The Debt Ceiling Deal In A Nutshell

The Washington Post summarizes the debt-ceiling deal, which is currently rushing through the legislative process and most be completed by June 5 to avoid a default on the federal debt:

President Biden and House Speaker Kevin McCarthy (R-Calif.) have hashed out a deal to raise the federal debt ceiling and fund the government for the next two years.

Biden can point to a deal that, at least temporarily, frees him from the headache of the debt ceiling, while staving off Republican demands for steep cuts to domestic spending. McCarthy gets a deal that curtails federal spending and increases some work requirements on federal aid programs, such as food stamps. . . .

Here’s what’s in — and out — of the deal.

Raises the debt ceiling past the 2024 election

. . . Biden . . . will not have to deal with the debt ceiling again until after the next presidential campaign because the agreement raises the debt ceiling until 2025. . . .  

Keeps funding flat for most domestic programs

The biggest sticking point in negotiations has been funding levels for part of the federal budget — separate from Social Security and Medicare — that funds hundreds of domestic programs, such as scientific research, rental aid and nutritional assistance for mothers.

McCarthy pushed for substantial cuts to these programs because he wanted to bring down federal spending while increasing funding for the military and veterans affairs. Ultimately, the White House agreed to an inflation-adjusted reduction in direct spending on these kinds of programs — but mitigated by redirecting funds from other areas, such as the money clawed back from an expansion in the IRS budget that was approved last year. Spending on these domestic programs will fall by $1 billion from this year to next and rise by 1 percent in 2025. . . .

Claws back some money from the IRS

Sparing most domestic programs from cuts required the Biden administration to agree to pare back roughly $20 billion of the $80 billion Congress approved last year for an expansion of the IRS. . . .

The original $80 billion was included in the Inflation Reduction Act, Biden’s signature economic bill, to help pay for the climate and health-care spending in the measure. While the nonpartisan Congressional Budget Office said the expansion would increase revenue by $240 billion by allowing the IRS to step up enforcement, conservatives furious with the measure have argued it would unleash tens of thousands of new auditors on Americans. The IRS has said it plans to raise audit rates back to 2011 levels for only wealthy taxpayers.

Slight funding boosts for the military and veterans affairs

The deal also meets the requests in Biden’s budget to increase spending for the military and veterans affairs in line with inflation. . . .

New work requirements for federal programs

Meeting a GOP priority, the deal increases work requirements for some recipients of federal food stamps and family welfare benefits. . . . The deal does not include additional work requirements for Medicaid.

While the precise details were not clear, the deal raises the age at which adults will be required to work to receive food stamps from 50 to 54. For example, a 52-year-old woman currently receiving food stamps without having to work 20 hours per week may have to do so under the agreement. While the deal will also make it easier for the homeless and veterans to get food stamps, the administration projects that the debt ceiling agreement overall will lead to fewer people on food stamps facing work requirements, the White House official who briefed reporters said. These changes are set to expire in 2030. 

The changes to the family welfare benefits program, Temporary Assistance for Needy Families, will require states to ensure that a higher percentage of their welfare beneficiaries are working, but not as dramatically as Republicans had sought.

Major natural gas pipeline in West Virginia

In a surprise revealed Sunday night, the debt ceiling deal includes provisions to expedite a major natural gas pipeline from West Virginia to Virginia that has long been championed by Sen. Joe Manchin III (D-W.Va.).

The Mountain Valley Pipeline, which has been strongly opposed by environmental groups, would transport Appalachian shale gas about 300 miles from West Virginia to Virginia if built. The company has said it would carry 2 billion cubic feet of gas a day to help support domestic energy and liquefied natural gas, but environmental advocates say the project would impact hundreds of streams, wetlands and several miles of national forest land.

The proposal backed by Biden and McCarthy says federal agencies “shall issue all permits and verifications necessary” within 21 days of the legislation’s enactment to complete the pipeline’s construction.

Out of the deal: Closing tax loopholes, cutting student debt relief . . . 

The White House had proposed closing a number of tax loopholes, arguing that any deal to lower the deficit should include increases in federal revenue as well as spending cuts. The GOP ruled those ideas out.

Similarly, House Republicans had fought for repealing some of the clean energy tax credits approved by Democrats last year. The Biden administration objected strongly to that proposal, and they fell out of the final deal.

House Republicans also fought to block the White House’s plan to cancel student loan debt. The agreement codifies into law the White House’s prior announcement that it would no longer extend forbearance on student loan payments. But the deal does not change Biden’s proposal to cancel up to $20,000 in student debt per borrower, which is now being reviewed by the Supreme Court.

All of the changes extracted by the House Republicans are bad ones, but their very bad demands have been scaled back considerably and this point of leverage for House Republicans has been eliminated for the time being.