’re selecting the wrong lever. The debt limit is where Washington keeps staging its fiscal theater, but the actual drivers of the deficit sit almost entirely elsewhere.
Start with where the country actually stands. Gross federal debt hit $40.05 trillion on August 18, split roughly four-to-one between debt held by the public, which stands at more than $32 trillion, and intragovernmental holdings, such as the Social Security trust fund. That milestone arrived just five months after the debt topped $39 trillion in March, a pace of accumulation with no peacetime precedent. Net interest on that debt ran $963 billion through the first ten months of fiscal 2026, up $117 billion, or 14 percent, from the same period last year, and the Congressional Budget Office’s July report put the fiscal year-to-date deficit at $1.8 trillion, $169 billion ahead of last year’s pace over the same span. Money is not the constraint. Political will is.
First, credit where it’s due: the Trump administration’s fraud-hunting has produced real numbers, though not as real as advertised. The Department of Government Efficiency, before it officially wound down this July, claimed roughly $215 billion in savings on its public tracker. The Government Accountability Office reviewed that claim in August and found it could not verify the reliability of most of it, including significant portions of the underlying contract and grant terminations DOGE counted toward the total. Vice President JD Vance’s newer task force has been more disciplined about its methods, although it is not yet independently audited to the same standard: the White House’s own fraud dashboard reports more than $230 billion in fraud identified since January 2025, $56 billion stopped before disbursement, and $55 billion recovered through enforcement. Stopping fraud before a check goes out, rather than clawing it back afterward, is the right instinct, and Vance deserves credit for making that distinction publicly. But we need to do the arithmetic. Even taking the White House’s own numbers at face value, the combined total is a rounding error against a $1.8 trillion annual deficit and a $40 trillion balance sheet. Fraud enforcement is worth doing, but it is not a fiscal strategy. It’s pocket change dressed up as a solution, and Congress knows it, which is precisely why fraud recovery gets press conferences and entitlement reform doesn’t.
The real drivers of debt come from five places: mandatory spending, health care costs, discretionary appropriations, tax revenue, and interest. Durable deficit reduction has to touch more than one of them at once. A bipartisan group in the House, led by Representatives Bill Huizenga (R., Mich.) and Scott Peters (D., Calif.), has proposed the closest thing to a serious framework currently before Congress. Their resolution sets a target of reducing the federal deficit to 3 percent of GDP or less by the end of fiscal year 2030. It has bipartisan cosponsors and the treasury secretary’s public endorsement. It has also stalled in committee since January without a vote, because it is a sense-of-the-House resolution and carries no binding force. A target without enforcement is a New Year’s resolution with a press release attached.
Mandatory programs are where the money is actually disappearing to. Social Security, Medicare, and Medicaid together account for most federal outlays, and none of the credible reform options require breaking a promise to a current retiree. The Congressional Budget Office has already planned the menu: Gradually raising the eligibility age for future beneficiaries, slowing benefit growth for higher earners, and raising or eliminating the payroll tax wage cap will all reduce Social Security’s shortfall without touching anyone already drawing a check. In regard to Medicare, the CBO’s own options for correcting how Medicare Advantage plans get paid for patient risk would save anywhere from $124 billion to just over $1 trillion over ten years, depending on how far Congress is willing to go. Medicaid could see comparable savings from capping open-ended federal matching. None of this is radical. It is the same due diligence any fiduciary organization runs before agreeing to fund a liability that grows on autopilot.
Discretionary spending is the other half of the ledger, and it has even less structure holding it together than mandatory spending does. The caps set under the 2023 Fiscal Responsibility Act expired before this fiscal year began, leaving statutory PAYGO, first enacted in 2010, as the only budget-control mechanism still on the books. Congress zeroed out both PAYGO scorecards this past November as part of the legislation that reopened the government, according to the Congressional Research Service, wiping out the enforcement that should have followed a reconciliation bill CBO scored as adding $3.4 trillion to the deficit. A rule everyone agrees to erase isn’t a rule, it’s a formality Congress performs on the way to spending more. On the defense side, where nearly half of discretionary spending lives, the CBO has scored an option that would reduce Defense Department funding by roughly $1.1 trillion over the next decade through personnel and force-structure changes, not as a recommendation but as proof the number isn’t sacred just because the department wearing the uniform asked for it first.
None of this happens through debt-limit brinkmanship, and Congress should stop pretending otherwise. Refusing to raise or suspend the limit doesn’t cut spending. It risks default on obligations the government has already incurred, which is a self-inflicted crisis layered on top of a real one. The Barrasso–Steube bills get the sequencing backward: They’d force a spending fight at the exact moment the government is least able to negotiate calmly, with a default deadline as the gun to everyone’s head. The discipline they’re reaching for belongs in the ordinary budget and reconciliation process, where the CBO can score it, the public can see it coming, and nobody has to threaten the full faith and credit of the United States to make a point about the number of employees at an agency.
A workable package exists, and it doesn’t require either party to surrender its identity to get there. Protect current retirees and near-retirees. Phase in eligibility and benefit-growth reforms for everyone else. Fix how Medicare pays private insurers before it fixes anything else, since that’s where the CBO’s own numbers show the most money sitting on the table. Restore enforceable discretionary caps instead of letting PAYGO get zeroed out by year-end legislation. Set a binding deficit target, not a sense-of-the-House suggestion, with automatic spending or revenue backstops that trigger unless Congress votes affirmatively to waive them.
Every mechanism in that package is still just a law, and this Congress has already shown how easily a law gets erased when the deficit becomes inconvenient to acknowledge. PAYGO was supposed to be the backstop. It lasted until a year-end funding bill zeroed out the scorecard by a simple majority vote. That’s the case for a balanced budget amendment: not a replacement for the reforms above, but the one mechanism a future Congress can’t quietly repeal in a must-pass bill at midnight. Article V sets a high bar on purpose, requiring two-thirds of both chambers, then three-fourths of the states, and that difficulty is the point. A fiscal rule undone by the same process that ignored it in the first place was never a rule. Congress should send a balanced budget amendment to the states this term and find out which members are serious about the debt and which ones just like talking about it.
Revenue belongs in that package, too, and pretending otherwise is its own kind of magical thinking. Closing tax preferences that function as spending by another name, ending the practice of passing tax cuts that aren’t paid for, and letting the payroll tax wage cap actually mean something again would each move the needle without touching statutory rates. Growth helps on its own terms; permitting reform, a stable regulatory environment, and infrastructure spending with a demonstrated return all raise revenue by expanding the base rather than raising rates. But growth alone has never closed a gap this size, and Congress treating it as the whole answer is the fiscal equivalent of a fund manager telling his limited partners that the market will eventually bail out a bad allocation decision. Sometimes it does, but a prudent manager doesn’t build the plan around wishful thinking.
Fraud recovery makes for a good press conference. It doesn’t make for a solvent country. Congress has the menu, created by its own budget office, and has had it for years. The debt didn’t cross $40 trillion because nobody knew what to cut. It crossed $40 trillion because cutting it was never on anyone’s reelection calendar, and until that changes, the fiduciary duty Congress owes the people who will service this debt in 2040 will keep going unpaid.