September 20, 2023

McCarthy and Biden’s debt ceiling deal could hurt student loan borrowers and those on food stamps — and cost some Americans their jobs

Kevin McCarthy with President Joe Biden at an Oval Office meeting on the debt ceiling on May 22.

Kevin McCarthy with President Joe Biden at an Oval Office meeting on the debt ceiling on May 22.Saul Loeb/AFP/Getty Images

  • Biden and McCarthy finally reached an agreement on Saturday night to raise the debt ceiling.

  • The deal strengthens job requirements for welfare programs and codifies the end of the student loan payment pause.

  • The agreement must be legally signed as early as June 5 before the US defaults.

A deal to raise the debt ceiling between House Speaker Kevin McCarthy and the White House will end the interruption of student loan payments, make it more difficult for some low-income Americans to get food stamps, and reduce government spending in years to come. reduce billions.

On Saturday night, McCarthy and President Joe Biden finally reached an agreement to raise the debt ceiling before the country faces a default on June 5. approach to raise the debt ceiling – Biden wanted the final deal to be a clean raise, without any cuts, while McCarthy refused to avert bankruptcy without cuts to many Democratic priorities.

The deal the two sides reached required a compromise — a New York Times analysis estimated that the deal would save $136 billion through fiscal year 2025. programs, along with codifying the end of the student loan payment pause. The pause currently expires 60 days after June 30 or 60 days after the Supreme Court makes a final decision on the legality of Biden’s broad student debt relief plan, whichever comes first.

The deal also changes the Supplemental Nutrition Assistance Program work requirements for people ages 18 to 54 who do not have children and are able to work. To receive SNAP, these adults must work a minimum of 80 hours per month or receive job training.

However, the deal also helps expand access to this program for other vulnerable groups, such as veterans and the homeless, according to the Times.

While the agreement in principle means avoiding economically disastrous consequences, Moody’s Analytics estimates that the cuts could lead to a reduction in employment of 120,000 jobs by the end of 2024. The Financial Intelligence Service added that the new job requirements for income support programs could also lead to the loss of tens of thousands of jobs.

“Not the best timing for fiscal restraint as the economy is fragile and recession risks are high,” Mark Zandi, who runs the Moody’s Analytics Econ Twitter account, wrote Friday.

However, Zandi noted that the changes would be “manageable”. And while the deal is a blow to some ordinary Americans who depend on government programs, experts who spoke to the Times agreed.

Unlike in 2011, when a similar deal was struck between then-President Barack Obama and former chairman John Boehner to cut government spending by trillions over a decade, economists say the deal is not aggressive enough to completely sink the economy – even as it is now. stands.

Jason Furman, a Harvard economist, told the Times that while the 2011 debt deal resulted in stagnant economic growth for a country recovering from the 2008 recession, government spending cuts could help keep interest rates in check, which have risen in response to skyrocketing inflation.

“The economy still needs cooling, and this is taking the pressure off interest rates to bring about that cooling,” Furman told the Times.

Now Congress must act quickly to get this legislation signed into law before the government runs out of money to pay its bills. This signals an important week for lawmakers — especially as some Democrats and Republicans are not happy with the compromise that resulted in the final agreement. Still, it’s vital that a bill to raise the debt ceiling gets signed into law, because a default could mean a recession – and millions of jobs lost as a result.

Read the original article on Business Insider

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