The default is canceled, but there will be restrictions: Biden and the Republicans agreed on a new national debt limit

President Joe Biden and Speaker of the House Kevin McCarthy have a tentative agreement that would raise the national debt limit and end their standoff just days before a possible US default. Yahoo.

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The US is days away from being unable to pay its bills. Ever since the U.S. hit the national debt limit (that is, the total amount of federal debt that could be outstanding) in January, the Treasury Department has been using what it calls "emergency measures" to avoid a default.

Public debt limit, which the US authorities have been trying to agree on in recent weeks, is a legally fixed limit on borrowing that the state can accumulate.

Biden refused for months to negotiate future spending cuts with McCarthy, demanding that lawmakers first accept an unconditional debt ceiling increase and then submit a 2024 budget proposal. Bilateral talks between Biden and McCarthy began on May 16.

On the subject: America is threatened with default: how it will affect your life

Speaker of the US House of Representatives Republican Kevin McCarthy announced an agreement in principle with the White House to prevent a sovereign default.

“I just got on the phone with President Joe Biden. After he lost time and refused to negotiate for months, we came to an agreement in principle worthy of the American people, ”the congressman wrote on his Twitter.

The agreement will prevent a default (which has never happened in US history) if it can be passed through the US Congress before the Treasury Department has enough money to cover the obligations. The department warned that the deadline was June 5, reports with the BBC.

This gives politicians and markets additional breathing room on an issue that regularly threatens economic chaos.

Legislators on both the left and the right were quick to raise concerns about some of the compromises. The details of the agreement are still being worked out. What is already clear is that she is proposing a number of changes to the way government works.

There will be new limits on government spending, new requirements for access to government assistance, and some cuts in bureaucratic red tape associated with energy projects.

Here is what is known so far.

Costs

At the center of this deal is an agreement on public spending.

This issue nearly derailed the negotiations. The two sides clashed over the GOP's demand to roll back an increase in discretionary government spending that was approved by Congress late last year, just before the Republicans took control of the House of Representatives.

In the end, Biden and McCarthy agreed to keep overall non-defense spending largely at current levels next year. Then, in 2025, there will be a slight 1% increase in spending.

McCarthy called the new limits introduced on May 27, which include cuts in certain areas, "historic."

According to a person familiar with the talks, both sides were able to secure settlements through appropriation adjustments that would result in cuts in some key areas, but not to the extent that the Republicans had originally demanded.

The two-year agreement also sets out only general spending plans, providing much more discussion in the coming months about which programs will run shortfalls. However, it seems that a possible government shutdown, which was planned for the end of this year, is being excluded from discussion.

The thin line drawn by the negotiators has already proved highly unpopular with the most conservative and most liberal legislators in both parties.

Rep. Bob Goode (R-VA) stating "No one calling himself a Conservative can justify a YES vote."

But budget hawks at the Committee for a Responsible Federal Budget were quick to praise the agreement, with its president Maya MacGuineas saying "the process has been stressful, risky and unpleasant, but at the end of the day, we have a plan to introduce savings and raise the debt ceiling." and this is what is needed."

Job requirements and social programs

Another thorny issue that remained unresolved until the very last hour was what job requirements would be needed in exchange for access to public assistance such as food stamps and the Temporary Assistance for Needy Families (TANF) program.

This agreement will change what some Americans need to access these two programs. These are changes that, according to McCarthy, "will lift Americans out of poverty and provide jobs."

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Many details remained unclear on May 28 in the morning. Medicaid, another relief program, will not be affected.

According to PunchBowl News, McCarthy told his caucus behind closed doors on May 27 that the final demands are "a little stronger" than even what the Republicans accepted in their debt ceiling proposal in March.

On the other hand, President Biden argued in a statement that the agreement "reduces costs while protecting important programs for workers."

The idea of ​​tougher job requirements is a sensitive issue for both parties, but especially for liberal Democrats, who argue that any higher job requirements would do little to reduce deficits and be unnecessarily harsh on the most vulnerable Americans.

Rep. Pramila Jayapal (D-WA), who leads the 100 most progressive members of the House of Representatives, said last week that her members "are not going to make an agreement that harms workers."

Biden acknowledged in a statement that some of his colleagues may be unhappy that "the deal is a compromise, which means not everyone gets what they want."

Energy projects and student loans

Industry groups and lawmakers have long complained about the mass of government red tape that often gets in the way of energy projects.

The agreement appears to make modest changes to the National Environmental Policy Act, a 1970 law that allows the federal government to analyze the environmental impact of proposed projects. The goal is to make it easier for the government to review energy projects in the coming years, but the full regulations, as well as other key details, have yet to be officially released.

One issue that doesn't seem to be being tackled in a meaningful way: tax credits for clean energy. Republicans wanted to cancel the loans that were part of Biden's Inflation Reduction Act last year, arguing they distort the market.

But President Biden touted on May 27 how "the agreement protects my key priorities and the key priorities of Democrats in Congress and legislative advances."

The agreement also does not appear to include the White House's idea of ​​raising additional revenue by closing tax loopholes that could affect taxation in industries such as energy and cryptocurrencies. McCarthy said on May 27 that there were "no new taxes" in the agreement.

Another issue is student loans.

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Republicans initially sought to nullify Biden's debt relief efforts. But the GOP eventually backed down, knowing a lawsuit was ongoing that could see the Supreme Court overturn the effort in the coming months anyway.

McCarthy made it clear at the beginning of the negotiations that he was ready to allow this issue to be decided in court.

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