The good, the bad, and the ugly of the debt ceiling deal

The House voted on Wednesday night to pass the Fiscal Responsibility Act, the bill codifying the deal between President Joe Biden and House Speaker Kevin McCarthy, R-Calif., to raise the debt ceiling. The final vote — 314 — 117, with Democrats providing the majority of the votes in favor — highlighted just how much the final agreement changed versus when the GOP passed its "Limit, Save, Grow Act" in April.

With just days before a June 5 deadline that would have left the U.S. unable to pay its bills, there’s been no time to spare in actually getting the deal through Congress. Tellingly, the vote reflects the fact that the deal is bipartisan in the sense that it’s gotten votes from both parties, not that it is a win for both parties equally. Likewise, it is a compromise in that only some Americans will have their lives impacted for the worse. The alternative was either a massive hole Republicans tried to cut into the social safety net with their original bill, or widespread economic chaos a default would have caused.

In all, though, it is clear that the bill could have been much worse. The Republican priorities it contains have been significantly pared back and there are a few Democratic priorities that were unexpectedly worked into the deal. Below is a look at exactly what the bill does.

First, the deal raises the debt ceiling until Jan. 1, 2025. That’s almost a full year later than Republicans initially wanted, punting the issue until after the next presidential election. Its budget provisions also get us through the next two fiscal years, which means the odds for a potential government shutdown have shrunk significantly. And, importantly, no matter what happens in 2024, the debt limit revision expires when Democrats will still control the Senate and White House.

In all, though, it is clear that the bill could have been much worse.

The bill is proof that Biden successfully defended the vast majority of his agenda passed by the last Congress. For example, there were only minor tweaks to the Inflation Reduction Act; the climate and health care provisions it contained were left intact. And a set of spending caps in the bill are pegged to the current year’s budget, not to fiscal year 2022’s budget as the GOP sought.

One surprise benefit in the deal overall is a carveout in the work requirements needed to receive Supplementary Nutritional Assistance Benefits (SNAP), also known as food stamps. We’ll get to the Republican-sponsored changes in a bit, but the legislation makes it so that veterans and unhoused Americans will no longer have to fill out tedious paperwork to show they’re looking for work before they can receive help. It’s a change that the Congressional Budget Office estimates could lead to a net increase of people enrolled in SNAP, which has caused some consternation among House Republicans.

The bill includes federal spending caps for the next two fiscal years. “In fiscal year 2024, it would limit military spending to $886 billion and nonmilitary discretionary spending to $704 billion,” NBC News reported. “In fiscal year 2025, those numbers would rise to about $895 billion and $711 billion.” When paired with inflation, this basically flatlines government spending on nondefense items for the next two years. That’s definitely annoying, given the number of unfulfilled items on Biden’s agenda, but again, it could have been much worse.

As I mentioned earlier, the bill also places new work requirements on SNAP as well the Temporary Assistance for Needy Families (TANF) program. Those requirements have been shown to do more harm than good. Likewise, adding hoops for the needy to jump through more often than not discourages qualified recipients in the name of saving the government a paltry amount of money.

One provision that wasn’t in the GOP’s original pitch is the approval of the Mountain Valley Pipeline. Its inclusion is seen as a bit of a deal sweetener from the White House for Sen. Joe Manchin, D-W.Va., who has advocated for its construction. It was also taken as a slap in the face to environmental activists and Sen. Tim Kaine, D-Va., whose state the pipeline would cross. And while both fossil fuel and clean energy advocates are happy that environmental assessments will move faster now, they don’t get a win that’s comparable to the win fossil fuel advocates get with the pipeline.

The bill further rescinds about $28 billion in unspent Covid relief funds, which seems like they could probably be put to other uses related to the long-term aftermath of the pandemic — or preparing for the next one. Clawing back that money has been a talking point for the GOP for a minute and was always seen as the easiest ask for Democrats to fulfill. So back into the budget it returns.

The deal also cuts $1.4 billion from the $80 billion that Democrats allocated last year to IRS to fully staff its auditors, and make sure the wealthy are actually paying their fair share. That investment was determined to be a net decrease on the deficit, but Republicans have been promising to roll back the full funding, so the amount they got is just enough for them to call it a win. And, most pettily, the bill reinstates federal student loan payments in August. The Education Department was already planning to end the pause on payments either at the end of August or 60 days after the Supreme Court rules on Biden’s student loan forgiveness plan, whichever came later.

Ideally, we shouldn’t have to deal with this congressionally created crisis every time the GOP remembers it doesn’t like deficits when a Democrat is president. But here we are. The White House insists the deal its negotiators cut is a budget deal that just happens to include a debt ceiling lift; it’s a pretty blatant face-saving measure.

There’s also still an appropriations battle to go through this year to actually fund the government based on the budget agreements in the deal. There’s also a fun little 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. That’s something to keep an eye on.

So is the potential political fallout for McCarthy that comes from cutting this deal. Previous GOP speakers haven’t fared well after “caving” to Democratic demands, which is the way members of the House Freedom Caucus are characterizing what McCarthy has done. Murmurs of toppling McCarthy have tamped down in the last few days after some initial grumbling. But the right-wing of the Republican caucus won’t let McCarthy forget how few of their demands were met.

Politics aside, the bill as passed is one based on a principle that government should do the least harm possible while benefitting the most. In this case, a decision was made to only hurt some people rather than allow a debt default that would have hurt everybody. Of course, the “some” isn’t ever the wealthy, whose tax rates were never at risk of rising thanks to Republicans shielding them. Predictably, the burden falls on the poor and needy, who are expected to be grateful they get any help at all.