Debt Deal Done

Negotiators for President Biden and Speaker Kevin McCarthy (R-Calif.) struck an agreement late Saturday on government spending that will raise the debt ceiling and avert a looming default.

 

Rep. Massie was Key to Debt Deal Passage - Why did he vote for it?


by Brett Samuels and Emily Brooks, The Hill.com, May 28, 2023

The deal, which must still make its way through the House and Senate in the coming days, came together after days of intense negotiations to resolve disagreements over work requirements, spending caps and other issues.

Both Biden and McCarthy touted the agreement as a win late Saturday, but they must now sell their respective parties on the specifics.

 

Here’s a look at what’s in the deal.


Raises debt ceiling two years

The deal raises the debt limit for two years rather than by a monetary amount, meaning the issue wouldn’t come up again until after the next presidential election.

The debt limit increase is separate from the spending agreement, and a source familiar with negotiations said it was consistent with the structure of budget deals in 2015, 2018 and 2019 that simultaneously raised the debt limit at the time.

Treasury Secretary Janet Yellen warned lawmakers this week that the agency would likely run out of money and default on June 5 without congressional action. Experts had warned a default could trigger a recession.

The White House for months maintained it was not negotiating on the debt limit and insisted Congress had a responsibility to raise the debt ceiling without conditions. In recent days, officials argued they were not negotiating over the debt ceiling, but were merely in talks over a spending agreement.

Spending caps

A GOP one-pager on the deal said it includes a rollback of non-defense discretionary spending to fiscal year 2022 levels, while limiting topline federal spending to 1 percent annual growth for six years.

But a source familiar with the agreement said there are no budget caps in place after 2025, only “non-enforceable appropriations targets.” And the source said non-defense spending would stay roughly flat when factoring in other agreed appropriations adjustments. 

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That same source said defense spending would be consistent with what Biden requested in his 2024 budget proposal, which was nearly $900 billion.

The deal fully funds medical care for veterans, including funding the Toxic Exposure Fund through the bipartisan PACT Act.

The level and length of spending cuts in the final text could ultimately determine how many Republicans are willing to support the agreement, given numerous conservatives had viewed the negotiations as an opportunity to dramatically rein in government spending.

Work requirements

Work requirements were one of the largest sticking points in talks in recent days, with Republicans adamant that tougher work requirements be included in any deal while the White House balked at changes that would take away assistance from poor Americans.

The agreement phases in an increase for the age until which recipients of food stamps must seek work to be eligible for the benefits, from 49 to 54, but it also includes reforms to reduce the number of vulnerable people, including veterans and people who are homeless, subject to the limits under the SNAP program.

The changes to the food stamp program will sunset in 2030, a source familiar with the agreement said.

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The deal does include some additional work requirements for the Temporary Assistance for Needy Families (TANF) program, which is likely to frustrate Democrats. A source familiar with the agreement said changes included in the original House GOP bill to raise the debt limit are not in the final deal, which would have put more than 1 million potential beneficiaries at risk.

The agreement does not include any changes to work requirements for Medicaid recipients, which Republicans had proposed but that the White House pushed back hard on.

COVID-19 funds clawback

The GOP one-pager on the deal said it will claw back “tens of billions” in unspent funds appropriated to combat COVID-19, including $400 million from the Centers for Disease Control and Prevention “Global Health Fund.”

Biden had indicated in recent weeks that he would open to putting unused COVID-19 relief funds on the table as part of spending talks.

IRS funds

The deal would cut some IRS funding without nixing the full $80 billion funding boost over a decade that Democrats approved last year for increased enforcement actions. Repealing that boost has been longtime GOP priority. The GOP list said the deal will “nix the total FY23 staffing funding request for new IRS agents.”

Rep. Dan Bishop (R-N.C.) disapprovingly said in a tweet that the deal rescinds $1.9 billion in IRS funding. “That’s the kind of ‘get’ that’s so good McCarthy agreed to increase the debt ceiling $4 trillion,” Bishop tweeted.

Permitting reform and environmental provisions

A White House source familiar with the agreement confirmed to The Hill that the tentative deal includes energy permitting reform, a major priority for Sen. Joe Manchin (D-W.V.) and an aspect McCarthy has said was a possible feature of a deal.

The source emphasized that the deal preserves the climate provisions of the Inflation Reduction Act (IRA), Biden’s signature climate and infrastructure legislation, which the GOP had earlier sought to pare down in exchange for a debt ceiling increase.

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“The agreement codifies, in [the National Environmental Protection Act], reforms aimed at boosting the coordination, predictability, and certainty associated with federal agency decision-making,” the source said in a statement.

The tentative deal reportedly would overhaul the permitting process to put a single agency in charge of developing the final environmental review document under a public timeline. The White House emphasized that this would not reduce the statute of limitations or otherwise curtail available legal remedies.

Manchin in 2022 agreed to back the IRA in exchange for a vote on a permitting reform package, although his proposal was later blocked by Senate Republicans. Separately, Senate Environment and Public Works Chair Tom Carper (D-Del.) introduced renewable energy-specific permitting reform earlier this month.

A GOP one-pager on the deal confirmed that it includes measures to “cut red tape and streamline energy & infrastructure projects.”

No new taxes

McCarthy said in brief statements to the press on Saturday that the deal included no new taxes.

“There are no new taxes, no new government programs,” McCarthy said.

Democrats unhappy with the deal to raise the debt ceiling

Biden had in recent days publicly advocated for revenue sources to be part of negotiations, specifically focused on closing loopholes and increasing taxes on wealthy Americans.

Incentive to pass government funding bills

In a move meant to encourage Congress to pass appropriations bills on time, the debt deal includes a measure that caps continuing resolutions to fund the government at 99 percent of current levels until all 12 appropriations bills are enacted. That idea has long been floated by Rep. Thomas Massie (R-Ky.).

Administrative Pay-Go

Repubulicans say that the deal includes the first-ever statutory Administrative Pay-Go language, relating to agencies proposing spending reductions that accompany discretionary spending increases. Republicans hope the measure will result in savings on executive rules and regulations that are enacted.
 

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