Lame Duck Session Shouldn’t Be an Excuse to Borrow More

Through the end of 2026, there may be significant pressure on lawmakers to pass a litany of different priorities to “clear the decks” for the next Congress. With near record debt levels, surging interest rates, and looming trust fund insolvency, Congress should avoid adding to the debt with any unpaid-for spending increases or tax cuts during the lame-duck session.

In the coming weeks, Congress will need to resolve the government funding deadline, which is set to expire on December 11 after a continuing resolution (CR) was enacted in September. The House has passed 3 of the 12 appropriations bills for Fiscal Year (FY) 2027, while the Senate has not passed any.

Yet some have called for going beyond setting FY 2027 discretionary spending levels, suggesting that increased defense, health care, agricultural, infrastructure, and education funding, among other potential policies, could become part of an end-of-year agreement. In total, we estimate that these policies could cost $200 billion or more on a temporary basis or up to nearly $1 trillion on permanent basis. Congress may also try to raise the debt ceiling in the lame duck session, which it must do by mid-2027 in order to avoid potential default.

Cost of Potential Lame Duck Policies, FY 2027-2036

Source: CRFB estimates based on proposed legislation and Congressional Budget Office scores.
Note: most figures rounded to the nearest $5 billion. *Generally one year. +Generally ten years or more. ^Combines $70 billion supplemental funding request with $350 billion reconciliation request.
 

Supplemental Defense Spending

In June, the President requested more than $70 billion in military-related funding, primarily for the war in Iran, which was subsequently included in the reconciliation instructions of proposed House and Senate budget resolutions earlier this year. The President has also requested $350 billion in mandatory defense funding as part of his plan for a $1.5 trillion defense budget for FY 2027 – though more realistically, the funding could be spaced out over multiple years. This suggests Congress could consider providing as much as $420 billion of additional defense spending in the lame duck, perhaps as part of a reconciliation package.

Highway Bill

The surface transportation (highway) provisions enacted as part of the 2021 Infrastructure Investment and Jobs Act (IIJA) will expire on December 11 following a short extension that was included in the September CR. The BUILD America 250 Act – a five-year reauthorization bill introduced in the House by the bipartisan leadership of the Transportation and Infrastructure Committee – could be considered during the lame duck. We estimate the bill would increase deficits by $90 billion over the next decade – with $100 billion in higher spending only slightly offset by $12 billion in new revenue from fees on electric vehicles. Relative to the pre-IIJA baseline, which may be more appropriate given the intended temporary nature of IIJA, the bill would add more than $200 billion to the debt. Even a single-year highway bill could cost $10 billion. And none of these proposals would do anything to prevent insolvency of the Highway Trust Fund in 2028.

Veterans’ Benefits

Disabled military retirees with less than 20 years of service are not allowed to receive military retirement and veterans’ disability benefits at the same time – with a dollar-for-dollar offset in place to prevent ‘double-dipping.’

The Major Richard Star Act would loosen this rule, allowing some veterans to receive both benefits at the same time. Depending on the details, this would cost between $13 billion and $78 billion over a decade at a time when veterans’ spending is already the fastest growing part of the budget outside of interest. Because the bill has received 218 signatures on a discharge petition, House rules require a vote. Though policymakers could consider including offsets, as in the Take Care of America’s Veterans Act.

National Defense Authorization Act

The National Defense Authorization Act (NDAA), which annually authorizes defense discretionary spending, normally does not make significant changes to mandatory spending or revenues and thus does not add to deficits. However, the Congressional Budget Office (CBO) estimates that the Senate version of the FY 2027 NDAA would increase mandatory spending by $30 billion over the next decade. Roughly $24 billion of that new mandatory spending stems from extending the Department of Defense’s Strategic Capital Loan Program, while a further $5 billion comes from multiyear contract authority for E-2D aircraft and intercontinental ballistic missile components. The House-passed NDAA would not significantly affect mandatory spending.

Airport and Air Traffic Control Funding

The Modern Skies Act, introduced on September 28, would provide $30 billion in supplemental funding related to airports and air traffic control modernization. The bill includes roughly $10 billion for software and technology upgrades to air traffic control systems, $10 billion for improvements to airport infrastructure, and $10 billion for a pilot grant program supporting up to three medium-hub airports. This new funding would come in addition to the $12.5 billion provided for air traffic control modernization last year in the One Big Beautiful Bill Act (OBBBA).

