After months of negotiating an increase of the United States debt ceiling, President Joe Biden and House Speaker Kevin McCarthy finally reached a deal on the $31.4 trillion debt.
Where Does This Deal Stand?
The House passed the new legislation last Wednesday night with a final vote of 314-117, including 149 Republicans and 165 Democrats voting for the bill. President Biden made a statement Wednesday, calling this agreement a “bipartisan compromise” since the legislation includes suspending the debt ceiling and placing a cap on government spending.
Biden continued about the bill being “good news for the American people and the American economy.”
“..it [the legislation] honors my commitment to safeguard Americans’ health care and protect Social Security, Medicare, and Medicaid,” said Biden.
The Senate passed the new legislation Thursday night and President Biden signed the document into action on Saturday.
What Does the Bill Include?
The 99-page bill, also known as the “Fiscal Responsibility Act of 2023,” implements a suspension of the debt ceiling through 2025 instead of raising the limit. Suspending the debt limit until 2025 gives Congress time before it needs to be readdressed and seeks to prevent the matter from being used as a political ploy in the 2024 presidential election.
Suspending the debt ceiling until 2025 may bring relief to those concerned about their financial investments, government agencies, and overall U.S. economy in a default. Financial advisors can benefit from the new debt ceiling agreement as it may be a helpful tool in making their clients feel more comfortable about their financial future.
Along with suspending the debt limit, the legislation includes government spending cuts. McCarthy’s previous bill pushed to reduce spending to fiscal 2022 levels and limit these funds for a decade. However, the new deal proposes fiscal 2024 non-defense spending remain at fiscal 2023 levels and allows an increase of 1% in 2025.
House Republicans tried stopping Biden’s student loan forgiveness program he rolled out at the end of last year but were shut down. However, the legislation will end Biden’s freeze on student loan payments by September and prevent him from reinstating the prohibition.
Veteran Medical Care
The bill’s budgetary conditions include continued complete funding for veterans’ healthcare but are accompanied by other government spending limits and amendments.
One temporary amendment will be valid until 2030 and affects adults ages 18 to 49 who receive government-funded food stamps. They will only be eligible for benefits three months out of every three years unless they work a minimum of 20 hours each week. However, there are exemptions for veterans, parents, people declared homeless, disabled, and/or former foster children.
COVID-19 Relief Funds
In the new deal, the White House accepted a proposal made by House Republicans to claw back approximately $28 billion of unspent COVID-19relief funds. More spending cuts include a rescinded $1.4 billion of Internal Revenue Service funding from the 10-year allocation of $80 billion outlined in the Inflation Reduction Act passed last year.
Climate and Clean Energy
Although House Republicans attempted to rescind the Inflation Reduction Act’s clean energy tax credits, the new bill does not include any changes to the climate and clean energy provisions.
Instead, the legislation advocates creating a lead agency to oversee new energy projects and getting them approved promptly.
What Happens Next?
The Fiscal Responsibility Act of 2023 can possibly prevent the U.S. from defaulting on its debt by suspending the debt ceiling. However, government spending cuts come along with this new legislation. The House passed the bill last Wednesday and the Senate voted for the legislation that following day. President Biden signed the new deal into action on Saturday.
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