The drama’s not over yet.
It’s been a nail-biting few weeks, but President Biden at last announced on Sunday that he and House Speaker Kevin McCarthy have reached an agreement in principle to tackle the debt limit and cap spending. “It takes the threat of catastrophic default off the table,” Biden said in a brief statement, adding: “I strongly urge both chambers to pass that agreement. Let’s keep moving forward.”
Here’s what’s in the deal, and what needs to happen to get it through Congress.
A longer timeline
The bill suspends the debt limit through January 1, 2025, postponing the issue until after the 2024 election.
Some give and take
Non-defense spending will remain flat in the 2024 fiscal year, and rise by 1% in the 2025 fiscal year after adjustments, after which there’ll be no budget caps. Per CNN, there’ll be no budget caps after fiscal 2025.
According White House talking points that have been seen by CNN, the agreement allocates $886 billion for defense, $121 billion for veterans’ medical care and $637 billion for other non-defense programs.
Veterans’ medical care will remain fully funded, according to a White House source who spoke to CNN. Work requirements for some adults receiving food stamps will be temporarily expanded, meaning that able-bodied adults up to the age of 55 will have to work at least 20 hours a week or meet other criteria in order to get food stamps for more than three months out of every three years. There will however be more exemptions for other groups on food stamps, including veterans and homeless people.
According to a House Republican fact sheet seen by CNN, IRS funding will be cut. House Republicans have maintained that the $80 billion earmarked for the Internal Revenue Service would have been spent on new agents — though the IRS itself said that the money would’ve been used to support and modernize its operation, and assist taxpayers. Per the Washington Post, the White House has said that spending on domestic programs will be maintained by redirecting these funds, and from unused Covid-19 aid.
Climate and clean energy measures will reportedly remain untouched — but student loan repayments, which were temporarily suspended, will resume at the end of the summer.
Cause for optimism
The short timeframe of this debt deal means it’s likely to impact the economy less severely than that reached by President Obama and Speaker John Boehner in 2011.
“For months, I had worried about a major economic fallout from the negotiations, but the macro impact appears to be negligible at best,” Ben Harris, a former deputy Treasury secretary for economic policy told The New York Times.
Harris stressed the benefit of markets’ ability to function and maintain stability without a looming debt crisis.
What happens next
The drama’s not over yet. The bill still needs approval from both chambers in Congress — and while some might see the agreement as a testament to Biden’s ability to mediate across the political divide, his own party is not keen on giving ground to Republicans.
Democratic Rep. Pramila Jayapal, who’s chair of the Congressional Progressive Caucus, told CNN’s State of the Union she was “not happy with some of the things” she heard about the bill before it was made public. She warned that Democratic leaders still “have to worry” about progressives backing the bill.
Biden, whose political career has been marked by a readiness to seek the center ground, has remained firm that his approach is the right one. “No one got everything they want. But that’s the responsibility of governing,” he told reporters. Asked whether he made too many concessions to achieve a deal, he replied “I didn’t.”
Dissent among Republicans
Axios’ Andrew Solender and Juliegrace Brufke have noted that McCarthy’s authority could be in peril if he fails to persuade those Republicans who’ve already criticized the bill for its relative lack of spending cuts.
In a statement, GOP Rep. Matt Rosendale of Montana said: “The Fiscal Irresponsibility Act fails to cut spending and continues to fund the Democrats’ and Biden Administration’s radical agenda. It is frankly an insult to the American people to support a piece of legislation that continues to put our country’s financial future at risk.”
Republican Rep. Ralph Norman called the agreement “insanity,” complaining that the bill has “virtually no cuts.” Rep. Chip Roy accused McCarthy of cutting a handshake deal in January that means all nine Republicans on the House Rules Committee must be in agreement before legislation can move forward. Since Roy himself (and at least one other GOP opponent to the bill) is on the panel, such an agreement would cripple the bill.
The House Rules Committee is holding a key meeting at 3 pm on May 30. Senior GOP sources tell CNN that only seven Republican members must sign off in order for a bill to advance to the floor. This puts pressure on Rep. Thomas Massie of Kentucky, a GOP member who’s yet to take a stand either way.
Massie reportedly indicated to CNN in January that he was reticent to vote against rules to stop bills in their tracks.
“I would be reluctant to try to use the rules committee to achieve a legislative outcome, particularly if it doesn’t represent a large majority of our caucus,” Massie told the network. “So I don’t ever intend to use my position on there to like, hold somebody hostage – or hold legislation hostage.”
On Monday night, he tweeted: “I think it’s important to keep in mind the debt limit bill itself does not spend money, but it does enable past deficit spending and any new deficit spending in the appropriations bills that Congress will pass in September.”
And if the bill reaches the floor?
According to The Washington Post, the bill would need the support of at least 111 Republicans and 107 Democrats to hit the 218-vote threshold required to pass in the House. McCarthy’s allies maintain that the majority of House Republicans are on board.
In case anyone needed a reminder, the deal needs to make it through Congress asap, as the government could be out of cash by June 5 if the debt limit isn’t raised before then. Here’s what could happen if the U.S. actually hit the debt ceiling.