Farm Bill

Reporting indicates that the Senate may take up the Farm Bill during the lame duck, which reauthorizes agriculture programs typically on a five-year basis. CBO scored the Senate Agriculture Committee’s Farm Bill as costing $4 billion over ten years. Lawmakers may also fund the administration’s June emergency supplemental funding request for farm subsidies, which would cost an additional $11 billion.

SNAP Cost-Share Delay

OBBBA requires that states with high Supplemental Nutrition Assistance Program (SNAP) payment error rates share up to 15% of the program’s benefit costs starting in FY 2028. Some have called for delaying this requirement, which would cost about $5 billion for one year, $10 billion for two years, and $50 billion over a decade. The Senate’s Farm Bill proposes a one-year delay and additional state flexibility but offsets this cost over time by increasing the payment from high error rate states.

Pell Grant Shortfall

The Pell Grant program has fully depleted its reserves, meaning some combination of programmatic changes and higher funding will be necessary to avoid an abrupt cut to award amounts. It will require $16 billion simply to fund the Pell Grant program through FY 2027 and $104 billion above baseline ($132 billion above flat funding) to maintain current grant levels over the next decade. Rather than borrowing this money, Congress should consider enacting reforms to lower the cost of the Pell Grant program and also consider offsetting new funding with student loan reforms as proposed in the House Labor, Health and Human Services, and Education appropriations bill or higher education tax break reform, as we recently suggested.

Health Extenders

Congress often includes extensions of certain health-related policies when funding the government. We estimate a one-year extension of expiring health care programs could cost up to $7 billion, predominantly for expiring community health center funding, National Health Service Corps funding, and veteran-related health programs. Permanently funding these programs could cost $70 billion or more over ten years.

Medicare Physician Payments

Traditional fee-for-service Medicare pays physicians according to the Physician Fee Schedule (PFS). Statute limits how much PFS can grow annually, although Congress routinely provides bonus physician payments. We estimate a 2.5% Medicare physician bonus payment could cost up to $2 billion on a temporary basis and up to $25 billion if made permanent. Costs would be far higher if further payment increases were made each year. CRFB has proposed reforming the PFS system to help avoid or moderate these new costs.

Tax Policies

Congress may consider an end-of-year package of tax policies as well. This could include addressing tax provisions that are set to expire this year or expired last year; for example, the Work Opportunity Tax Credit (WOTC) expired at the end of 2025 after being extended for five years at a cost of $16 billion, and we estimate that a one-year extension could cost $2 to $4 billion and a ten-year extension could cost roughly $45 billion. Lawmakers may also consider other proposals, including a package around the taxation of cryptocurrency, modifying or repealing the One Big Beautiful Bill Act’s changes to the deduction of gambling losses, and/or a proposed tax credit to encourage domestic film production. We broadly estimate that these policies could add $5 billion to $50 billion to deficits over the next decade – potentially more if all of them are included.

Debt Ceiling

While not an explicit cost, press reports indicate that Congress may move to raise the debt ceiling for the remainder of the Trump Administration. The debt ceiling is currently set at $41.1 trillion – raised $5 trillion by OBBBA – and will likely be reached in the next six months, at which point the Treasury Department will begin employing “extraordinary measures” to avoid a U.S. government default. Every $2 trillion increase in the limit will delay this date by about a year.

Congress must raise or suspend the debt limit to avoid default. When they do, they should use it as an opportunity to assess our dismal fiscal situation and pair it with deficit reduction measures and/or meaningful process reforms to help get federal borrowing under control.

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The upcoming lame-duck session of Congress may seem like an opportune time to “clear the deck” on many policy priorities. But with debt now above 100% of GDP and interest costs at an all-time record, it would be a terrible time to further add to the debt.

The policies Congress may consider this year could easily add $200 billion to the debt if enacted on a temporary basis or upwards of $1 trillion over a decade if enacted permanently. Policymakers should avoid these costs to the extent possible and offset them – using Super PAYGO to pay for them twice over – when necessary.

Offsets could include changes to lower health care costs, tackling waste, fraud, errors, and abuse, and enacting fixes to the 2025 reconciliation law, among other changes.