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Bipartisan Deal Suspends The Debt Ceiling
Earlier this month, President Biden and House Speaker McCarthy agreed on a bipartisan deal to suspend the debt ceiling until January 2025 in exchange for some policy concessions from both sides. The deal imposes caps on federal spending for fiscal years 2024 and 2025, with some adjustments for veterans’ health care and other priorities.
Here are some of the key provisions of the deal:
The debt ceiling suspension
The deal suspends the nation’s $31.4 trillion borrowing limit until January 2025, allowing the Treasury to continue paying its bills without congressional approval. This removes the debt ceiling as a potential issue in the 2024 presidential election and avoids a possible default that could harm the credit rating of the U.S. and increase borrowing costs for everyone.
The spending caps
The deal limits the growth of federal discretionary spending, which includes defense, education, health care, infrastructure and more, for the next two years. Non-defense spending will remain relatively flat in fiscal 2024 and increase by 1% in fiscal 2025, after certain adjustments are made. Defense spending will increase by about $182 billion over two years. These caps could affect the availability and quality of public services and programs that you rely on or benefit from.
The policy concessions
The deal includes some Republican demands, such as recouping unspent Covid-19 money, reducing new funding for the IRS, lifting a pandemic-era freeze on federal student loan repayments, imposing stricter work requirements for food stamp recipients and including permits for a natural gas pipeline project. These concessions could affect your taxes, your student debt, your access to food assistance and your energy costs.
The deal was passed by both chambers of Congress with strong Democratic support, many Republicans opposed it for not addressing the long-term debt problem. President Biden signed it into law just two days before the deadline for default.
The deal is seen as a compromise that avoids a crisis but does not solve the underlying fiscal challenges facing the nation. It also sets up high-stakes deadlines for 2025, when the debt ceiling will be reinstated, ACA subsidies will expire and Trump’s tax cuts will sunset. We can anticipate increased pressure for future tax increases or spending cuts to address the long-term debt problem.