McCarthy and Biden’s Debt Ceiling Agreement: What’s in it?

After months of negotiations, Speaker of the House Kevin McCarthy (R-Calif.) and President Joe Biden have finally reached a deal to raise the debt ceiling. The bill is now headed for a vote in Congress.

Both McCarthy and Biden have praised the deal as a compromise agreement and expressed confidence that it will pass both chambers of Congress. The deal would suspend the debt ceiling until 2025. You can read the full text of the bill here.

The package meets several key Republican demands, including spending cuts, work requirements for government assistance, and other measures.

“There’s so much in this that’s positive,” McCarthy said during a May 28 appearance on Fox News.

“This is really a step in the right direction,” he added, contrasting this package with previous debt ceilings that saw no spending cuts. “It puts us on a trajectory that’s different.”

What’s Inside the Package?

• Non-Defense Spending Caps: The deal meets a crucial GOP demand to cap spending on non-defense items. Under the provisions of the deal, non-defense spending will remain at roughly the same level as the year prior, capping at around $637 billion. This will see an approximately one percent increase in fiscal year (FY) 2025.
• Stricter Work Requirements for Government Aid: The package will also bolster work requirements to receive some types of government assistance. Specifically, the deal tightens requirements to receive Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF). The bill will ensure that families with children do not have their benefits cut. It also carves out exemptions for the homeless and veterans.
• IRS Funding Cut: The deal would cut a portion of funding for the Internal Revenue Service, approved last year as part of the Inflation Reduction Act. That bill gave the IRS $80 billion—more money than the agency had ever received from Congress and six times its previous budget.
• Student Loans: Though Republicans hoped to rescind an executive action by Biden canceling up to $20,000 in federal student loan debt, the package will leave the program untouched. On the other hand, it will end the Biden administration’s pause on student loan payments at the end of the summer.
• COVID Aid Clawbacks: The agreement would rescind about $30 billion in unspent coronavirus relief money that Congress approved through previous bills, with exceptions made for veterans’ medical care, housing assistance, the Indian Health Service, and some $5 billion for a program focused on rapidly developing the next generation of COVID-19 vaccines and treatments.
• No Fossil Fuel Permitting Reform: Though there were bipartisan hopes that the package would include reforms to the permitting process for fossil fuel projects, the package contains very few provisions.

Though many in the GOP caucus are unhappy with the package, thinking it doesn’t go far enough, McCarthy praised the tentative deal for its provisions cutting federal expenditures.

“Think about this: we were finally able to cut spending,” he said. “We’re the first Congress to vote for cutting spending year over year.

“So, you cut that back, you fully fund the veterans, you fully fund defense, but you take that non-defense spending all the way back to lower than ’22 levels.”