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President Biden and Speaker Kevin McCarthy on Saturday reached an agreement in principle to lift the debt limit for two years while cutting and capping some government spending over the same period, a breakthrough after a marathon set of crisis talks that has brought the nation within days of its first default in history.
Congressional passage of the plan before June 5, when the Treasury is projected to exhaust its ability to pay its obligations, is not assured, particularly in the House, which plans to consider it on Wednesday. Republicans hold a narrow majority in the chamber, and right-wing lawmakers who had demanded significantly larger budget cuts in exchange for lifting the borrowing limit were already in revolt.
But the compromise, which would effectively freeze federal spending that had been on track to grow, had the blessing of both the Democratic president and the Republican speaker, raising hopes that it could break the fiscal stalemate that has gripped Washington and the nation for weeks, threatening an economic crisis.
Mr. Biden urged the House and Senate to pass the agreement in a late-night statement issued by the White House, saying it would prevent a catastrophic default.
“It is an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone,” Mr. Biden said. “And the agreement protects my and congressional Democrats’ key priorities and legislative accomplishments. The agreement represents a compromise, which means not everyone gets what they want.”
The president and Mr. McCarthy spoke by phone on Saturday evening to resolve final sticking points.
In a nighttime news conference outside his Capitol office that lasted just one minute, Mr. McCarthy said the deal contained “historic reductions in spending, consequential reforms that will lift people out of poverty into the work force, rein in government overreach” and would add no new taxes. He declined to answer questions or provide specifics, but said he planned to release legislative text on Sunday.
“We still have more work to do tonight to finish all the writing of it,” he said.
The plan was structured with the aim of enticing votes from both parties, though it has drawn the ire not only of conservative Republicans but also Democrats furious at being asked to vote for cuts they oppose with the threat of default looming.
Still, it gives Republicans the ability to say that they succeeded in reducing some federal spending — even as funding for the military and veterans’ programs would continue to grow — while allowing Democrats to say they spared most domestic programs from significant cuts.
The deal would suspend the borrowing limit, which is currently $31.4 trillion, for two years — enough to get past the next presidential election.
According to a person familiar with the agreement, it also would impose new work requirements for some recipients of government aid, including food stamps and the Temporary Assistance for Needy Families program. It would place new limits on how long certain recipients of food stamps — people under the age of 54, who do not have children — could benefit from the program. But it also would expand food stamp access for veterans and the homeless, said the person, who spoke on condition of anonymity because they were not authorized to discuss details of the package.
The tentative deal also claws back some unspent money from a previous pandemic relief bill, and reduces by $10 billion — to $70 billion from $80 billion — new enforcement funding for the I.R.S. to crack down on tax cheats. It includes measures meant to speed environmental reviews of certain energy projects and a provision meant to force the president to find budget savings to offset the costs of a unilateral action, like forgiving student loans — though administration officials could circumvent that requirement. It also includes an enforcement measure that is meant to avert a government shutdown later this year.
The work requirements and the environmental review reforms were among the last details the two sides worked out on Saturday.
White House and congressional negotiators — working around the clock at the Capitol, in the White House and virtually — pushed the resolution nearly to the last minute, increasing pressure on lawmakers to accept a solution unpopular with activists on both the right and left. Economists and Wall Street analysts warned that a default would be devastating and potentially lead to a global economic meltdown.
To avert a default, the House and the Senate must pass the deal and send it to Mr. Biden for his signature. That promises to be a heavy lift for both Mr. McCarthy and Representative Hakeem Jeffries of New York, the Democratic leader, who must now cobble together a coalition of House Republicans and Democrats to push it through.
Mr. McCarthy has repeatedly said he believes a majority of his conference would vote for the deal, but it is not clear yet how many Republicans will back the compromise — and how many Democrats might be needed to vote for it to make up for G.O.P. defections.
The path also is likely to be rocky in the Senate, where quick action requires bipartisan support and conservatives have signaled they are unwilling to go along.
In a sign of their displeasure, House Freedom Caucus members were huddling to identify procedural tools to delay passage of the agreement or make the bill more conservative.
Republicans have refused for months to raise the debt limit unless Mr. Biden agreed to spending cuts and reducing future debt — risking a default to wield their leverage. The final agreement accomplishes their goal, but only modestly. A New York Times analysis of the spending caps at the center of the agreement suggests they will reduce federal spending by about $650 billion over a decade, if spending grows at the expected rate of inflation after the caps lift in two years.
The cuts in the package are almost certainly both too modest to win the votes of hard-line conservatives and too stringent to win the votes of progressives in the House. Lawmakers in the House Freedom Caucus were privately pillorying the deal on Saturday night, and the Congressional Progressive Caucus had already begun to fume about it even before negotiators finalized the agreement.
But budget hawks urged passage. “The process was tense, risky and ugly, but in the end, we have a plan to enact savings and lift the debt ceiling, and that is what is needed,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget in Washington.
