Details of the deal between President Joe Biden and House Speaker Kevin McCarthy were made public on Sunday as a 99-page bill. The bill would suspend the nation’s debt limit through 2025 to avoid a federal default and limit government spending.
Now that we know what’s included and what’s not, here are the agreement terms.
The first one is a Two-year suspension of debt ceilings and spending caps. The debt ceiling would be suspended until January 2025, well beyond the next presidential election, and nondefense spending would remain approximately steady in the 2024 fiscal year before increasing by 1% the following year. The plan allocates $886 billion for defence in the next fiscal year, the same amount Biden suggested, and $704 billion for other purposes. In addition, if Congress fails to pass 12 yearly budget bills, discretionary expenditure will be reduced by 1% compared to the prior year. The bill aims to cap federal budget growth at 1% for the following six years, but beyond 2025, that provision would be null and void. While formal calculations have not been made public, the White House believes the proposal will result in at least a $1 trillion reduction in government spending.
The second is unspent COVID money. About $30 billion in unused coronavirus relief funds allocated by Congress in earlier measures would be cancelled out under the accord. It recoups uncommitted funds from various federal programmes that received funding during the pandemic, such as housing vouchers, loans to small businesses, and internet access in remote places.
The law safeguards $5 billion for a programme to rapidly develop the next generation of COVID-19 vaccines and treatments and cash for housing aid for veterans and the Indian Health Service.
The third is IRS Spending. Republicans aimed for funds allocated to the IRS in 2016 to combat tax evasion. The law cuts $1.4 billion from the IRS’s budget.
The fourth is Work Requirements. The agreement would enact tougher work requirements for people receiving SNAP benefits (formerly known as food stamps), a long-held goal of the Republican Party. The debt ceiling bill enacted by the Senate had fewer amendments than the one passed by the House.
Most physically capable persons between 18 and 49 already have to work to support themselves. The law would gradually raise the age cap, eventually settling on 54 as the upper limit. However, in 2030, the clause will no longer be in effect, and the maximum age will revert to 49.
Veterans, the homeless, and youth ageing out of foster care all received increases in benefits because of Democratic efforts. The contract states that this will end in 2030 as well.
The agreement would also make it marginally more difficult for states to exempt specific individuals from SNAP job requirements. Under the current legal framework, governments have some discretionary authority to provide exemptions from the applicable work requirements; however, this authority is subject to numerical caps. The deal would limit the number of exemptions a state can provide each month and would limit the ability of governments to roll over unused exemptions from one month to the next.
The accord will also alter the cash assistance programme for low-income families with children, known as Temporary Assistance to Needy Families. The compromise would update and rebalance a credit that permits states to compel fewer recipients to work, making it harder for states to escape the federal government’s work requirement mandate.
The fifth is speeding up energy projects. The deal makes changes to the National Environmental Policy Act for the first time in more than four decades, such as the identification of a “single lead agency” to develop and schedule environmental studies in order to streamline the law. It shortens the duration of environmental assessments and impact statements and streamlines other aspects of environmental review processes.
Agencies will have a year to conduct environmental reviews, with an additional year allotted for reviews of projects with complicated environmental implications.
The law also prioritises the Mountain Valley project, a natural gas project in West Virginia that Senators Joe Manchin and Shelley Moore Capito have supported.
The sixth is student loans. Since the beginning of the coronavirus outbreak, Republicans have worked to roll back the Biden administration’s attempts to offer millions of debtors with student loan relief and aid. Despite the failure of the Republican amendment to undo the White House’s plan to forgive $10,000 to $20,000 in debt for practically all borrowers, Biden agreed to terminate the moratorium on student loan repayment.
In the last few days of August, the moratorium on student loan payments would end.
Meanwhile, the Supreme Court, currently ruled by its right-wing 6-3, will decide the fate of student loan relief. During oral arguments, several judges voiced serious doubts about whether or not Biden’s proposal would pass constitutional muster. A conclusion is anticipated by the end of June at the latest.
Now let’s discuss what is left out
The final accord did not include the House Republicans’ recent measure that would have imposed new work requirements on some Medicaid enrollees. Democrats in the White House and Congress strongly opposed the plan, arguing that it would reduce access to necessities like food and healthcare without contributing to economic growth.
The Republican plan to eliminate many of the tax subsidies for renewable energy that Democrats passed last year along party lines also did not make it into the final agreement. They distort the market and squander taxpayer money, McCarthy and the Republicans have said of the tax breaks.
The administration has justified the tax credits by saying they have led to private sector investments totalling hundreds of billions of dollars, generating thousands of new manufacturing jobs in the US.
Passing it won’t be a cakewalk
Both the Democratic president and the Republican speaker of the House are trying to persuade legislators to approve the plan to avoid a default that would have a destabilising effect on the global economy.
However, the law will be debated and analysed by Congress due to its inclusion of provisions to support veteran medical care, alter work requirements for some government aid users, and simplify environmental evaluations for energy projects.
McCarthy announced a vote on the bill in the House on Wednesday, giving the Senate time to review it before June 5, the date Treasury Secretary Janet Yellen predicted the United States could default on its debt obligations if Congress does not act in time.
Other staunch conservatives are anxious that the deal won’t do enough to reduce future deficits, while other Democrats are concerned about the potential for changes to work requirements in social welfare programmes like food stamps.