WASHINGTON − It isn’t the clean debt limit bill President Joe Biden had hoped for.
Regardless, the bipartisan deal to suspend the debt ceiling in exchange for spending cuts and policy changes is still a win for Biden on many levels.
It keeps the economy on an even keel, avoiding a default that would have been catastrophic for financial markets and American households, potentially dooming his reelection bid.
If Congress approves the package Biden hammered out with House Speaker Kevin McCarthy, R-Calif., it will also get this nasty fight off his plate as he shapes his campaign message.
“The debt limit deal is dumb public policy, but the worst outcomes were avoided,” tweeted Dan Pfeiffer, who was a top adviser to President Barack Obama. “For that, Pres. Biden deserves credit.”
But it’s not all smooth sailing ahead.
If Congress doesn’t agree on how to squeeze next year’s budget into the spending caps set by the deal, the federal government could shut down temporarily later this year.
And Biden has to hope that his could’ve-been-worse message to progressives keeps them enthusiastic about his reelection despite their unhappiness with parts of the deal.
Here’s a look at the risks and rewards for Biden:
Avoiding a catastrophic default
The economy has been a defining factor in presidential elections.
The failure of the federal government to meet its debt obligations, which has never happened before, would be a shock to the stock market, wounding the economy and Americans’ retirement accounts. The U.S. credit rating would be downgraded, increasing borrowing costs for the government and consumers.
Those hits, and more, to an economy still struggling to recover from the pandemic would be difficult for Biden to overcome − especially heading into an election year. With inflation still a concern for voters, only about a quarter of Americans surveyed in March said the economy is good. Only 31% approved of Biden’s handling of the economy, according to an Associated Press-NORC Center for Public Affairs Research poll.
Though the deal must still get through Congress, the House was expected to approve it Wednesday night. The Senate is expected to vote before Monday, the earliest date the government may not be able to pay all its bills.
“I cannot stress enough that we have no margin, no margin, for error,” Senate Majority Leader Chuck Schumer, D-N.Y., said Wednesday. “Either we proceed quickly and send this bipartisan agreement to the president’s desk, or the federal government will default for the first time ever.”
Next debt fight pushed to 2025
The deal suspends the limit on how much the federal government can borrow until January 2025. That puts off the next fight until after the 2024 presidential election.
Biden, who had to cut short an international trip to deal with the debt crisis, can now focus on other issues. He may soon, for example, have to come up with an alternative way to help student loan borrowers if the Supreme Court blocks his plan to wipe out $400 billion in student loan debt for tens of millions of Americans.
He also has his hands full with the war in Ukraine, managing the southern border, and implementing the major policy bills that Biden protected from being gutted during the debt negotiations.
Also, since announcing his reelection bid in April, Biden has yet to kick his campaign into high gear.
Will progressives revolt?
One potential problem for Biden’s reelection is progressives losing enthusiasm because of the agreement.
Rep. Pramila Jayapal, the Washington state Democrat who heads the Congressional Progressive Caucus, told reporters Wednesday that she opposes the package. She has called the deal’s expansion of work requirements for food assistance “very bad policy” that adds red tape for struggling Americans without achieving the stated goal of encouraging people to work.
“If we want to have credibility with the progressive wing of the party, then we need to be able to show that we’re fighting for them,” Jayapal said.
But while Biden agreed to a scaled-back version of the work requirements Republicans sought, he also carved out exemptions for people experiencing homelessness, veterans and people ages 18 to 24 who were in foster care when they turned 18.
The nonpartisan Congressional Budget Office estimates that will result in more people, not less, getting food assistance once the changes are in place.
Although Biden had initially hoped Congress would address the debt limit without preconditions, the administration argues it got the best deal possible in a divided government.
“Negotiations require give-and-take. No one gets everything that they want,” said Shalanda Young, Biden’s budget director. “But the president successfully protected core Democratic priorities and the historic economic progress that we have made over the last two years.”
Potential government shutdown
Once default is off the table, lawmakers can return to writing the 12 spending bills that must be passed to keep the government running beyond this fiscal year. As an incentive, the deal includes a 1% across-the-board cut if Congress hasn’t approved the annual spending bills by Jan. 1, 2024.
But it will still be difficult for lawmakers to agree on how to apply the spending limits included in the deal, which would keep nondefense funding levels roughly flat for 2024. And Republicans are going to be looking for ways to cut spending beyond that.
“That’s our opportunity,” Rep. Thomas Massie, R-Ky., said of the next steps in the budget process.
Brendan Buck, who worked for two previous Republican speakers of the House, tweeted that attempts to approve less spending than what was agreed to in the deal “would be tough for the idea of a functioning appropriations process this summer.”
Young, Biden’s budget director, said one goal of the negotiations was to set the spending cap at an achievable level.
“Because it’s hard, even in a unified government, to get all 12 bills done,” Young said. “And I think we reach the sweet spot in this agreement to give the appropriators the tools they need to get started, get that appropriations process unlocked, and have a fighting chance to get bills done by Oct. 1.”
Contributing: Francesca Chambers and Candy Woodall