The deal would impose caps on discretionary spending for two years, though those caps would apply differently to spending on the military than to the rest of the federal budget. Spending on the military would grow next year, as would spending on some veterans’ care. Spending on other domestic programs would fall slightly — or stay roughly flat — compared with this year’s levels.
The announcement came after months of political brinkmanship. Mr. Biden and congressional Democrats initially insisted that House Republicans raise the debt ceiling without conditions, but relented after Mr. McCarthy marshaled his conference to pass a bill to increase the nation’s borrowing limit in exchange for cutting government programs by an average of 18 percent over a decade. Republicans purposefully avoided laying out exactly which programs they planned to cut, but the bill’s passage forced Mr. Biden to do what he had said he never would: negotiate over raising the debt ceiling.
The deal was ultimately struck by a group led by Mr. Biden’s counselor, Steve Ricchetti; his budget director, Shalanda Young; and two of Mr. McCarthy’s closest confidants, Representatives Patrick T. McHenry of North Carolina and Garret Graves of Louisiana. They agreed to use some creative accounting maneuvers in the deal to help provide both sides political cover.
But Mr. McCarthy was still likely to face a revolt from the hard-right lawmakers in his conference whom he empowered as part of the concessions he made to become speaker in January, after a bruising 15-round election.
On a private call to brief members of his conference on the emerging deal, Mr. McCarthy sold the agreement as a victory, saying there was little in the package that Democrats supported. But hard-right lawmakers in the Freedom Caucus, who for days had been venting frustration with the emerging contours of the deal, made their displeasure known.
All the things “they fought for” in the House bill were omitted from the agreement, Representative Bob Good of Virginia said, according to a person familiar with the remarks who spoke on the condition of anonymity to describe a private call. Mr. McCarthy and his deputies defended the deal, citing several wins, including rolling back money for the I.R.S.
Progressives, too, had vented their unhappiness before the deal was even announced.
Lindsay Owens, the executive director of the liberal Groundwork Collaborative in Washington, criticized the deal for forcing budget cuts in domestic programs — and in particular, for reducing enforcement money for the I.R.S.
“Conceding to Republican demands to hamstring the I.R.S.’s ability to go after wealthy tax evaders is a losing proposition for Democrats,” she said. “It undermines an important policy initiative, drains a good source of revenue and requires the caucus to vote down a policy that is incredibly popular with the public.”
Peter Baker contributed reporting.
Jim Tankersley is a White House correspondent with a focus on economic policy. He has written for more than a decade in Washington about the decline of opportunity for American workers, and is the author of "The Riches of This Land: The Untold, True Story of America's Middle Class." @jimtankersley
Catie Edmondson is a reporter in the Washington bureau, covering Congress. @CatieEdmondson
Luke Broadwater covers Congress. He was the lead reporter on a series of investigative articles at The Baltimore Sun that won a Pulitzer Prize and a George Polk Award in 2020. @lukebroadwater
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President Joe Biden signed into law Saturday a bill to suspend the nation's debt limit through January 1, 2025, to avert a first-ever US default.Did the House pass the debt ceiling? ›
The House on Wednesday overwhelmingly passed legislation negotiated by President Biden and Speaker Kevin McCarthy to suspend the debt ceiling and set federal spending limits, as a broad bipartisan coalition lined up to cast a critical vote to pull the nation back from the brink of economic catastrophe.Who won the debt ceiling deal? ›
House Speaker Kevin McCarthy
McCarthy is perhaps the biggest political winner out of the debt-ceiling fight, overcoming discontent from the right flank of his party and squeezing spending concessions out of the White House after Biden initially refused to negotiate over the debt ceiling.
WASHINGTON — The Senate voted Thursday night to pass a bill that would extend the debt ceiling for two years and establish a two-year budget agreement on a broad bipartisan vote. The vote was 63-36.Who owns most of the US government's debt? ›
Domestic Holders of Federal Debt
The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.
The U.S. has never reached the point of default where the Treasury was incapable of paying U.S. debt obligations, though it has been close on several occasions. The only exception was during the War of 1812 when parts of Washington D.C. including the Treasury were burned.What senators did not vote for debt ceiling? ›
Sen. Ron Johnson of Wisconsin. Sen. John Kennedy of Louisiana. Sen. James Lankford of Oklahoma. Sen. Mike Lee of Utah.How many Democrats voted for the debt ceiling bill? ›
It sailed through the House by a vote of 314 to 117 on Wednesday, and cleared the Senate on Thursday by a vote of 63 to 36. In the House, a majority of each party's members — 149 Republicans and 165 Democrats — voted to pass the bill. Seventy-one Republicans and 46 Democrats voted against it.Which Democrats voted against the debt ceiling bill? ›
The agreement, which will almost certainly be signed into law by Biden, is designed to prevent a historic first debt default in U.S. history, which had been due to take place in early June. Senators Ed Markey, Jeff Merkley and John Fetterman joined Sanders and Warren to make up the five Democratic rebels.How many Senate votes needed for debt ceiling? ›
Senate Votes to Pass Debt Ceiling Bill
The 60-vote threshold having been achieved. The bill is passed.”
