WASHINGTON − President Joe Biden on Saturday afternoon signed a bipartisan debt limit package, avoiding a calamitous default shortly before the nation could have run out of maneuvers to pay its bills on Monday.
Biden has called the agreement he negotiated with House Speaker Kevin McCarthy, R-Calif., a necessary compromise that protected Democrats’ key priorities while cutting some of the spending Republicans oppose.
Biden thanked McCarthy, House Democratic Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell for their partnership, according to a release from the White House.
Most importantly, the deal prevents a blow to the economy from a federal default. That’s also a political boost for Biden whose road to re-election would have been a lot harder with a shaky economy.
The agreement burnishes Biden’s credentials as a bipartisan dealmaker.
But it’s also a win for McCarthy.
Biden had insisted that Congress send him bill to raise the debt ceiling without conditions, betting that Republicans wouldn’t be able to get a package of spending cuts through the House.
In fact, however, the GOP-controlled House in April narrowly passed a bill to lift the debt ceiling in exchange for $4.8 trillion in spending cuts.
Biden was forced to negotiate.
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The deal he agreed to will cut $1.5 trillion from the federal budget over the next decade, according to the nonpartisan Congressional Budget Office.
That’s far less than the original House GOP plan. And it also spends more, not less, on food stamps – the exact opposite of Republicans’ goal. That’s because while Biden agreed to a scaled-back version of the work requirements Republicans sought, he also carved out exemptions for the homeless, veterans and people ages 18 to 24 who were in foster care when they turned 18. As a result, more people overall will get food assistance once the changes are in place, according to the Congressional Budget Office.
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Still, McCarthy called the spending cuts “historic.”
While the package easily passed both the House and the Senate, it was criticized from both the left and right.
Far-right Republicans wanted deeper spending cuts. Defense hawks wanted more military spending.
Progressives complained about the expanded work requirements for low-income assistance programs, expedited permitting for oil and gas projects and caps on future spending.
The spending caps do not apply to Social Security and Medicare, popular programs both parties agreed were off the table despite their huge effect on the federal deficit.
About $30 billion in unspent coronavirus relief money will be rescinded. Billions of dollars in recently approved funding for the IRS to improve customer service and go after tax cheats will be repurposed, reducing the amount of taxes that would’ve been collected with full funding.
Student loan borrowers, who have been granted pauses from their monthly payments during the pandemic, would have to resume payments after August.
But the package did not include Republican measures to stop Biden’s program to forgive student loan debt for millions of Americans and to end many of the landmark renewable energy tax breaks included in last year’s Inflation Reduction Act, Biden’s signature climate and prescription drug law.
While the deal suspends the debt limit until Jan. 2, 2025, more budget fights lay ahead.
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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.
The Treasury Department has been using “extraordinary measures” to pay the nation’s bills since mid-January, when the nation bumped up against the $31.381 trillion limit on how much can be borrowed.
The Treasury borrows money to pay all its bills because the government spends more than it collects in revenues. The amount the government can borrow is set in statute, making that a separate process from the decisions made in annual spending bills and policy measures that determine how much funding goes out the door and how much is collected in taxes and other revenues.
