Biden and McCarthy reach a deal to avoid default. Here's what's in it

May 29th, 2023

President Biden and House Speaker Kevin McCarthy, seen here speaking at the U.S. Capitol on March 17, agreed to a deal that would raise the debt ceiling.
Drew Angerer / Drew Angerer

While many families in the U.S. were relaxing over the Memorial Day weekend, top negotiators for President Biden and House Speaker Kevin McCarthy were working late into the night to finalize the details of a measure that, if passed, would avoid a historic government default and raise the nation’s debt ceiling.

McCarthy released the outcome of those efforts, 99 pages of legislative text, on Sunday evening, giving House lawmakers 72 hours to review the bill before a planned vote in that chamber. Both Biden and McCarthy say the bill includes necessary trade-offs.

“The agreement prevents the worst possible crisis: a default for the first time in our nation’s history, an economic recession, retirement accounts devastated, millions of jobs lost,” President Biden told reporters Sunday evening, arguing that the compromise preserves a series of Democratic priorities.

The bill would hold nondefense spending for fiscal year 2024 at roughly current levels and raise it by 1% in 2025. The agreement separately suspends the debt limit for nearly two years until Jan 1, 2025.

Its completion follows weeks of negotiations as the government crept toward the date when it would run out of money to pay its bills.

“When you sit and negotiate within two parties, you got to deal with both sides of the aisle,” McCarthy told reporters on Sunday. “So it’s not 100% of what everybody wants.”

Even as McCarthy and Biden praise the bill as a framework that can gain bipartisan support, many lawmakers are waiting until they review the text to make a decision on whether to support it.

The bill would limit spending and expand work requirements

The measure was unveiled Sunday evening just after Biden and McCarthy spoke to discuss final details.

If passed, the bill would:

Set spending caps for the federal budget in the first two years in 2024 and 2025, and then sets appropriations targets for the following four years;

Raise the age of food stamp recipients subject to work reporting time limit requirements from 50 to 54, but only until 2030;

Create new exemptions that waive work requirements for: young adults ages 18 to 24 aging out of foster care, and all veterans and those experiencing homelessness, but also only until 2030;

Place new restrictions on how often states can waive work requirements for food stamp recipients; Require the Agriculture Department to publish a report of which state waivers it approves and rejects;

Reduce the timeline for when environmental impact statements need to be released for proposed projects;

Reform how federal agencies conduct environmental impact statements;

Claw back funding for the Internal Revenue Service;

End the current pause on student loan repayments and interest accrual 60 days after June 30.

The measure would also recover unspent pandemic funding, including money allocated by the American Rescue Plan and the Coronavirus Aid, Relief and Economic Security (CARES) Act, both landmark COVID relief packages. Republicans previously touted clawing back billions from these measures.

These rescissions include federal funding originally allocated for COVID testing, vaccine coordination at the Centers for Disease Control and Prevention and vaccine distribution, and for mental health awareness and education, and different industry pandemic responses including agriculture and railroads.

Biden and McCarthy are urging Congress to pass the bill

On Sunday night, Biden said he will “strongly urge both chambers to pass that agreement.” He told reporters upon his return to the White House on Sunday he expects to see the bill on his desk.

The president previously insisted he wanted Congress to authorize a debt ceiling increase without any conditions. But in April, House Republicans approved a bill that would raise the debt ceiling in exchange for spending cuts. GOP negotiators used that proposal as a framework for talks with the White House.

Asked what he’ll tell some Democrats who say he made too many concessions, Biden disputed that stance.

“They’ll find I didn’t,” Biden said.

The House speaker told reporters Sunday morning he expects to get a majority of support from his GOP conference, despite early signs of push back from some members.

“We’re going to have Republicans and Democrats be able to move this to the President,” McCarthy said.

If the bill is approved in the House chamber, it would then head to the Senate for a days-long process to try to greenlight the plan before it can head to the president’s desk.

Senators were briefed on the plan Sunday evening. Majority Leader Chuck Schumer warned them that as a result of some opposition to the plan, they should be prepared to vote on the measure as early as Friday and into the weekend.

Senate Minority Leader Mitch McConnell, who has been steadfast in his belief that a deal would be reached in time to avert default, lauded the agreement.

“Today’s agreement makes urgent progress toward preserving our nation’s full faith and credit and a much-needed step toward getting its financial house in order,” McConnell said, urging swift passage in the Senate.

The timeline to avoid a default remains tight. On Friday, Treasury Secretary Janet Yellen updated her guidance on the so-called “X date” — when the U.S. would run out of money to pay its bills — to June 5. Previously she had said it would be as early as June 1.