May 28, 2023 debt ceiling news

President Joe Biden and House Republicans have reached an agreement in principle to raise the debt ceiling and cap spending, after several weeks of tense negotiations.

Now, congressional leaders in both parties have to convince enough of their members to vote for the agreement, which contains provisions that lawmakers on each side of the aisle don’t support.

Here’s what we know about the deal, based on a fact sheet circulated by House Republicans and a source familiar with the negotiations.

Raises the debt ceiling: The agreement would increase the debt limit for two years.

Caps nondefense spending: Under the deal, nondefense spending would remain relatively flat in fiscal 2024 and increase by 1% in fiscal 2025, after certain unspecified adjustments to appropriations are made, according to the source.

After fiscal 2025, there would be appropriations targets, but they would not be enforceable, according to the source.

The House GOP fact sheet says nondefense discretionary spending would be rolled back to fiscal 2022 levels and topline federal spending would be limited to 1% annual growth for the next six years.

Expands work requirements: The agreement calls for temporarily broadening work requirements for certain adults receiving food stamps.

Currently, childless, able-bodied adults ages 18 to 49 are only able to get food stamps for three months out of every three years unless they are employed at least 20 hours a week or meet other criteria. The deal would raise the age to 54, according to the source. The GOP fact sheet says it would apply to those up to age 55.

Restart student loan repayments: The deal would require borrowers to pay back their student loans again, according to the House GOP fact sheet, although when repayments would start is not specified. They have been paused since the Covid-19 pandemic began.

Read more about the deal here.

President Joe Biden and House Speaker Kevin McCarty will speak Sunday afternoon before 2 p.m. ET to "complete an agreement," House Minority Leader Hakeem Jeffries said, and the tentative bill text will be released afterward.

In a letter to his Democratic colleagues, Jeffries did not say if he would support the negotiated deal, but noted: "It is my expectation that over the next several days, there will be multiple opportunities to review and discuss the legislation with the Biden administration in advance of any mid-week vote scheduled by House Republicans."

Stiff opposition is expected from both the left and right. That means it’s going to require an intense whipping operation – and support from both sides of the aisle – to get the bill over the finish line.

House Speaker Kevin McCarthy said Sunday he would be able to get the majority of his conference to vote for the tentative deal cut with the White House to raise the debt ceiling for two years.

While he acknowledged some conservative pushback, McCarthy cast the deal as a major victory after President Joe Biden held out on negotiating for months.

“We were able to do this when the president said he wasn’t even going to talk to us,” the California Republican said.

Asked if he has talked to House Democratic leader Hakeem Jeffries, McCarthy said the two have been in regular touch, although he has not asked the New York Democrat to get a specific number of votes from his side of the aisle at this point. 

“Right now, the Democrats are very upset. The one thing Hakeem told me: ‘There is nothing in the bill for them,’” McCarthy said.

GOP Rep. Dusty Johnson of South Dakota said Sunday that there were "no wins for Democrats" in the tentative debt limit deal that House Republicans and the White House struck late Saturday night.

"There is nothing after the passage of this bill that will be more liberal or more progressive than it is today. It is a remarkable conservative accomplishment," Johnson, chair of the center-right Republican Main Street Caucus, told CNN's Jake Tapper on "State of the Union."

President Joe Biden acknowledged in a statement Saturday that the deal was a compromise, "which means not everyone gets what they want."

Johnson, a third-term lawmaker, maintained that Republicans will overwhelmingly support the deal, despite criticism from some of the more conservative members of the party such as House Freedom Caucus member Bob Good of Virginia.

Senior White House officials have been calling rank-and-file Democrats since Saturday night and trying to sell them on the debt limit deal, according to lawmakers who have received the calls.

Many Democrats are worried the White House gave away too much in order to get a debt limit hike through 2024, and some are angry that they have gotten scant details about the contours of the deal and have had to learn about it in the press.

Democrats will be briefed virtually by White House officials at 5 p.m. ET Sunday night.

The briefings are critical since Democratic votes will likely be needed to get the bill through the House. 

Although the White House and House Republicans have reached a tentative agreement to raise the debt ceiling, the saga isn't over yet. Congress still needs to pass the deal – far from a guaranteed outcome – and President Joe Biden would need to sign it before the US defaults or misses a scheduled payment.

If lawmakers fail to pass the tentative agreement, and don’t raise the country’s debt limit by early June, the government may confront an unprecedented challenge: determining which bills to prioritize for payment as the Treasury Department grapples with insufficient funds.

Debt vs. other payments

If the US doesn’t raise the debt ceiling in time, the Treasury may have to decide whether to make interest payments to its debtholders or to pay its non-debt obligations, such as Social Security, veterans’ benefits, unemployment insurance, food stamps and running government organizations such as the military and the US Centers for Disease Control and Prevention.

