Reconciliation Should Reduce Deficits, Fight Inflation, and Strengthen Medicare

As negotiations have resumed over a potential reconciliation bill, policymakers should maintain focus on combining any new spending and tax breaks with a plan to reduce budget deficits, help the Federal Reserve to combat inflation, and strengthen the Medicare program. Press reports suggest the legislation will include roughly $500 billion of new spending and tax breaks along with $1 trillion of offsets – including proposals to reduce prescription drug costs and expand the Medicare tax to improve solvency. The result would be roughly $500 billion of deficit reduction.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

It appears that political leaders may be about to do something that would improve the fiscal health of the nation. This would be a hugely welcome event. After years of budget-busting actions from both parties, and the current challenges of surging inflation, near-record debt-to-GDP, and Medicare hospital insurance just 6 years from insolvency, it is time to change course.

If press reports are right, the reconciliation bill under consideration would be an important step in the right direction. Whereas last year’s bill would have worsened the deficit and set up a series of chaotic and costly expiration cliffs, it appears that lawmakers are now talking about actual gimmick-free deficit reduction.

Fiscal policy alone isn’t going to stop inflation from rising, but thoughtful deficit reduction – especially from lowering health care costs – can help the Federal Reserve better do its job. And while half a trillion of deficit reduction won’t come close to fixing our debt, it’s a very encouraging start. The $200 billion of that deficit reduction going to Medicare will extend solvency by three to four years.

If policymakers want to expand the size of the package and deficit reduction, they could look for further savings from health care, spending cuts, or revenues including considering a carbon tax, which could further reduce long-term debt and carbon emissions.

It’s time to stop the excessive borrowing and start putting our debt on a more manageable path – we're encouraged that there appears to be a serious discussion of starting to make these changes.


For more information, please contact Kim McIntyre, Director of Media Relations, at