The midterm elections, which gave control of Congress to the Democrats, will usher in at least two years of divided government. That sharing of power offers an opportunity for bipartisanship and compromise to address the unsustainable trajectory of the federal budget.

The time to create a more sustainable path for the federal budget is now. At the end of fiscal year 2026, which wrapped up on September 30, debt held by the public was equal to the size of the country’s gross domestic product (GDP)—i.e., as large as the entire U.S. economy. According to the Congressional Budget Office (CBO), that debt-to-GDP ratio will exceed its high of 106 percent, which was set right after World War II, within the next few years and will continue rising rapidly afterwards. Such growth in debt will limit flexibility in addressing budgetary priorities and restrain economic growth. And the large stock of existing debt could limit options to address the next economic, financial, or health crisis.

Why Bipartisanship?

The most effective solutions require some combination of higher taxes and lower spending; making changes to popular policies and programs on either side of the ledger creates political risks. Budget reforms often produce concentrated costs on specific groups while spreading the benefits across the broader public, making them unpopular even when economists or fiscal experts argue that they are necessary. As Richard Rubin and David Luhnow noted in their article in the Wall Street Journal on October 30, “The politics are too toxic for one party to handle.”

Arguments for a bipartisan approach include:

• Shared political responsibility: If both parties support a difficult budget deal, neither party will bear all of the electoral backlash.

• Durability: Major fiscal changes are more likely to survive changes in political control when they have support from both sides. Organizations focused on fiscal policy often emphasize the value of durable bipartisan reforms. Businesses and households can make long-term financial decisions with greater confidence when policies are stable.

• Balancing priorities: Republicans often emphasize spending restraint and tax reduction, while Democrats often emphasize protecting social programs and public investment. Long-term budget agreements require elements of both approaches.

• Public trust: Voters may be more willing to accept painful compromises if they see leaders from both parties agreeing that a problem is real and requires action.

Bipartisanship Generates Durable Legislation

The Bipartisan Policy Center states that “Any solutions to address the debt must be bipartisan, both to pass and to serve as good, durable policy.”

In 2003, procedures for budget enforcement that were implemented on a bipartisan basis were about to expire. At that point, CBO noted that procedures intended to support fiscal sustainability had been effective in large part because there had been a consensus in previous years that deficit reduction was important. Such bipartisan consensus needs to be rebuilt.

Examples of past bipartisan agreements exist. The Wall Street Journal article mentions a few:

The deal on Social Security in 1983 between President Ronald Reagan and Democratic Speaker Tip O’Neill, budget agreements between President Bill Clinton and Republican Speaker Newt Gingrich in the 1990s. Such bipartisan agreements generated legislation that succeeded in promoting better fiscal outcomes.

Examples of major one-party legislation also exist, but such legislation often generates repeated efforts to modify or repeal it. For example, the Affordable Care Act was enacted in March of 2010 with no Republican votes in the House or the Senate. For the following 15 years, various efforts by Congress were made to repeal it and other changes occurred both legislatively and administratively. Many elements of the original legislation remain in place today, but uncertainty surrounding the program continues to be high.

Financial Markets Will Do It Otherwise

If legislators are not able to restrain the growth in federal debt, financial markets eventually will do the work for them. That reckoning—which may arrive without much warning—could be abrupt and painful. It would be better to put in place a smart legislative package that gradually implements policies to achieve fiscal sustainability. In addition, no one knows when the tipping point for a debt-induced crisis will occur; it would be advisable to start addressing the issue now and provide insurance against a worst-case scenario.

The Grand Bargain Project Offers a Roadmap

The Grand Bargain Project recognizes that trade-offs will need to be made and shared sacrifice will be necessary to put the country on a better fiscal footing. Using YouGov polling, 73 percent of citizens—across all ideologies—wanted members of Congress from both parties to make a Grand Bargain package of reforms a priority. The set of aspirations addresses the fact that interconnected problems require interconnected solutions.

Translating the wording of the Grand Bargain into an illustrative package of policy reforms to reduce total spending and raise revenues would keep the debt-to-GDP ratio from exceeding its all-time high and actually put that ratio on a downward path. The time is now to start working on improving the fiscal picture and setting the country on a better economic path.