The Senate vote was 63 to 36.What's in the new debt ceiling bill? ›
Some $886 billion will be spent on defense, according to the bill text. The debt ceiling bill that House Republicans passed in April would have returned discretionary spending to fiscal 2022 levels and then limited the growth in spending to 1% for a decade. Defense spending would have been protected.Does China owe money to the US? ›
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).What country does the US owe the most money to? ›
With $1.1 trillion in Treasury holdings, Japan is the largest foreign holder of U.S. debt. Japan surpassed China as the top holder in 2019 as China shed over $250 billion, or 30% of its holdings in four years. This bond offloading by China is the one way the country can manage the yuan's exchange rate.What if the US paid off its debt? ›
If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world. "It was a huge issue ... for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration. The U.S. borrows money by selling bonds.Has the US ever been debt free? ›
As a result, the U.S. actually did become debt free, for the first and only time, at the beginning of 1835 and stayed that way until 1837. It remains the only time that a major country was without debt. Jackson and his followers believed that freedom from debt was the linchpin in establishing a free republic.What happens if U.S. debt gets too high? ›
Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.Has the US ever failed to raise the debt limit? ›
The national debt has increased under every presidential administration since Herbert Hoover. The United States has raised its debt ceiling at least 90 times in the 20th century. It has never been reduced.Why did fetterman vote against the debt ceiling bill? ›
Fetterman said his vote came down to new work requirements on older Americans receiving food aid, a part of the bill added to sweeten the deal for Republicans pushing for more government spending cuts.How much debt is the US in? ›
When the government spends more than it earns, it has a budget deficit and must issue debt in the form of Treasury securities. The U.S. has run a deficit for the last 20 years, substantially increasing the national debt. In fact, according to the Department of the Treasury, the current debt is $31.4 trillion.
In 1917, during World War I, Congress created the debt ceiling with the Second Liberty Bond Act of 1917, which allowed the Treasury to issue bonds and take on other debt without specific Congressional approval, as long as the total debt fell under the statutory debt ceiling.How many Republicans voted for the debt ceiling bill today? ›
The debt ceiling compromise bill sailed to passage in the House on Wednesday evening. The House voted 314-117 after just over an hour of debate on the legislation. The bill required a simple majority — 218 — to pass in the House. Over 70 Republicans voted against the bill.What is the new US debt ceiling? ›
Every so often, US Congress votes to raise or suspend the ceiling so it can borrow more. The cap currently stands at roughly $31.4tn (£25.2tn).How many votes does it take to pass a bill in the House? ›
The bill is then assigned to a committee for study. If released by the committee, the bill is put on a calendar to be voted on, debated or amended. If the bill passes by simple majority (218 of 435), the bill moves to the Senate.How much debt can the US handle? ›
The debt limit caps the total amount of allowable outstanding U.S. federal debt. The U.S. hit that limit—$31.4 trillion—on January 19, 2023, but the Department of the Treasury has been undertaking a set of “extraordinary measures” so that the debt limit does not yet bind.How much is the US in debt? ›
The U.S. has run a deficit for the last 20 years, substantially increasing the national debt. In fact, according to the Department of the Treasury, the current debt is $31.4 trillion.What is the current U.S. debt? ›
The current U.S. debt is $31,462,154,854,903 as of May 23, 2023.Why does the US have so much debt? ›
America's debt has risen massively since the beginning of the 21st century, as "politicians from both parties have made a habit of borrowing money to finance wars, tax cuts, expanded federal spending, care for baby boomers, and emergency measures to help the nation endure two debilitating recessions," writes Jim ...How much debt is the US in 2023? ›
The deficit is projected to fall to $1,154 billion billion in 2023, and debt held by the public is projected to grow to $26,033 billion, but fall as a percent of GDP, to 101.8 percent. After 2023, the deficit is projected to roughly stabilize at around 5 percent as a percent of GDP.Can the Senate pass a bill without the House? ›
A bill must pass both houses of Congress before it goes to the President for consideration. Though the Constitution requires that the two bills have the exact same wording, this rarely happens in practice. To bring the bills into alignment, a Conference Committee is convened, consisting of members from both chambers.
When the Senate considers the bill, they can vote on it indefinitely. When there is no more debate, the bill is voted on. If 51 of 100 Senators vote for it, the bill passes by a simple majority.What's more important the House or the Senate? ›
Whilst the US Constitution makes no reference to which is more important than the other, the Senate can be seen as more important for a number of reasons. Senators are elected every six years, as opposed to the House being elected every two.