US House of Representatives Passes Bipartisan Bill to Raise Debt Ceiling and Limit Government Spending, with Student Loan Payments Set to Resume in 2023
The United States House of Representatives has passed a bipartisan bill to raise the debt ceiling and limit government spending in a bid to avert a potential default.[0] The bill is the result of a deal struck between House Speaker Kevin McCarthy and President Joe Biden, which includes provisions to cap federal baseline spending for two years in exchange for Republican votes to raise the debt ceiling beyond next year's elections and into 2025.[1] However, the bill also includes a provision that terminates the student loan payments pause 60 days after June 30, and prohibits the education secretary from extending the pause on federal student loan payments without an act by Congress. As per the legislation, the current suspension of student loan payments would terminate on “sixty days after June 30, 2023” which is sixty days after June 30, 2023. The existing income-driven repayment plans would continue to be implemented.[2]
The debt ceiling deal will limit government spending and reduce deficits by at least $1.5tn over the next decade, according to the Congressional Budget Office.[3] It sets spending caps for the next two years to set up the appropriations process, and includes spending caps for the subsequent four fiscal years, although they are advisory and Congress could ignore them.[4] The bill nominally reduces top-line discretionary spending at non-defence agencies for fiscal 2024, but includes offsets elsewhere that can be applied to those accounts and will ultimately keep funding essentially frozen at fiscal 2023 levels.[5]
The bill includes provisions to limit the threat of a shutdown for the next two years.[6] If by Jan. 1, 2024, Congress has not passed all 12 annual appropriations bills, a continuing resolution would kick in that cuts discretionary spending for defence and non-defence agencies by 1% until such bills are passed.[7] The identical contingency will apply in 2025.[6] The current funding is scheduled to terminate on September 30, implying that a shutdown in autumn may still transpire.[6]
While the agreement staves off any rollbacks of the Biden administration's student debt relief, the future of the program remains uncertain.[7] In the upcoming weeks, the Supreme Court will determine whether Biden can proceed with his plan to cancel the debt.[7] As the Supreme Court will make the decision on Biden's student loan cancellation plan, the bill remained silent on the matter.[2]
The deal has been hailed as a major breakthrough, but critics argue that it has simply postponed the battles over appropriations. In addition, the understanding that spending levels beyond FY 2025 will be determined by the results of the 2024 elections means that the current debt crisis and the imminent government-shutdown crisis will continue for the foreseeable future unless American voters give somebody effective control of Washington next year.[8]
Before Monday, when the Treasury Department estimates that the United States may not have sufficient funds to fulfill its debt responsibilities, the bill must pass through both the GOP-majority House and the Democratic-controlled Senate.[9]
0. “Debt ceiling bill clears first House hurdle, teeing up Wednesday vote” CBS News, 31 May. 2023, https://www.cbsnews.com/news/debt-ceiling-bill-house-rules-committee-vote/
1. “McCarthy-Biden debt ceiling deal passes big procedural hurdle in House” Fox News, 31 May. 2023, https://www.foxnews.com/politics/mccarthy-biden-debt-ceiling-deal-passes-big-procedural-hurdle-house
2. “Debt Ceiling Agreement Lifts Student Loan Pause, Cuts Some IRS Funding” Forbes, 29 May. 2023, https://www.forbes.com/sites/kellyphillipserb/2023/05/29/debt-ceiling-agreement-lifts-student-loan-pause-cuts-some-irs-funding
3. “McCarthy Confident on Debt Vote Despite Hard-Line Ouster Threat” Yahoo Finance, 31 May. 2023, https://finance.yahoo.com/news/republican-hard-liners-threaten-reckoning-163342304.html
4. “What's in the debt limit bill? Key provisions in the Biden-McCarthy deal to avert default” CNBC, 30 May. 2023, https://www.cnbc.com/2023/05/30/whats-in-the-debt-limit-bill-key-provisions-in-the-biden-mccarthy-deal-to-avert-default.html
5. “Debt-Ceiling Deal Is Done. Recession, Stock Slide May Follow.” Investor's Business Daily, 30 May. 2023, https://www.investors.com/news/economy/debt-ceiling-fight-is-just-the-start-these-big-fiscal-drags-could-derail-u-s-economy-stock-market/
6. “Debt Limit Deal Would Save Feds' Paychecks, But Freeze Agency Spending” GovExec.com, 30 May. 2023, https://www.govexec.com/management/2023/05/debt-limit-deal-would-save-feds-paychecks-freeze-agency-spending/386877
7. “Here are the 6 must-know provisions of the new debt ceiling deal” POLITICO, 28 May. 2023, https://www.politico.com/news/2023/05/28/6-pillars-of-the-debt-ceiling-deal-00099108
8. “Did We Just Trade a Debt Default for a Government Shutdown?” New York Magazine, 30 May. 2023, https://nymag.com/intelligencer/2023/05/did-we-just-trade-a-debt-default-for-a-government-shutdown.html
9. “Debt ceiling bill clears key hurdle, teeing up final House vote before it goes to Senate” CNBC, 30 May. 2023, https://www.cnbc.com/2023/05/30/debt-ceiling-deal-updates.html
