President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) reached a tentative agreement to raise the U.S. debt ceiling over the weekend, providing a glimmer of hope peeking through the fiscal cloud hanging over DC. This deal would be a possible default, which many economists believe would be catastrophic. Here’s what you need to know about the deal.
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The basics of a debt ceiling
The debt ceiling is simply the maximum amount the U.S. government legally owes. The current borrowing limit is a whopping $31.4 trillion. This number was reached in January.
In an interesting twist, the proposed deal suggests a two-year suspension of the debt limit rather than just raising it. This would mean that the controversial issue of the sovereign debt ceiling would remain off the table until after the 2024 presidential election.
A bipartisan effort with significant implications
Should this deal win the approval of lawmakers on both sides of the aisle, it would allow the federal government to borrow money to pay its bills through 2025. However, the road to garnering this support is not without its challenges. .
The proposed deal brings a slew of provisions, including several cuts favored by Republicans in addition to increases in defense and veterans spending.
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Neither Republicans nor Democrats got exactly the deal they wanted, so both parties will have to sell their harder members if they agree to this proposal.
The impact of the deal on programs and services
One of the notable aspects of this debt ceiling deal is the full funding of veterans’ medical care, a provision consistent with Biden’s proposed budget blueprint for 2024. There are also proposed revisions to the Supplemental Nutrition Assistance Program (SNAP or “food stamps”). as they are usually regarded).
At the same time, the deal anticipates some funding cuts. This includes reducing the hiring of new IRS employees and recovering an estimated $30 billion in unused COVID-19 relief money.
Controversy and consequences
The specter of a possible default, should the deal not be reached, carries the risk of significant global economic disruption.
Experts have sounded the alarm about the consequences of such a situation, which could range from an international financial crisis to a domestic recession. A ripple effect that would likely lead to job losses, a spike in borrowing and the potential erosion of household wealth.
It comes down to
Speaker of the House Kevin McCarthy and President Joe Biden have agreed on a possible debt ceiling. The deal would save some spending, but not nearly as much as Republicans initially wanted. If the deal is approved, the debt ceiling would be lifted for the next two years.
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