💰💸🇺🇸 US Debt Ceiling Deal

What is the US debt ceiling and why is it important?

• The US debt ceiling is a limit on the amount of money the US government can borrow to pay its bills.
• The debt ceiling has been a contentious issue in US politics, with debates over whether to raise it or not.
• The recent debt ceiling deal lifts the limit on borrowing but also includes spending cuts, leaving some defense projects unfunded.
• The debt ceiling is important because if it is not raised, the US government risks defaulting on its debt, which could have serious consequences for the economy and global financial markets.

What was the deal reached between the Biden administration and Republican leaders?

• The Biden administration and Republican leaders have reached a deal to raise the federal debt ceiling and fund the government for the next two years.
• The deal incentivizes lawmakers to fully fund the government or face 1% across-the-board cuts to both defense and nondefense spending next year.
• The legislation clears the decks of the most politically perilous fights for a White House eager to focus on implementing and selling Biden’s first two years of legislative accomplishments.
• Biden brokered the deal with McCarthy after promising that he would not negotiate over the debt ceiling, a posture he maintained even as the leaders hashed out a plan to slash the federal budget.

What are the other provisions in the bill?

The bill includes federal spending caps for the next two fiscal years, limiting military spending to $886 billion and nonmilitary discretionary spending to $704 billion in fiscal year 2024, and about $895 billion and $711 billion in fiscal year 2025. The bill also places new work requirements on SNAP and the Temporary Assistance for Needy Families (TANF) program, which have been shown to do more harm than good. Additionally, there is a sequestration provision in the bill, where if a continuing resolution is in place next January, there are automatic 1% cuts to both defense and nondefense spending that will snap into place.

What would have happened if the debt limit was not raised?

If the debt limit was not raised, the US would have faced a catastrophic default, which would have led to a global financial crisis. The debt ceiling bill has passed in the House, raising the debt ceiling until Jan. 1, 2025, which is almost a full year later than Republicans initially wanted, punting the issue until after the next presidential election. The bill is proof that Biden successfully defended the vast majority of his agenda passed by the last Congress. However, a $16 billion list of lower-priority defense items like tanks, helicopter upgrades, and a ship, that would normally be paid for as part of the defense budget, could go unfunded after the U.S. passed a landmark bill that lifts the debt ceiling but curbs federal spending. The debt deal capped national security spending in fiscal 2024 at $886 billion, which is what U.S. President Joe Biden requested. The bipartisan deal to avert a government default this week featured modest cuts to a relatively small corner of the federal budget. As a curb on the growth of the nation’s $31.4 trillion debt load, it was a minor breakthrough, at best.

What is the reaction from Democrats and Republicans after the debt ceiling deal?

The article mentions that both sides left the meeting feeling that they had made progress toward a deal. However, progressive Democrats were unsettled by what they viewed as weeks of being boxed out of the negotiations and sharply objected to the inclusion of the issue altogether. Republicans disputed the Congressional Budget Office's analysis outright.

What's the significance of the debt ceiling for the US economy?

• The US debt ceiling deal has left $16 billion of lower-priority defense items unfunded, including tanks, helicopter upgrades, and a ship.
• The debt deal capped national security spending in fiscal 2024 at $886 billion, which is what U.S. President Joe Biden requested.
• The debt ceiling crisis may have longer-term reputational and financial costs, leading foreign officials to reassess their perspectives on the stability of the United States.
• The bipartisan deal to avert a government default this week featured modest cuts to a relatively small corner of the federal budget, showing how difficult it could be for lawmakers to agree anytime soon on a major breakthrough to demonstrably reduce the nation's debt load.
• There is no clear economic evidence that current debt levels are dragging on economic growth, but the debt is poised to top $50 trillion by the end of the decade even after accounting for newly passed spending cuts.

What are the implications of the debt ceiling deal for the average American?

There is no clear answer to how the debt ceiling deal will affect the average American. However, the deal may strand $16 billion of lower-priority defense items like tanks, helicopter upgrades, and a ship that would normally be paid for as part of the defense budget. The deal also includes a budget agreement that lifts the debt ceiling, but it curbs federal spending. There is still an appropriations battle to go through this year to fund the government based on the budget agreements in the deal. Additionally, if a continuing resolution is in place next January, there are automatic 1% cuts to both defense and nondefense spending that will snap into place.

What are the next steps after the debt ceiling deal has been passed?

• There is still an appropriations battle to go through this year to actually fund the government based on the budget agreements in the deal.
• There is a sequestration provision tucked into the bill, where if a continuing resolution is in place next January then there are automatic 1% cuts to both defense and nondefense spending that will snap into place.
• A $16 billion list of lower-priority defense items like tanks, helicopter upgrades and a ship, that would normally be paid for as part of the defense budget, could go unfunded after the U.S. passed a landmark bill that lifts the debt ceiling but curbs federal spending.
• Legislators, the Department of Defense and other agencies are wondering how to pay for projects that in past years were last-minute additions to the must-pass defense policy and appropriations bills, that generally get approved with little discussion.