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Fiscal Responsibility Act (Bipartisan Debt Limit Increase)


President Biden and House Speaker McCarthy (R-CA) reached an agreement over the weekend on a package to provide additional government borrowing authority while reducing federal spending.

The agreement suspends the debt limit through Jan. 1, 2025, sets statutory caps on defense and nondefense discretionary spending for FY 2024 and FY 2025, and rescinds certain funding previously appropriated for COVID-19 response and for IRS enforcement.

Among its other provisions, it tightens work requirements for food stamps and TANF and streamlines the permitting process for energy projects. Treasury Secretary Yellen said Treasury would be unable to pay for all government obligations starting June 5 unless Congress acted to provide additional borrowing authority by then. 

Debt-Limit Suspensions 

The deal suspends the debt ceiling, effectively giving Treasury unfettered borrowing authority for another two years before another debt-ceiling increase would need congressional approval. That would be a win for Democrats, especially Biden, who wouldn’t have to face another debt-limit battle before seeking reelection next year.

Discretionary Spending

The negotiators agreed to keep non-defense spending roughly flat next year and increase it by just 1% in 2025. The deal puts limits on what’s known as discretionary spending, the money Congress appropriates each year to fund federal agencies and programs. The restrictions don’t apply to mandatory programs like Medicare and Social Security.

Defense spending would rise next year by 3.3%, as Biden requested in his proposed budget. That is below the rate of inflation so doesn’t meet Republican defense hawks’ aspirations for a military build-up. But it is a break from the 2011 debt-limit deal, in which spending caps were equitably applied to defense and non-defense spending.

The deal means that many federal programs will face budget cuts next year since there will be no increase to account for inflation. Congress always has the authority to approve move spending in case of an unexpected event, such as a war or pandemic.

Work Requirements

The deal calls for a phased-in expansion of work requirements to apply to older recipients of SNAP benefits. Work requirements for food assistance would eventually apply up to age 54, instead of age 49, as current law requires.

The White House says it scored a win by gaining exceptions for veterans and vulnerable groups such as homeless people. And the administration also claims as a win a provision that would end the tougher work requirements in 2030 without additional action by Congress.

But the stricter work standards are a win for Republicans, who pushed for additional work rules for adults seeking anti-poverty assistance. They say this would save money by reducing the number of people who receive benefits from those programs.

House Speaker McCarthy's (R-CA) Statement on the Fiscal Responsibility Act

“The American people elected House Republicans to stop the out-of-control inflationary spending that has broken family budgets. Today, we secured a historic series of wins worthy of the American people. 

“We cut spending year-over-year for the first time in over a decade while fully funding national defense and veterans' health benefits, include the largest rescission in history by clawing back billions in unspent COVID funds, and achieve consequential work requirements to welfare programs to lift Americans out of poverty and grow the economy. We enact for the first time into law 'Pay-Go' rules for the Executive Branch, which forces the Executive Branch to find dollar-for-dollar savings in the government for costly rules and regulations, so that executive overreach is reined in and held accountable. And in order to help grow our economy and lower costs for the American people, we streamline the process for permitting in America and begin to prune an overgrown federal bureaucracy that has expanded during the Biden administration. 

“The Fiscal Responsibility Act does what is responsible for our children, what is possible in divided government, and what is required by our principles and promises. Only because of Republicans’ resolve did we achieve this transformative change to how Washington operates. 

 “We are just 140 days into this Republican majority. And we’re just getting started.”

Against

Some conservatives expressed early concerns that the compromise does not cut future deficits enough, while Democrats have been worried about proposed changes to work requirements in programs such as food stamps.

“The D.C. Swamp has proposed the largest debt ceiling increase in our nation’s history, adding $4 trillion to the existing $31 trillion national debt,” said Rep. Matt Rosendale (R-MT). "The Fiscal Irresponsibility Act fails to cut spending and continues to fund the Democrats’ and Biden Administration’s radical agenda. It is frankly an insult to the American people to support a piece of legislation that continues to put our country’s financial future at risk. Montanans did not send me to Washington to support business as usual, which is why I will be voting AGAINST the Fiscal Irresponsibility Act."

Progressives believe this is a bad deal. They argue that Democratic leaders set a terrible precedent by saying no negotiations over the debt limit and then ultimately negotiating. It’s bad policy to make it harder for poor people to put food on the table while making it easier for rich people to cheat their taxes.

Do you think Congress should pass the Fiscal Responsibility Act, to increase the debt ceiling, and cut spending?

Additional Information:

Among other consequential changes, this agreement:
  • shuts down the COVID slush funds
  • blocks all of his $5 Trillion in new tax proposals
  • ends the out-of-control spending that is driving up the cost of living
  • eliminates $1.4 billion that would be wasted on hiring Biden’s new army of IRS agents
  • enacts most consequential work requirements for welfare recipients in a generation

Two-year debt increase, spending limits

The agreement would keep nondefense spending roughly flat in the 2024 fiscal year and increase it by 1 percent the following year, as well as provide for a two-year debt-limit increase — past the next presidential election in 2024. That’s according to a source familiar with the deal who provided details on the condition of anonymity.

Veterans care

The agreement would fully fund medical care for veterans at the levels included in Biden’s proposed 2024 budget blueprint, including for a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards. Biden sought $20.3 billion for the toxic exposure fund in his budget.

Work requirements

Republicans had proposed boosting work requirements for able-bodied adults without dependents in certain government assistance programs. They said it would bring more people into the workforce, who would then pay taxes and help shore up key entitlement programs, namely Social Security and Medicare.

Democrats had roundly criticized the proposed changes, saying they would lead to fewer people able to afford food or health care without actually increasing job participation.

House Republicans had passed legislation that would create new work requirements for some Medicaid recipients, but that was left out of the final agreement.

But the agreement would expand some work requirements for the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. The agreement would raise the age for existing work requirements from 49 to 54, similar to the Republican proposal, but those changes would expire in 2030. The White House said it would at the same time reduce the number of vulnerable people at all ages who are subject to the requirements.

Speeding up energy projects

The deal puts in place changes in the National Environmental Policy Act that would designate “a single lead agency” to develop environmental reviews, in hopes of streamlining the process.

What was left out

Republicans had sought to repeal Biden’s efforts to waive $10,000 to $20,000 in debt for nearly all borrowers who took out student loans. But the provision was a nonstarter for Democrats. The budget agreement would keep Biden’s student loan relief in place, though the Supreme Court will have the ultimate say on the matter.

The Supreme Court is dominated 6-3 by conservatives, and those justices’ questions in oral arguments showed skepticism about the legality of Biden’s student loans plan. A decision is expected before the end of June.


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