House Speaker Kevin McCarthy took a victory lap immediately after the House passed the debt limit deal with a big bipartisan showing.
US debt ceiling deal: what’s in and out of Biden and McCarthy’s agreement
With the details of the deal now clear, here’s what’s in and out:
Two-year debt limit suspension, spending limits
The agreement would keep non-defense spending roughly flat in the 2024 fiscal year and increase it by 1% the following year, as well as suspend the debt limit until January 2025 – past the next presidential election.
For the next fiscal year, the bill matches Biden’s proposed defense budget of $886bn and allots $704bn for non-defense spending. It also requires Congress to approve 12 annual spending bills or face a snapback to spending limits from the previous year, which would mean a 1% cut.
Overall, the White House estimates that the plan would reduce government spending by at least $1tn, but official calculations have not yet been released.
Care for military veterans
The agreement would fully fund medical care for veterans at the levels included in Biden’s proposed 2024 budget blueprint, including a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards. Biden sought $20.3bn for the toxic exposure fund in his budget.
Unspent money from Covid-19 pandemic
The agreement would rescind about $30bn in unspent coronavirus relief money that Congress approved through previous bills, including federal programs for rental assistance, small business loans and broadband internet for rural areas.
The legislation protects pandemic funding for veterans’ medical care, housing assistance, the Indian Health Service and developing the next generation of Covid-19 vaccines and treatments.
Funding for the Internal Revenue Service
Republicans targeted money that the federal tax agency was allotted last year to crack down on tax fraud. The bill bites into some Internal Revenue Service (IRS) funding, rescinding $1.4bn.
Work-for-benefits requirement
The agreement would expand work requirements attached to the Supplemental Nutrition Assistance Program, Snap, formerly known as food stamps – a longtime Republican priority. But the changes are pared down from a hardline debt ceiling bill previously generated and passed in the House, which are a huge no for progressive Democrats.
Work requirements already exist for most able-bodied adults between the ages of 18 and 49. The bill would phase in higher age limits, bringing the maximum age to 54 by 2025. But the provision expires, bringing the maximum age back down to age 49 five years later, in 2030.
Democrats also won some new expanded benefits for veterans, homeless people and young people ageing out of foster care. The agreement would also make a small boost to the Temporary Assistance to Needy Families program, which gives cash aid to families with children, making it harder for states to avoid paying.
Energy projects
The deal puts in place changes in the National Environmental Policy Act for the first time in nearly four decades that would designate “a single lead agency” to develop and schedule environmental reviews, in hopes of streamlining the process for approval for energy projects – both involving fossil fuels and renewable energy.
The bill also gives special treatment to the controversial Mountain Valley pipeline, a West Virginia natural gas pipeline championed by pivotal Democratic senator Joe Manchin, and Republican senator Shelley Moore Capito, by approving all its outstanding permit requests.
Student loans
Republicans have long sought to reel back Biden’s temporary relief on student loans during the coronavirus pandemic. Biden has agreed that the pause in loan repayments will end in late August. Meanwhile, a GOP proposal to rescind the White House’s plan to waive $10,000 to $20,000 in debt for nearly all student borrowers is not in the debt ceiling package. The conservative-dominated US supreme court is due to rule next month on whether Biden has the power to waive the debt.
What’s left out?
House Republicans passed legislation last month that would have created new work requirements for some Medicaid recipients, but the White House successfully blocked that from the deal. Also absent is a GOP proposal to repeal many of the clean energy tax credits Democrats passed in party-line votes last year.
“I have been thinking about this day since before my vote for speaker because I knew the debt ceiling was coming. I wanted to make history,” a beaming McCarthy said.
The speaker thanked his negotiating team, Reps. Garret Graves and Patrick McHenry, saying: “They’ve given their time and talents in this effort for more than a month.”
When pressed on his relationship with President Joe Biden after this process, he lamented that “he hasn’t invited me to dinner or lunch yet, so.”
McHenry said it was an honor to be part of the team. Graves said many believed this would be a dysfunctional Congress, but instead the speaker was making this a “transformational Congress.”
- Republican who voted against debt limit deal says she still trusts McCarthy
Rep. Nancy Mace said that she still trusts House Speaker Kevin McCarthy, despite her frustrations with and opposition to the debt limit deal that passed the House on Wednesday night.
“I do. I disagree with him vehemently on this thing tonight, but we can agree to disagree on a lot of things,” she said.
Mace defended her vote against the bill, despite 149 of her Republican colleagues supporting it.
“There were more votes from Democrats than there were Republicans and I think, the far left know, the progressives know how good of a deal they got tonight,” she said. “This was not a compromise. Republicans got very little. We’re adding $4 trillion of debt over the next two years, there’s no cap on the debt limit itself, on the debt ceiling, and you know, we’re expanding and growing government welfare. That’s what happened tonight.”
JUST IN: House passes debt limit bill
The House has passed the debt limit deal to suspend the nation’s debt ceiling through January 1, 2025.
The final tally for the vote was 314 to 117.
A total of 149 Republicans and 165 Democrats voted for the bill, while 71 Republicans and 46 Democrats voted against the bill.
The bill will next need to be passed by the Senate before it can be sent to President Joe Biden to be signed into law. It’s not yet clear when the Senate will vote.
FAQs:
Known as the Fiscal Responsibility Act of 2023, the bill provides for an increase to the debt ceiling of $31.4 trillion for two years, which means President Joe Biden will not need to negotiate it again before the November 2024 presidential election.
The deal also places limited curbs on government spending that will please some Republicans, but it does not deliver the big cuts that right-wingers wanted and which progressive Democrats would have balked at. The deal holds nonmilitary spending roughly flat for the 2024 fiscal year from this year. It also limits the increase by one percent for 2025, according to the proposed bill.
The agreement preserves plans by the Biden administration to increase spending for the military and veterans in line with inflation as well. The deal also pares back funds allocated for the expansion of the Internal Revenue Service (IRS). Last year, Congress had approved $80 billion for the IRS to boost tax enforcement. The debt ceiling agreement pulls back $10 billion to spend in other areas.
On the labor front, the deal establishes work requirements for people who are receiving federal food assistance or on family welfare, in a victory for the Republican side. It is set to raise the age at which childless adults will be required to work to receive food stamps from 49 to 54. As a concession to Democrats, the deal relaxes the requirements for veterans and the homeless.
Concerns about the viability of raising the US debt ceiling are affecting oil prices. A few Republican lawmakers have expressed opposition to the deal, while President Joe Biden and House Speaker McCarthy remain optimistic about its passage. Republicans have argued that steep spending cuts are necessary to curb the growth of the national debt, which at $31.4 trillion is roughly equal to the annual output of the economy.
The final agreement must be approved by a divided US Congress before June 5 – the deadline set by the Treasury Department for meeting the financial obligations. The uncertainty is keeping investors on their toes and creating a stand-off, according to Reuters.
A default would take currency markets to places “the world’s not seen before” and that in turn would affect energy prices and trading as most of the crude oil is exchanged using the US dollar, according to S&P Global Commodity Insights “It will likely lead to severe recessions, which again will have an impact on energy consumption and demand,” it added.
