Debt Ceiling Deal Reached ‘in Principle’

We almost wrecked the economy . . . for this?

Reuters (“Biden, McCarthy reach tentative US debt ceiling deal“):

U.S. President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative deal to suspend the federal government’s $31.4 trillion debt ceiling on Saturday evening, ending a months-long stalemate.

However, the deal was announced without any celebration, in terms that reflected the bitter tenor of the negotiations and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people,” McCarthy tweeted.

Biden called the deal “an important step forward” in a statement, saying: “The agreement represents a compromise, which means not everyone gets what they want. That’s the responsibility of governing.”

The deal would suspend the debt limit through January of 2025, while capping spending in the 2024 and 2025 budgets, claw back unused COVID funds, speed up the permitting process for some energy projects and includes some extra work requirements for food aid programs for poor Americans.

After months of back-and-forth, the tentative agreement came together in a flurry of calls. Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal, McCarthy briefed his members later in the evening, and the White House and the House leader spoke afterward.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill on Sunday, then speak to Biden and have a vote on the deal on Wednesday.

Biden and McCarthy have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority — meaning it will need bipartisan support before the president can sign it.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, a source familiar with the deal said.

“It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, rein in government overreach – there are no new taxes, no new government programs,” McCarthy said.

AP (“Debt-ceiling deal: What’s in and what’s out of the agreement to avert US default“):

President Joe Biden and House Speaker Kevin McCarthy have reached an agreement in principle on legislation to increase the nation’s borrowing authority and avoid a default.

Negotiators are now racing to finalize the bill’s text. McCarthy said the House will vote on the legislation on Wednesday, giving the Senate time to consider it ahead of the June 5 deadline to avoid a possible default.

While many details are unknown, both sides will be able to point to some victories. But some conservatives expressed early concerns that the deal doesn’t cut future deficits enough, while Democrats have been worried about proposed changes to work requirements in programs such as food stamps.

A look at what’s in and out of the deal, based on what’s known so far:

TWO-YEAR DEBT INCREASE, SPENDING LIMITS

The agreement would keep non-defense spending roughly flat in the 2024 fiscal year and increase it by 1% 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 will 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.

However, 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. And 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 the National Environmental Policy Act that will 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 keeps Biden’s student loan relief in place, though the Supreme Court will have the ultimate say on the matter.

So, essentially, we won’t have to have this fight again for at least two years in exchange for some meaningless budget caps (any subsequent budget would supersede them, since Congress can’t bind a future Congress), funding a veterans program both parties wanted to fund to begin with, tweaks to environmental review processes, and modest changes to existing work requirements for federal assistance programs. Assuming Members actually vote for the deal.

That hardly seems worth months of tense negotiations, much less threatening to put the world economy in jeopardy.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College. He's a former Army officer and Desert Storm veteran. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. DK says:

    Who is we? Lol

    Looks like Dark Brandon wouldn’t budge and McCarthy’s people got spooked and threw in the towel. Hopefully, Biden is on the phone with Bernie and Jayapal, telling them to have ‘progressives’ howl and knash their teeth — so enough House Republicans will think they won to get this over the finish line.

  2. OzarkHillbilly says:

    “It is a tale told by an idiot, full of sound and fury, signifying nothing.”

  3. Gustopher says:

    However, the agreement would expand some work requirements for the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps.

    I would like the recipients of the mortgage tax deduction to have to jump through the same hoops and the SNAP recipients.

    Work requirements sound nice, but they are just more paperwork and hassle in the lives of people who are already pushed to the limit. It doesn’t encourage work, it sets up traps to knock people who are qualified out of the program. It doesn’t even teach them to do annoying paperwork that demonstrates things that everyone already knows (a valuable skill!), it just punishes them if they don’t do it right.

  4. OzarkHillbilly says:

    @Gustopher: It doesn’t encourage work, it sets up traps to knock people who are qualified out of the program.

    That is the purpose of them, screwing the lazy moochers.

  5. Gustopher says:

    Overall, I’m tired of this shit, and would have rather Biden just told the Republicans to pound sand and used the 14th Amendment. It’s going to happen sooner or later. 2025 is right around the corner, and perpetually balancing on the brink of crisis is a terrible way to run a country.

    At the very least, we should have a standing policy of vetoing every budget that isn’t fully funded with taxes and/or borrowing authority.

  6. Tony W says:

    @Gustopher: I think we might have seen a 14th Amendment Solution if this was Biden’s 2nd term.

