President Biden and Speaker Kevin McCarthy reached an agreement Saturday to raise the debt ceiling while imposing new limits on federal spending. If approved by Congress, it would end a partisan impasse and prevent a devastating national slump.
Not only would the deal resolve an acrimonious row over debt and spending issues that has gripped Washington for weeks, but it would also bring about important changes to environmental permits, work requirements for social safety net programs, and the introduction of the Internal Revenue Service tax.
The agreement, described as an agreement in principle solidified during a phone call between Mr Biden at Camp David and Mr McCarthy in Washington, still needs to be translated into formal legislative language before it can be considered final. Details began to emerge on Saturday night, and many questions remained outstanding.
But here are some takeaways based on the information provided at the beginning.
The debt ceiling will be raised until 2025, after the next election.
The federal government reached the $31.4 trillion debt ceiling set by law in January, but the Treasury Department is using various accounting tricks to avoid breaching it. Treasury Secretary Janet L. Yellen said Friday that her department will finalize those measures by June 5, at which point the government will no longer be able to meet its obligations.
The deal that Mr. Biden and Mr. McCarthy struck will raise the debt ceiling for two years beyond the 2024 election, so neither of them will have to tackle the problem again in the current period. Republicans had originally proposed one year. Both sides are counting on winning the 2024 election and being in a stronger political position when the next cap is reached.
Domestic spending will be capped, but not as much as Republicans would like.
Mr. McCarthy’s Republicans insisted that any increase in the debt ceiling be contingent on spending cuts, so the agreement he reached with Mr. Biden would limit some programs to continue in the same two years that the debt cap would be raised. Republicans originally sought a 10-year time frame for the spending limits but agreed to the shorter horizon.
The deal keeps non-defense spending in 2024 at about the 2023 level and increases it by 1 percent in 2025, in part by redirecting funding from other programs. Among other things, the agreement would cut about $10 billion from the $80 billion Biden previously received to help the IRS go after tax fraud for the wealthy, and he would use that money to preserve domestic programs that would otherwise be cut.
Some of the remaining billions of dollars from the COVID-19 relief package that passed shortly after Biden took office will be returned. An analysis by The New York Times suggests that the caps would reduce overall federal spending by about $650 billion over a decade — a fraction of the cuts Republicans originally sought — if spending grows at the expected rate of inflation after caps are lifted in two years.
Defense, Social Security, Medicare, and Veterans programs will be protected.
The agreement would protect the military and benefits such as Social Security and Medicare from spending cuts imposed on other parts of the government. It would also fully fund veterans’ medical care, including expanded services for those at risk of toxic burn pits.
The deal would effectively preserve the Biden administration’s big increases over the past two years in areas such as Title I education funding for low-income students, child care and development grants, cancer research and the president’s other priorities. He will leave Mr. Biden’s effort to forgive $400 billion in student loan debt in the coming decades, though that faces a Supreme Court challenge. But it would not include any of the tax hikes on the wealthy and corporations that Biden sought in the original budget proposal.
Some recipients of government assistance will encounter new job requirements.
New work requirements will be imposed on some government aid recipients, including food stamps and the Temporary Assistance Program for Needy Families. Among other things, the agreement will limit how long people under 54 without children can receive food stamps, though those limits will expire in 2030 unless Congress renews them. The package will also expand the reach of food stamps for veterans and the homeless.
Major energy projects will be given a streamlined review process.
Environmental permits for major energy projects will be simplified. One lead agency will commission one review document to be prepared on a general schedule. The agreement will enact these changes without reducing the general scope of the current review process, reducing the statute of limitations, and introducing barriers to standing or withdrawing injunctive relief or other judicial remedies.