The debt-ceiling deal between President Joe Biden and House Speaker Kevin McCarthy would suspend the United States’ debt limit through 2025 to avoid a federal default while limiting government spending, but its details are unlikely to be popular with progressive Democrats or hard-right Republicans.
The Democratic president and Republican speaker are trying to win lawmakers over to the plan, announced Saturday, in time to avert a default that would shake the global economy. Congress will be scrutinising and debating the legislation, which also includes provisions to fund medical care for veterans, change work requirements for some recipients of government aid and streamline environmental reviews for energy projects.
McCarthy said the House will vote on the legislation on Wednesday, giving the Senate time to consider it before June 5, the date when Treasury Secretary Janet Yellen said the US could default on its debt obligations if lawmakers do not act in time.
Some hardline conservatives have expressed early concerns that the compromise does not cut future deficits enough, while Democrats have been worried about proposed changes to work requirements in programmes such as food stamps.
With the details of the deal – released on Sunday – now clear, here’s what’s in and out:
Two-year debt limit suspension, spending limits
The agreement would keep non-defence spending roughly flat in the 2024 fiscal year and increase it by one percent the following year, as well as suspend the debt limit until January 2025 – past the next presidential election.
For the next fiscal year, the bill matches Biden’s proposed defence budget of $886bn and allots $704bn for non-defence spending.
The bill also requires Congress to approve 12 annual spending bills or face a snapback to spending limits from the previous year, which would mean a one percent cut.
The legislation aims to limit federal budget growth to one percent for the next six years, but that provision would not be enforceable starting in 2025.
Overall, the White House estimates that the plan would reduce government spending by at least $1 trillion, but official calculations have not yet been released.
The agreement would fully fund medical care for veterans at the levels included in Biden’s proposed 2024 budget blueprint, including a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards. Biden sought $20.3bn for the toxic exposure fund in his budget.
Unspent COVID money
The agreement would rescind about $30bn in unspent coronavirus relief money that Congress approved through previous bills. It claws back unobligated money from dozens of federal programmes that received aid during the pandemic, including rental assistance, small business loans and broadband for rural areas.
The legislation protects pandemic funding for veterans’ medical care, housing assistance, the Indian Health Service, and some $5bn for a programme focused on rapidly developing the next generation of COVID-19 vaccines and treatments.
Republicans targeted money that the Internal Revenue Service (IRS) was allotted last year to crack down on tax fraud. The bill bites into some IRS funding, rescinding $1.4bn.
The agreement would expand work requirements for the Supplemental Nutrition Assistance Program, also known as food stamps — a longtime Republican priority. But the changes are pared down from the House-passed debt ceiling bill.
Work requirements already exist for most able-bodied adults between the ages of 18 and 49. The bill would phase in higher age limits, bringing the maximum age to 54 by 2025. But the provision expires, bringing the maximum age back down to age 49 five years later, in 2030.
Democrats also won some new expanded benefits for veterans, homeless people and young people aging out of foster care. That would also expire in 2030, according to the agreement.
The agreement would also make it slightly harder for states to waive work requirements for SNAP for certain individuals. Current law allows states to issue some exemptions to the work rules on a discretionary basis, but limits how many people can be exempted. The agreement would lower the number of exemptions that a state can issue and curb states’ ability to carry over the number of exemptions they can hand out from month to month.
The agreement would also make changes to the Temporary Assistance for Needy Families programme, which gives cash aid to low-income families with children. While not going as far as the House bill had proposed, the deal would make adjustments to a credit that allows states to require fewer recipients to work, updating and readjusting the credit to make it harder for states to avoid.
Speeding up energy projects
The deal puts in place changes in the National Environmental Policy Act for the first time in nearly four decades that would designate “a single lead agency” to develop and schedule environmental reviews, in hopes of streamlining the process. It also simplifies some of the requirements for environmental reviews, including placing length limitations on environmental assessments and impact statements.
Agencies will be given one year to complete environmental reviews, and projects that are deemed to have complex impacts on the environment will need to be reviewed within two years.
The bill also gives special treatment to the Mountain Valley Pipeline — a West Virginia natural gas pipeline championed by Senators Joe Manchin, a Democrat, and Shelley Moore Capito, a Republican — by approving all its outstanding permit requests.
Republicans have long sought to reel back the Biden administration’s efforts to provide student loan relief and aid to millions of borrowers during the coronavirus pandemic. While the GOP proposal to rescind the White House’s plan to waive $10,000 to $20,000 in debt for nearly all borrowers failed to make it into the package, Biden agreed to put an end to the pause on student loan repayment.
The pause in student loan repayments would end in the final days of August.
The fate of student loan relief, meanwhile, will be decided at the Supreme Court, which is dominated 6-3 by its conservative wing. During oral arguments in the case, several of the justices expressed deep scepticism about the legality of Biden’s plan. A decision is expected before the end of June.
What’s left out
House Republicans passed legislation last month that would have created new work requirements for some Medicaid recipients, but that was left out of the final agreement. The idea faced stiff opposition from the White House and congressional Democrats, who said it would lead to fewer people being able to afford food or healthcare without actually increasing the number of people in the workforce.
Also absent from the final deal is the GOP proposal to repeal many of the clean energy tax credits Democrats passed in party-line votes last year to boost the production and consumption of clean energy. McCarthy and Republicans have argued that the tax breaks “distort the market and waste taxpayer money”.
The White House has defended the tax credits as resulting in hundreds of billions of dollars in private-sector investments, creating thousands of manufacturing jobs in the US.
The Democratic president and Republican speaker are trying to win over lawmakers to the plan in time to avert a default.