Imagine having a credit limit, a maximum amount of money you’re allowed to borrow. Now imagine that once you reach that limit, you’re not allowed to borrow any more until you pay off some of that debt. This is essentially what the debt ceiling is in the United States. But what happens when that ceiling is reached? Well, the government can no longer borrow money, making it incredibly difficult to fund important programs and pay bills. To avoid this, the debt ceiling has been temporarily suspended several times in the past, and it’s happening again. President Biden recently reached a deal with House Minority Leader Kevin McCarthy to temporarily suspend the debt ceiling. In this blog post, we’ll take a look at the details of the Biden-McCarthy agreement and what it means for the future.
1. Introduction to Debt Ceiling Deal
The latest news from the US government reveals that President Joe Biden and House Speaker Kevin McCarthy have agreed on the final details of a deal to raise the debt ceiling. The deal, which is expected to be voted on by House lawmakers as early as Wednesday, will see the debt ceiling suspended until the first quarter of 2025, beyond the 2024 elections. The agreement also includes provisions to streamline the environmental review process, claw back unspent COVID relief funds, and raise the age limit for work requirements for SNAP recipients. Republicans who sought to cut IRS funding will also get a portion of their wish.
2. Suspension of Debt Ceiling
The debt ceiling, or the statutory limit on how much debt the US government can accumulate, has been temporarily suspended by President Joe Biden and Republican House Speaker Kevin McCarthy. The deal would allow the government to pay its bills by suspending the $31.4 trillion debt ceiling until January 1, 2025. The agreement also includes a cap on federal spending, with non-defense spending expected to stay at current levels in 2024, with a 1% increase in 2025. The extension of the debt limit lasts beyond 2024, providing a temporary solution to the polarizing issue until after the presidential election in November 2024.
3. Non-Defense Spending
The agreement between Biden and McCarthy on the temporary suspension of the debt ceiling also includes a cap on non-defense spending for 2024, with an increase of 1% in 2025. White House officials estimate that total non-defense discretionary spending, excluding benefits for veterans, would amount to $637 billion for the 2024 fiscal year. This represents a marginal decrease from the previous year’s $638 billion. The agreement aims to keep non-defense spending roughly flat in 2024, which would offset the debt ceiling increase. This would allow the US government to pay its bills without defaulting on its debt.
4. Defense Spending
President Joe Biden and Republican House Speaker Kevin McCarthy have agreed to temporarily suspend the US debt ceiling and cap some federal spending to prevent a US debt default. The deal suspends the $31.4 trillion debt ceiling until Jan. 1, 2025, allowing the US government to pay its bills. The deal boosts the total defense spending to $886 billion, in line with Biden’s spending proposal. Total defense spending is about a 3% increase from the $858 billion allocated in the current budget for the Pentagon and other defense-related programs in other agencies.
5. Funding for the Internal Revenue Service (IRS)
President Joe Biden and Republican House Speaker Kevin McCarthy have signed off on a deal to temporarily suspend the U.S. debt ceiling until Jan. 1, 2025. Under the agreement, non-defense spending would be capped at current year levels in 2024, with estimated non-defense discretionary spending totaling $637 billion for the 2024 fiscal year. The deal would boost total defense spending to $886 billion, representing about a 3% increase from the current budget for the Pentagon and other defense-related programs. Tough conversations on how to allocate funds under the new spending caps will take place in Congress this year.
The agreement would also provide new funding to the Internal Revenue Service (IRS) to enforce the tax code for wealthy Americans, yielding an estimated $200 billion in additional revenue over the next decade. The new legislation and subsequent appropriations would shift $10 billion in each of calendar year 2024 and 2025 in funding away from the IRS. However, administration officials believe the IRS can make do in the near term since it was founded over a 10-year period.
The deal would claw back much of the unused COVID relief funds as part of the budget deal, with the estimated amount of unused funds ranging between $50 billion and $70 billion. Some funds, including those related to vaccine funding, housing assistance, and support for Native Americans, would be retained. While no changes were made to Medicaid in the deal, the agreement would impose new work requirements on some low-income people who receive food assistance under the program known as SNAP up to age 54 instead of up to age 50.
The new legislation would require the Biden administration to follow through with a plan to end the current pause on student loan repayments by late August. However, it did not strike down Biden’s plan to forgive $430 billion in student debt. House lawmakers could vote on the deal as early as Wednesday, and conservatives have already voiced their opposition. The debt limit extension lasts past 2024, meaning Congress would not need to address the issue again until after the November 2024 presidential election.
