With days to spare until a government default, President Biden and House Speaker Kevin McCarthy (R-Calif.) on Saturday evening announced a deal to raise the federal debt ceiling and fund the government for the next two years.
The deal now faces an uncertain path to passage through the House and Senate. Conservatives have already objected to a deal they say does not do enough to cut federal spending, while some liberals have worried it sacrifices funding for key priorities. The specifics of the bill remained unclear, although lawmakers in both parties started to confirm key details Saturday night.
The deal accomplishes much for both Biden and McCarthy, enabling them to claim a victory that appeared elusive just days ago. Biden can point to a deal that, at least temporarily, frees him from the headache of the debt ceiling, while staving off Republican demands for steep cuts to domestic spending. McCarthy gets a deal that curtails federal spending, and enhances some work requirements on federal aid programs, such as food stamps.
Here’s what’s in - and out - of the deal announced Saturday.
1. Raises the debt ceiling beyond the 2024 election
For Biden, one upside of the deal - assuming it passes - is that he will not have to deal with the debt ceiling again until after the next presidential campaign, because the agreement raises the debt ceiling until 2025. This was a top priority of the administration, which will be grateful to move past the messy fight over the debt limit that has provoked substantial criticism even among fellow Democrats.
The administration has been furious with the brinkmanship over the debt limit for months, believing McCarthy recklessly took the nation’s economy hostage to push through conservative changes to the federal government. If it passes, the deal will ensure the GOP will not be able to do so again until the next House term. Democrats will try to win back control of the House in 2024, although if they don’t - and Biden wins - the nation could face a similar standoff two years from now.
2. Largely holds funding flat for domestic programs
The biggest sticking point in negotiations has been funding levels for part of the federal budget - separate from Social Security and Medicare - that funds hundreds of domestic programs, such as scientific research, rental aid and nutritional assistance for mothers.
McCarthy pushed for substantial cuts to these programs, because he wanted to bring down federal spending while increasing funding for the military and veterans affairs. Ultimately, the White House agreed to an inflation-adjusted reduction in direct spending on these kinds of programs - but one that will be mitigated by redirecting funds from other areas, such as the money clawed back from Internal Revenue Service expansion. Spending on these programs will rise by 1 percent in 2025 under the deal.
The administration had appeared to be facing cuts to these programs of about 8 or 12 percent, which would have undermined key programs and made the deal very difficult for the White House to sell to Democratic members of Congress. The near-freeze is far closer to a typical federal spending deal during divided government, even if it’s not what Democrats would prefer.
3. Claws back some money for the IRS
Despite sparing domestic programs from cuts, the Biden administration agreed to do so in part by paring back some portion of the $80 billion it approved last year for an expansion of the IRS.
That $80 billion was included in the Inflation Reduction Act, Biden’s signature economic bill, to help pay for the climate and health-care spending in the measure. While the nonpartisan Congressional Budget Office said the expansion would increase revenue by $240 billion by allowing the IRS to step up enforcement, conservatives furious with the measure have argued it would unleash tens of thousands of new auditors on Americans. The IRS has said it plans to raise audit rates back to 2011 levels only for wealthy taxpayers.
Paring back the expansion is aimed at giving McCarthy a victory he can use to sell the deal to House conservatives. But it could anger them for not doing enough to reduce IRS funding, while also upsetting liberals who say the IRS needs all the new money to improve tax collection and customer service.
The exact amount of money stripped from the IRS was not immediately clear.
4. Slight funding boosts for the military, veterans affairs
The deal also meets the requests in Biden’s budget to increase spending for the military and veterans affairs in line with inflation.
The White House initially proposed to freeze spending on these programs, to accommodate the GOP’s request to restrict spending overall. But House Republicans rejected that proposal.
Negotiators ultimately agreed to slight boosts in funding for both, exempting them from the inflation-adjusted cuts for the domestic programs. They will grow in the deal in line with what Biden requested in his budget, though not as much as some Republicans sought.
5. New work requirements on federal programs
Meeting a GOP priority, the deal increases work requirements on federal food stamps and on family welfare benefits.
Republicans had pushed for sweeping changes to those programs and to Medicaid, the health insurance program. The deal does not include additional work requirements for Medicaid.
While the precise details were not clear, the deal raises the age at which adults will be required to work to receive food stamps from 50 to 54. The deal will also increase eligibility for food stamps by making it easier for the homeless and veterans to receive benefits. The changes to the family welfare benefits program, Temporary Assistance for Needy Families, were not immediately clear.
6. Out of the deal: Closing tax loopholes, cutting student debt relief
Negotiators on both sides agreed to drop key demands.
The White House had proposed closing a number of tax loopholes, arguing that any deal to lower the deficit should include increases in federal revenue as well as spending cuts. The GOP ruled those ideas out.
Similarly, House Republicans had fought for repealing some of the clean energy tax credits approved by Democrats last year, as well as stopping the White House’s plan to cancel student loan debt. The Biden administration objected strongly to those proposals, and they fell out of the final deal.
The Washington Post’s Marianna Sotomayor contributed to this report.