What’s in the US debt ceiling deal, and who won?

What's in the US debt ceiling deal, and who won?

The debt ceiling has been raised as part of a plan that was approved by Congress to prevent the United States from defaulting on its financial obligations.

The Senate ratified the accord on Thursday, one day after the House did so.

If passed and approved by President Joe Biden, it would extend the borrowing authority of the federal government until the next presidential election, in November 2024.

Highlights from the program, with commentary from BBC North America reporter Nomia Iqbal, are provided below.

Suspended debt limit till 2025

In order to borrow additional money to cover government expenses, Congress must vote to increase or suspend the limit on a regular basis. As of right now, it is £31.4tn ($31.4tn).

This includes interest on the national debt, tax refunds, and the salaries of government workers, the military, Social Security, and Medicare.

The debt limit is explained in plain English.

Could international anarchy be set off by a US debt default?

However, the inability of the two parties to come to an agreement on the conditions has made this more challenging in recent years.

The ceiling has not been increased to a set amount but is instead delayed until 2025 as part of the agreement that passed Congress.

This will ensure that the next battle over increasing the ceiling does not take place during the presidential election, allowing them to pay their expenses until then.

After the agreement is finalized, the rest of the world will be relieved since a US default would have far-reaching consequences.

Cost restraints, but no defense cuts

The Republican platform called for a 10-year freeze on all discretionary expenditures while increasing war spending and slashing all other budgets.

The accord freezes non-defense expenditure for 2020 and raises it by 1% in 2025. The long-term effects of this cost-cutting measure are unknown.

There would be a 3% increase in defense expenditure, reaching $886 billion.

After 2025, all spending limits will be lifted.

The nonpartisan Congressional Budget Office estimates savings of $1.5 trillion over a decade as a consequence of the law.

In addition, as President Biden had hoped, spending on veterans’ medical care as a whole will improve.

Nomia: Everyone is declaring triumph. The White House claims these reductions are negligible. Although President Biden supported the increase in military expenditure, it fell short of the inflation rate and the expectations of more hawkish Republicans.

Unused money from Covid was refunded.

After the public health emergency was declared over in May, Republicans demanded the return of any unspent humanitarian monies.

According to the CBO, this will cost around $30 billion.

Nomia: A triumph for the GOP. There was worry among Democrats that this would have an adverse effect on public health measures, but for Biden, giving up this issue was preferable to giving up on other Republican demands like Medicaid work requirements.

Modifications were made to welfare, but there was no major revision.

The Republican Party’s core demand was for stricter welfare benefit distribution, with the result that those who were physically competent to do so would be required to work in exchange for food and medical assistance.

The Democrats were certain that this was off-limits.

The Danish Lesson for the American Debt Crisis

Republican welfare reforms targeted Medicaid (low-income health insurance), SNAP (food stamps), and TANF (temporary assistance for needy families).

While Medicaid was not affected by the agreement, the age at which SNAP recipients must participate in work requirements was increased from 50 to 54.

Nomia: The White House will be pleased that it was able to get waivers from the food stamp work requirements for veterans and the homeless, but the ultimate victory goes to the Republicans who pushed for stiffer work requirements. Liberal Democratic parliamentarians had a hard time convincing their colleagues to support it.

Money for enforcing tax laws on America’s rich

Democrats scored a victory when they were able to secure $80 billion over ten years to assist the Internal Revenue Service (IRS) in enforcing the tax code included in last year’s Inflation Reduction Act.

Despite the IRS’s claims that the proposed $80 billion in funds would be used to update the system and create an army of agents to audit Americans, the Republicans intended to do rid of it anyhow. Instead, Biden agreed to cut $20 billion, but redirect the money to other non-defense expenditures, demonstrating his competence as a negotiator.

Permitting for energy projects is simplified.

Licenses for projects using both fossil fuels and renewable energy sources will be simplified under the new standards.

West Virginia’s Democrat senator, Joe Manchin, has been pushing for this for quite some time.

It will make it easier to get projects off the ground by streamlining the environmental assessment process.

For the White House, Nomia, it’s a mixed bag. New energy infrastructure construction takes too long, as all sides acknowledge, but they differ on which projects should take precedence. When it comes to energy, Democrats choose renewable sources, while Republicans want gas pipelines and fossil fuel projects. Some liberal Democrats saw this as a new line too far.

Exceptions to the Agreement

Help with Student Loans

Republicans intended to scrap Biden’s idea to cancel some or all of students’ debt, but it ultimately passed.

Nomia: The Supreme Court will finally rule on the student debt lawsuit brought by the Biden administration. However, the measure mandates that by the end of the summer, the Biden administration must implement a plan to resume regular student loan repayments, which have been suspended since the beginning of the outbreak.

Accumulated tax increases

Although Democrats had promised additional tax rises for the rich, these measures do not include any such increases.

Nomia: This will infuriate the Democrats in the House. They were already complaining that the White House had ignored raising taxes on the wealthy and influential.

Pure power

The renewable energy and environment elements of the Inflation Reduction Act escaped repeal despite Republican efforts to do so.

Nomia: It’s a win-win situation for everyone involved, especially the environment. “We applaud President Joe Biden and Speaker Kevin McCarthy for prioritizing national interests over partisan politics,” the American Clean Power Association stated.

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