  7. Kylopod says:

    @Gustopher: The ultimate solution is that Dems are going to have to abolish the debt limit next time they have the trifecta.

  8. Kathy says:

    Coincidentally I just finished reading The Poverty Paradox by Mark Robert Rank.

    One statistic that really stood out is how many people in America will experience poverty at some point in their lives. I forget exactly (stats and audiobooks are not a good combination), but it’s really high.

    Not to mention that most people who rely on welfare assistance are not unemployed. Rather they work for miserly wages. So what work incentives do they need?

  9. James R Ehrler says:

    I love this comment from Josh Marshall at TPM:

    On the merits this is a very good result because it means we won’t have the financial chaos of a debt default and we appear to have far more modest concessions than almost anyone was anticipating. In other words, the hostage taking was a fail. If you walk into Denny’s, pull out a gun and say gimme the money, if you end up just getting served breakfast that means you failed. And that’s kind of what happened here.

  10. Kylopod says:

    @James R Ehrler:

    and we appear to have far more modest concessions than almost anyone was anticipating.

    That’s why I’m not going to breathe a sigh of relief until the actual vote goes through. Already I’m seeing cries of protests from the right. Maybe it’s all just theater. Like a lot of slimy worms, McCarthy is more skilled at keeping his caucus in line than most people on either side of the aisle give him credit. And I think most Republicans secretly understand that. At least that’s been my impression. We’ll see.

  11. Michael Reynolds says:

    On the one hand, there are the MAGAts. On the other hand: Wall Street. The MAGAts want to tear the country down, the suits want to make money. It looks like money still talks in the GOP.

  12. James R Ehrler says:

    @Kylopod: Yup, going to need a lot of Dem House members to sign on. The Senate too.

    But the reality is that if this deal also obviates the need for budget negotiations and concessions this fall then it ended up being a budget negotiation wrapped in a debt default one. Not great but since the House was lost these types of concessions were a given in a budget deal.

    What Dems really should be working on is using this time to get a legal ruling that the whole debt ceiling law is either unconstitutional or rendered moot by later legislation.

  13. Moosebreath says:

    @Kylopod:

    “Already I’m seeing cries of protests from the right.”

    On the left as well. Some centrist Democrats like Jim Himes (scroll down here) are saying they may be “no” votes:

    ““I’m tempted to say, ‘No, I’m a no vote’ — because, as the speaker said, there is absolutely nothing for the Democrats in these things,” Himes said on “Fox News Sunday.”

    A former chair and current member of the pro-business New Democrat Coalition, Himes said he did not want to validate the negotiating process used by Republicans, “which at the end of the day is a hostage-taking process.””

  14. Lounsbury says:

    @Moosebreath: If the hostage taking process ends up being an embarrassing failure, it would be rather smarter to indeed “validate it” rather than not and open up the real potential of much worse including default which could risk being destructive enough to hand election to Trump. (I would rather suspect you agree, merely a comment on the quotes)

    Although enough theatrical protest from Democrats & Left may be helpful to introduce a sense of drama and perhaps complaint that keeps enough right side votes on board from feeling there are some ‘librul tears’ to sell to the primary voter constituency…

    @Michael Reynolds: Not merely Wall Street, there should be enough numerate Republicans to realise that a default moment would impact a broad range of consumers quite quickly via variable borrowing rates, notably unsecured credt like credit cards, that would translate into mass outrage when borrowers saw probably effective 200-700 basis point rate rises on their debt.
    (see UK and the Truss budget moment)

  15. DK says:

    @Moosebreath:

    ““I’m tempted to say, ‘No, I’m a no vote’ — because, as the speaker said, there is absolutely nothing for the Democrats in these things,” Himes said on “Fox News Sunday.”

    Reps. Himes and Jeffries are kinda right. “Kinda” because Democrats have been pushing for the veterans funding for quite some time, so they did get that.

    I suspect Jeffries and company will vote for it anyway, or maybe there will be a little more horse-trading after the GQP whip finds out how many Democratic votes they’ll need.

  16. Scott F. says:

    “It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, rein in government overreach – there are no new taxes, no new government programs,” McCarthy said.

    I don’t know. After all the irresponsible brinkmanship, McCarthy gets to claim this utter BS with a straight face and no one in the press will call him on it. That feels like a loss for good governance. Of course, good governance died with Gingrich’s term as Speaker, so while this latest fiasco is par for the course, it is nonetheless disappointing.

  17. just nutha ignint cracker says:

    @Lounsbury:

    …there should be enough numerate Republicans to realise …

    Yes, I used to think that, too. 🙁