A US default on its debt would undermine faith in the federal government’s ability to pay all its bills on time, affecting the government’s credit rating and unleashing massive turbulence in financial markets.

If America’s credit rating were downgraded, that could raise borrowing costs for millions of Americans, sending mortgage, personal loan and credit card rates higher. It could make business’ borrowing costs rise and lead to layoffs – and ultimately a recession.

Treasury will not be able to make everyone happy

Though prioritizing debt payments might stave off an even-greater economic collapse, the US may not emerge unscathed.

In 2011, Treasury Secretary Tim Geithner compared the government picking and choosing which bills to pay to homeowners who pay their mortgage while pushing off their car loan and credit card bills: While that key housing expense is taken care of, the person would likely still have damaged credit.

Betsey Stevenson, a professor of economics and public policy at the University of Michigan, said that no matter which payments Treasury decides to put first, the agency will likely be sued by those left behind.

Read more here.

The “agreement in principle” clinched by House Republicans and the White House late Saturday to raise the nation’s borrowing limit was the culmination of mad-dash negotiations over the course of the past week that regularly stretched late into the night.

But the marathon is far from over, and there is still little certainty the nation will avoid a default as both parties now work to consolidate support around the emerging package.

The agreement – which would raise the debt ceiling for two years, freeze spending on domestic programs, increase spending on defense and veterans issues, impose some new work requirements on federal food assistance programs and change some rules around energy permitting – was meant to include provisions that could sway members of both parties to vote for it.

Yet even ahead of the deal’s announcement, House members on both the left and right were already balking at some of the details said to be included in the package. Republicans who had demanded larger spending cuts threatened to withhold their support, while Democrats voiced concern that new rules on social safety net programs would send more Americans into poverty.

For House Speaker Kevin McCarthy, the upcoming battle to secure the votes of at least half of his party’s members – as he has promised – will be a defining moment for his hard-won young speakership.

Some more context: In the Senate, any one member can slow down the process by as long as a week, adding another layer of uncertainty as Washington rushes to avoid default.

Last week, Treasury Secretary Janet Yellen set June 5 as the date the government will run out of cash to pay its bills in full and on time. The US has never before defaulted, and economists predict the consequences would be catastrophic.

Read more about this here.

The White House and House Republicans have an agreement in principle on a deal to raise the debt ceiling for two years and cap spending, House Speaker Kevin McCarthy confirmed Saturday, moving the nation one step back from the brink of a historic default.

The agreement in principle was reached by President Joe Biden and McCarthy during a phone call Saturday, a source familiar with their call said. Now both leaders face the tall task of selling the deal to their allies in both chambers of Congress, where Republicans control the House and Democrats control the Senate. The deal must get passed before June 5 – the crucial date when Treasury Secretary Janet Yellen says the US will no longer be able to pay its bills.

If the deal ends up passing through Congress and being signed into law by Biden before that so-called X date, the White House and House Republicans will have avoided an unprecedented economic crisis. A default by the US government, which has never happened, could spark a global recession and the loss of millions of jobs – a scenario that loomed over the last-minute rush of holiday weekend negotiations.

The two-year deal would also push the next fight over raising the debt ceiling until after the 2024 elections.

You can read more here.

If Congress does not address the debt ceiling by June 5, the US Treasury Department will not have enough funds to pay all of the nation’s obligations in full and on time, Treasury Secretary Janet Yellen said Friday.

President Joe Biden and House Republicans have agreed in principle on a deal to raise the debt ceiling, House Speaker Kevin McCarthy said Saturday, though the work is far from done.

Now leaders in both parties have to convince enough of their members to vote for the deal, which contains provisions that lawmakers on each side of the aisle don’t support.

New date: Until Friday, Yellen had been warning Congress that the so-called X-date, when the US would be unable to satisfy all its obligations, would likely arrive in early June – and as soon as June 1. Earlier this week, she said she would try to give lawmakers a more precise date.

Big bills coming due: Treasury will send out more than $130 billion in payments in the first two days of June, including ones to veterans and Social Security and Medicare recipients. This will leave the agency with “an extremely low level of resources,” Yellen wrote.

During the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers – but it projects that it will not have the resources to meet all these obligations, she continued.

Ever since the US hit its borrowing cap in January, Treasury has been forced to rely on cash and extraordinary measures to pay the bills until Congress either raises or suspends the debt ceiling.

The agency had $38.8 billion of cash on hand, as of Thursday, according to federal data. The amount bounces around as Treasury takes in revenue and makes payments, but the balance has declined from $238.5 billion at the start of the month, when the coffers were relatively flush from tax collections in April.

Treasury had about $67 billion remaining in extraordinary measures as of Wednesday, down from around $220 billion at the end of January.