6. Clawback of COVID Relief Funds
President Joe Biden and Republican House Speaker Kevin McCarthy have agreed to a temporary suspension of the debt ceiling and the capping of federal spending to prevent a U.S. debt default. The legislative text will be passed by the House of Representatives and Senate in the coming days. The debt limit extension will last until Jan. 1, 2025, allowing the U.S. government to pay its bills. In exchange, non-defense discretionary spending will be roughly flat at current year levels, except for benefits for veterans, which total $637 billion for the 2024 fiscal year.
The deal would boost total defense spending to $886 billion, marking about a 3% increase from the current budget allotted for the Pentagon and other defense-related programs. Congress will have to engage in difficult discussions regarding the distribution of funds within the newly established spending limits. The agreement also requires the Biden administration to follow through with a plan to end the current pause on student loan repayments by late August.
As part of the budget deal, Biden and McCarthy agreed to claw back much of the unused COVID relief funds, estimated between $50 billion and $70 billion. The IRS will receive $10 billion in each of the calendar years 2024 and 2025 in funding, shifting funds away from the Internal Revenue Service. However, the IRS is expected to make do in the near term since it was founded over a 10-year period.
According to officials from the White House, certain funds will be kept, such as those allocated for vaccine funding, housing assistance, and help for Native Americans. While no modifications were made to Medicaid, the deal would establish fresh regulations that require specific low-income individuals who receive food assistance through the program SNAP to work until age 54 instead of 50.
The deal is significant because it would temporarily suspend the debt ceiling and cap federal spending, preventing the U.S. from defaulting on its debt for two years. However, congressional passage before June 5, when the Treasury is projected to exhaust its ability to pay its obligations, is not assured. Republicans hold a narrow majority in the House, and right-wing lawmakers who had demanded larger budget cuts were already in revolt.
7. Work Requirements for Low-Income Americans
The recent debt ceiling agreement between President Biden and House Speaker Kevin McCarthy has several key provisions. One of these provisions is the imposition of new work requirements for low-income Americans who receive food assistance under the Supplemental Nutrition Assistance Program (SNAP). While no changes were made to Medicaid in the deal, some low-income people aged up to 54 years old will now have to fulfill work requirements in order to qualify for food assistance. However, certain temporary changes will remove work requirements for veterans and those experiencing homelessness, regardless of age.
8. Student Loan Repayments
The debt ceiling deal between President Joe Biden and House Speaker Kevin McCarthy includes the suspension of the nation’s debt limit until January 2025. The deal also limits government spending and requires Congressional approval of 12 annual spending bills. The White House estimates that the plan would reduce government spending by at least $1 trillion. Additionally, the deal fully funds medical care for veterans and rescinds about $30 billion in unspent coronavirus relief money. It expands work requirements for the Supplemental Nutrition Assistance Program, formerly known as food stamps, but protects pandemic funding for veterans’ medical care and other programs.
However, under the debt ceiling deal, the student loan payment pause instituted at the start of the pandemic is “gone,” according to Speaker Kevin McCarthy. McCarthy explains that within 60 days of the debt deal being signed, borrowers who borrowed a student loan will have to pay the debt back. The Supreme Court has taken up a case challenging a student loan forgiveness program, and the timing of the repayment pause ending will depend on the Court’s decision. The Biden administration has said that borrowers should expect the end of the repayment pause but that the pause can still be used in emergencies. The agreement also ensures that individuals earning specific salaries can continue to have the option of utilizing a repayment plan based on their income.
Some hardline conservatives have expressed concerns that the compromise in the debt ceiling deal does not cut future deficits enough, while Democrats have been worried about changes to work requirements in programs such as food stamps. The agreement would keep non-defense spending roughly flat in 2024 and increase it by 1% the following year, as well as limit federal budget growth to 1% for the next six years. The legislation aims to reduce government spending by at least $1 trillion, but official calculations have not yet been released. The bill 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.
9. Funding for Veterans’ Medical Care
The Biden-McCarthy agreement includes provisions for funding medical care for veterans. The agreement would fully fund medical care for veterans, including a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards. The toxic exposure fund was previously included in Biden’s proposed 2024 budget blueprint with requested funding of $20.3 billion. The agreement would ensure that veterans receive the necessary medical support, which is a crucial aspect of their well-being. The allocation of funds for the toxic exposure fund is essential in providing veterans with the care they deserve. This provision is significant in ensuring veterans’ physical and mental health needs are met.
10. Scrutinization and Debates in Congress
The proposed debt ceiling deal between President Joe Biden and Republican House Speaker Kevin McCarthy has been met with scrutiny and intense debates in Congress. The deal aims to temporarily suspend the debt ceiling until January 1, 2025, allowing the US government to pay its bills without the risk of default. However, in exchange for this suspension, non-defense discretionary spending would be roughly flat in 2024, and there would be spending cuts, which would need to be addressed by Congress. The deal also includes an increase in total defense spending and the provision of funding to the Internal Revenue Service to ensure the enforcement of tax codes for wealthy Americans.