Joe Biden and House Speaker Kevin McCarthy seem to have reached a last-minute deal to address the impending debt ceiling crisis and address Republican demands for spending cuts. While the agreement has managed to avert a default just days before it could occur, its fate remains uncertain in Congress due to criticism from both progressive Democrats and hardline Republicans.
House Speaker McCarthy plans to schedule a vote on the bill, which he has dubbed “The Fiscal Responsibility Act,” for Wednesday.
Here are seven key points from the preliminary debt ceiling deal that, when taken together, have many conservatives arguing that McCarthy ‘caved’:
- Debt ceiling raised until 2025: The proposed agreement will increase the debt limit, which means that the government can borrow money with no risk of default until the end of 2024.
- Two-year spending caps: The deal sets limits on how much money can be spent each year for the next two years. Spending on things other than defense will not increase next year, but will go up by 1% in 2025. However, the amount of money available for domestic programs, not including Social Security and Medicare, will not change next year.
- Changes to work requirements for welfare programs: The agreement has added more work requirements for certain welfare programs like the Supplemental Nutrition Assistance Program. If able-bodied adults who are 54 years or younger and do not have dependent children don’t meet work requirements, they will be subject to time limits on receiving food stamps. The deal also increases food benefits for homeless individuals and veterans but does not affect Medicaid.
- Partial reduction of IRS funding: To address the concerns raised by Republicans, the agreement reduces the IRS funding by $10 billion out of the total approved amount of $80 billion that aimed to tackle tax fraud committed by wealthy individuals and corporations.
- Rescinding unspent COVID-19 relief funds: The agreement has clauses that allow for the recovery of unused COVID-19 relief funds that were approved during the Biden and Trump administrations. This would impact multiple programs, including a reduction of the CDC’s Global Health Fund by $400 million.
- No changes to taxes on the wealthy or corporations: The recent deal does not make any changes to the tax system and leaves the tax cuts of the wealthy and corporate tax loopholes introduced during former President Donald Trump’s term intact. It is expected that President Biden’s efforts to increase taxes for the wealthiest individuals and corporations will be a key issue in his reelection campaign.
- Inflation Reduction Act and student loan forgiveness maintained: The White House has managed to safeguard the Inflation Reduction Act, which concentrates on climate policies, prescription drugs and the president’s program for forgiving student loans, from being eliminated by the GOP-controlled House in its recent legislation. Nevertheless, individuals who paused their loan payments during the pandemic will have to start paying back their loans after the Supreme Court scrutinizes Biden’s program for forgiving student loans.
Now that the debt ceiling crisis has been avoided, the focus is shifting to the congressional vote on the deal. The fate of the deal is uncertain because there is opposition from both progressive Democrats and hardline Republicans. On Sunday, Speaker McCarthy justified the decision to offer the debt limit deal in exchange for increased government spending.
“We let government grow, but at a slower rate,” McCarthy said.
.@SpeakerMcCarthy defends offering a higher debt ceiling in exchange for increased govt spending: "We let government grow, but at a slower rate" pic.twitter.com/ZErpivTNhY
— Tom Elliott (@tomselliott) May 28, 2023