WASHINGTON — The bipartisan deal reached by Democratic President Joe Biden and Republican House Speaker Kevin McCarthy extends the debt limit by two years along with modest federal spending cuts and a host of policy provisions.
He 99-page Fiscal Responsibility LawWhat McCarthy says will win a vote in the Republican-led House on Wednesday must pass the Democratic-controlled Senate before a June 5 deadline set by the Treasury Department to act or risk default .
This is what is in the legislation:
Extension of the borrowing limit until 2025
The core of the agreement is the suspension of the debt ceiling, currently at $31.4 trillion, until January 1, 2025. The Treasury Department can then use «extraordinary measures» to pay the bills, which typically last for months.
That effectively solves the problem until the 2024 elections, leaving it up to the next president and the new Congress.
spending levels
The agreement includes spending caps for the next two years to set the allocation process. In fiscal year 2024, it caps military spending at $886 billion and nonmilitary discretionary spending at $704 billion. In fiscal year 2025, those numbers increase to around $895 billion and $711 billion.
McCarthy called the deal «historic» as it would amount to «cutting spending year after year for the first time in more than a decade.»
Taking adjustments into account, the White House projects that by reserving funding for veterans, non-defense spending is barely changed, with a slight reduction overall from 2023 to 2024.
«It’s flat. It’s about a billion dollar difference,» a White House official said. «In a divided government, we’re not going to have the kind of [non-defense discretionary] raises we would expect to get.»
conservative policy measures
What do House Republicans get?
The bill rescinds about $28 billion in unspent Covid relief funds, revokes $1.4 billion in IRS funding and restarts federal student loan payments after a long «pause» that began at the start of the pandemic. Work requirements apply to receive the benefits of the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families in Americans up to age 55 (the current limit is 50), with exceptions for veterans and homeless people.
The bill reforms the National Environmental Policy Law with the aim of expediting permits for projects; House Republicans tout it as «the first significant reforms to NEPA since 1982.»
What’s in it for the Democrats?
The White House is touting this as a budget deal, not a bailout payment for a debt ceiling extension, and stresses the modesty of the spending cuts despite facing a GOP-led House. It also notes that the bill «makes no changes to Medicaid» and leaves Social Security and Medicare intact. The White House says the bill fully preserves the climate and clean energy provisions of last year’s Cut Inflation Act and leaves intact Biden’s executive action on student debt forgiveness.
And avoid a catastrophic default for the remainder of Biden’s first term.
“We believe that removing the threat of default by 2025 is a significant advantage for the economy, a significant achievement,” the White House official said.