Connect with us

U.S. Politics

Federal Budget Agreement Reached to Avoid First U.S. Default



WASHINGTON, DC - MAY 30: U.S. House Minority Leader Hakeem Jeffries (D-NY) speaks to reporters about the debt limit at the U.S. Capitol. (Photo by Kevin Dietsch/Getty Images)

Bill Goes to House and Senate for Passage

By Mary Alice Miller
As we go to press, the bipartisan bill to suspend the nation’s debt ceiling passed by a vote of 314-117. Seventy-one Republicans and 46 Democrats voted against, representing the far right and far left of their respective parties. The bill immediately goes to the Senate for passage before the June 5 deadline.
President Biden and House Speaker McCarthy have reached an agreement to raise the U.S. debt limit. The deal would raise the $31.4 trillion debt ceiling until Jan. 1, 2025, avoiding a catastrophic default on U.S. Bills due during next year’s presidential election. The legislative text of the bill goes to the House of Representatives and Senate for passage. The debate will take place regarding how to allocate the new spending caps.

Biden said the bipartisan budget agreement “takes the threat of catastrophic default off the table: it protects our hard-earned and historic economic recovery. The agreement prevents the worst possible crisis: a default for the first time in our nation’s history, an economic recession, retirement accounts devastated, and millions of jobs lost. It also protects key priorities and accomplishments and values that congressional Democrats and I have fought long and hard for.”

Biden added, “The agreement also represents a compromise, which means no one got everything they want. But that’s the responsibility of governing.”

Acknowledging the budget deal “reduces spending while protecting critical programs for working people and growing the economy for everyone,” Biden said, “The agreement protects my and Congressional Democrats’ key priorities and legislative accomplishments.”

Treasury Secretary Janet Yellen warned that the U.S. Government could default on its debt obligations on June 5. That deadline would have allowed retirees and Social Security recipients to receive their first-of-the-month payments.
The deal includes $136 billion in budget cuts.
Non-defense discretionary spending would remain nearly the same at current-year levels in 2024.
Non-defense discretionary spending, excluding veteran’s benefits would stay virtually flat at $637 billion in fiscal year 2024, down from $638 billion in the previous year. There will be a 1% increase in 2025.
Defense spending would increase about 3% from the current $858 billion Pentagon budget, in line with Biden’s 2024 budget spending proposal.
In a previous budget, Biden and Democrats secured $80 over ten years for new Internal Revenue Service funding to hire thousands of new agents to enforce the tax code for wealthy Americans which was projected to bring in an additional $200 billion over a decade. The budget deal would shift $10 billion away from the IRS in 2024 and 2025.
Between $50 and $70 billion in unused Covid relief funds will be clawed back, though some funds will be retained for vaccine funding and housing assistance.
The biggest fight between Biden and McCarthy took place over stricter work requirements for low-income Americans to receive food and healthcare assistance. There were no changes to Medicaid, but there would be new work requirements for people up to 54 who receive SNAP food assistance, up from age 50. However, there would an expansion of eligibility for people like veterans and the homeless because of changes made to exemptions and relaxed work requirements.
The deal would require the Biden administration to continue a planned end to the pause on student loan repayments by late August. Biden’s plan to forgive $430 billion in student debt plans while the Supreme Court reviews the policy.
McCarthy got pay-as-you-go inserted into the deal. New agency spending that affects revenue and spending should be offset by savings. But the Biden administration could issue waivers to that requirement and judicial review of decisions would be limited.


“President Biden has delivered a result that has avoided a catastrophic default, prevents our economy from crashing, and stops the extreme MAGA Republicans from triggering a job-killing recession which seems that is a position they are taking for political reasons,” said House Democratic Leader Hakeem Jeffries. “The extreme MAGA Republican negotiating position and the extreme bill that they passed on April 26 ‘The Default on America Act’ contained nothing that was consistent with Democratic values or American values. It was unreasonable to think that that negotiating was going to be able to result in a resolution that would make sense for the American people when he understood and everyone understood that a bipartisan resolution was the only way forward to avoid a catastrophic default.”
Jeffries said, “The agreement that President Biden reached does several important things: in addition to avoiding a devastating default for everyday Americans, it protects Social Security, it protects Medicare, it protects Medicaid, it protects veterans, it protects the American people from the types of devastating spending cuts that were proposed by Republicans in their ‘Default on America Act’.
Jeffries is cautiously confident that Democrats will vote in support of the deal. “We have to avoid a market crash, we have to avoid tanking the economy, we have to avoid a default,” he said. “The reason why we are in this situation is that extreme MAGA Republicans made the determination that they were going to use the possibility of default to hold the economy and everyday Americans, hostage.”

Senator Kirsten Gillibrand concurs with Biden and Jeffries and proposed a solution. “I do believe is that we should fix this permanently. We should clarify what the 14th Amendment means and say no future Congresses can take the full faith and credit of the United States hostage. They were willing to crater the U.S. economy,” said Gillibrand. “As soon as we have the majority back in the House I would make this among the first thing I voted on because this should never happen again. It’s because we lost our majority that it had the opportunity to happen. So, we need to do everything we can to get our vote out to make sure we have a majority in the next Congress so that we can really codify what the 14th Amendment says.”
Explaining that even though the deal freezes the federal budget to 2023 levels, Gillibrand said, “The budgets that we passed last year were really strong. We got increases to affordable housing, we got increases to SNAP and food programs and we got increases to a lot of issues that Americans really wanted us to focus on. The upside is at least the place where they froze it was a very positive place of good work we did in the last Congress with all the work we did to get prescription drug prices moved down, to invest in green energy and green jobs, to invest in infrastructure and domestic manufacturing, all that was very positive. If we are going to freeze then freezing it to last year is not terrible but ideally, we would like that to increase with inflation every year.”

She added, “It doesn’t have things in it that I would have preferred but it’s a fair compromise about what we need to keep the full faith and credit of the United States solid. It is a responsible approach and one that shows that President Biden is putting the American people first.”
Overall, the deal could anger both House Republicans and Democrats who encouraged each side to stand firm on their priorities. The bill could be debated and voted on in the House as soon as Wednesday, and a few days later in the Senate.