WASHINGTON, May 28 (Reuters) – US President Joe Biden and Republican House Speaker Kevin McCarthy reached an agreement in principle on Saturday to lift the debt ceiling that would cut some of US federal spending.
While the bill is still being written, the general outline of the deal has been detailed by sources. Sometimes Democrats and Republicans don’t seem to be on the same wavelength.
Here’s what we know so far:
A CAP ON DISCRETIONARY EXPENDITURE
The deal would suspend the $31.4 trillion debt ceiling until January 2025, allowing the US government to pay its bills. In return, non-defense spending in 2024 would be “nearly flat” at current year levels, “when taking into account agreed credit adjustments,” said a source familiar with the negotiations. In 2025, it would rise by only 1%.
Republicans have told members that discretionary spending for non-defense purposes would be reduced to 2022 levels, aside from veterans’ health care, which would remain fully funded.
The U.S. government will spend $936 billion in non-defense discretionary spending by 2023.
TAKE A BREATH FOR THE 2024 ELECTIONS
The extension of the debt limit will last beyond 2024, meaning Congress will not have to address the deeply polarizing issue again until after the November 2024 presidential election.
This would prevent another political confrontation that will agitate global investors and markets until a Republican is elected president or Biden wins a second term.
HIGHER DEFENSE EXPENDITURE
The deal is expected to increase defense spending to about $885 billion, in line with Biden’s 2024 budget spending proposal, an 11% increase over the $800 billion allocated in the current budget.
MOVING SPECIAL IRS FUNDING
Biden and Democrats have secured $80 billion in new funding for a decade to help the Internal Revenue Service enforce the tax code for wealthy Americans in last year’s Inflation Reduction Act, a move the administration says will cost $80 over the next 10 years. $200 billion in additional revenue.
Republicans and Democrats had battled over moving that funding, which was allocated by law as “mandatory spending” to avoid becoming the political battle of the annual budget process, to “discretionary spending” to be allocated by Congress .
Republicans told their members that the deal canceled the 2023 funding request for new staff.
The IRS earmarked the $80 billion for hiring thousands of new agents, and the additional tax revenue they generated was expected to offset a slew of climate-friendly tax cuts. A recent IRS spending plan earmarked $372 million for enforcement in FY23 to hire 1,543 people and spent $1.4 billion in FY24 for 5,696 staff.
COVID CLAWBACK, CUT CDC
Biden and McCarthy are expected to agree to reclaim unused COVID resources as part of the budget deal, including funding earmarked for vaccine research and disaster relief. The estimated amount of unused funds is between $50 billion and $70 billion.
The bill will also save $400 million from the Centers for Disease Control’s Global Health Fund “which sends taxpayer money to China,” Republicans told members.
Biden and McCarthy fought fiercely over imposing tougher job requirements on low-income Americans to qualify for food and health care programs.
No changes were made to Medicaid in the deal, but the agreement would impose new job requirements on low-income people receiving food aid under the program known as SNAP up to age 54, rather than up to age of 50 years.
Republicans said they were making borrowers pay back their student loans. However, other sources say the deal codifies exemption from student loan payments while Biden’s executive action, which offers up to $20,000 in debt relief per borrower, is being reviewed by the Supreme Court.
‘PAY-GO’ AND CREDITS
Republicans said they obtained a budgeting mechanism known as “PAYGO,” which is short for pay-as-you-go, that says new legislation or executive orders that affect revenues and spending for Medicare, Social Security, and other major programs should be budget neutral. .
They also said that until all 12 credit bills were passed, a continuing resolution would limit funding to 99% of the allocated budget.
Biden and McCarthy agreed on new rules to make it easier for energy projects — including fossil fuel-based projects — to get approval. McCarthy and his Republicans had identified allowing reform as a pillar of any deal, and the White House backed the plan earlier this month.
Reporting by Jarrett Renshaw and Steve Holland; Additional reporting by Trevor Hunnicutt; Edited by Heather Timmons, Christopher Cushing and Deepa Babington