THE DEBT CEILING PACT IS UNLIKELY TO TRIGGER A RECESSION

The deal won’t dampen economic growth, but it fails to address long-term fiscal problems

- SANDRA BLOCK

Mark Zandi is chief economist for Moody’s Analytics.

The Fiscal Responsibility Act, which suspends the debt ceiling through January 1, 2025, reduces nondefense discretionary spending through the next fiscal year and limits growth in discretionary spending to 1% in 2025. Will these cuts push the economy into recession?

No, I don’t think so. When you do the arithmetic, the cuts and other provisions will reduce real gross domestic product by about two tenths of one percentage point at the peak of the impact in late 2024. It’s not the greatest thing in the world, given that the economy is struggling, but I don’t think it will push the economy into recession.

Another provision in the debt ceiling agreement will end the moratorium on student loan repayments, which means millions of borrowers will be required to resume payments in September. How will that affect the economy since those borrowers will presumably have less money to spend?