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President Biden and House Speaker McCarthy reach debt ceiling deal with student loan payments pause ending in 2023

President Joe Biden and House Speaker Kevin McCarthy have reached a deal to raise the debt ceiling and cut some federal spending. The agreement includes a provision that terminates the student loan payments pause 60 days after June 30, and prohibits the education secretary from extending the pause on federal student loan payments without an act by Congress. As per the bill, the current suspension of student loan payments will conclude on August 29, 2023, which is sixty days after June 30, 2023. The existing income-based payment schemes would continue to be implemented.[0] The bill was drafted as a result of an agreement reached between House Speaker Kevin McCarthy and President Joe Biden. The deal involves limiting federal baseline spending for a duration of two years, in return for the support of Republican votes to raise the debt ceiling beyond the upcoming elections and until 2025.

However, the deal only avoids a default and does not resolve anything other than that. The one big fight over the debt limit will give way to a thousand battles over appropriations.[1] Also, keep in mind that the debt-limit deal involves a significant act of postponing the issue to a later date, which is reflected in the agreement to determine spending levels beyond FY 2025 based on the outcome of the 2024 elections.[1] In the event that one of the parties secures a trifecta, they may have the ability (assuming the Senate filibuster is in play) to enforce their desired spending agenda on the opposing party.[1] It is probable that divided government will persist beyond the upcoming election. This will result in ongoing conflicts over the extent and structure of the federal government, which led to the current debt crisis and the imminent government shutdown crisis. These disputes are expected to continue for a long time.[1]

The debt-limit deal specifies some of the appropriations bills (e.g., funding levels for defense and veterans’ benefits backed by both parties). However, some issues will be resolved in the House and Senate Appropriations Committees, on their respective floors, and eventually through House-Senate negotiations, which may result in veto disputes with the White House.[1] In case any of these allocations are not resolved before October 1 and are not discussed in temporary spending agreements (which, once more, House Republicans are inclined to object to on ethical grounds), the sectors of the federal government affected will be closed down.[1] The debt-limit-deal legislation contains a significant incentive for regular appropriations in its finer points. If a stopgap spending bill includes appropriations at the end of the year, they will be subject to an automatic one percent reduction through the “sequestration” process, which enforces spending caps established in previous major debt-default agreements in 2011 and 2013. This reduction will be in addition to any previously enacted cuts.

As the Supreme Court will be responsible for the decision, the bill did not cover Biden's plan for canceling student loans.[0] In February of 2023, oral arguments were presented in the case and a decision is anticipated in the near future.[0] In late June, a Supreme Court ruling will determine the fate of Biden's $400 billion program to forgive student loans.[2] Should the justices determine that Republican-led states possess the right to file a lawsuit, it is highly probable that the outcome will be unfavorable to Biden.[2] The court, which is dominated by conservatives, has recently shown a lack of tolerance towards government agencies that adopt significant policies without the explicit approval of Congress.[2]

On Tuesday, the Congressional Budget Office, which is nonpartisan, predicted that the said bill would decrease deficits by $1.5 trillion in the next 10 years.[3] The bipartisan agreement to raise the debt ceiling and limit government spending passed a critical test in Congress on Tuesday, advancing out of the House Rules Committee despite opposition from some conservatives. The bill would hold non-defense spending for fiscal year 2024 at roughly current levels and raise it by 1% in 2025.[4] As per the agreement, the debt limit will be suspended for almost two years and will resume on Jan. 1, 2025.[5] After receiving approval in the House, the bill will undergo a multi-day process in the Senate to gain authorization before it can be sent to the president for approval.[6]

The deal seeks to limit the threat of a shutdown for the next two years.[7] In the event that Congress fails to pass all 12 yearly appropriations bills by January 1, 2024, a continuing resolution will be implemented which reduces discretionary spending for both defense and non-defense agencies by 1% until said bills are successfully passed.[8] The goal of the provision is to motivate legislators to approve funding bills that are itemized, since members from both the Democratic and Republican parties are eager to prevent a reduction in funding for their primary objectives.[7]

On Tuesday, the House Rules Committee, responsible for managing floor discussions, was prepared to assess the effectiveness of the debt agreement. A member of the libertarian committee, Representative Thomas Massie, declared his intention to support the measure's advancement to the House floor, indicating ample backing from the panel and obstructing the hard-liners' efforts to impede the agreement.[3] The Rules Committee is currently dominated by Republicans with a 9-4 lead. This indicates that if three members of the Republican party voted against the bill, in conjunction with every Democrat, the House floor would not have been able to consider the Biden-McCarthy deal.[9]

In conclusion, while the deal to raise the debt ceiling and cut federal spending may have been reached, it only avoids a default and does not resolve anything other than that.[9]

0. “Debt Ceiling Agreement Lifts Student Loan Pause, Cuts Some IRS Funding” Forbes, 29 May. 2023, https://www.forbes.com/sites/kellyphillipserb/2023/05/29/debt-ceiling-agreement-lifts-student-loan-pause-cuts-some-irs-funding

1. “Did We Just Trade a Debt Default for a Government Shutdown?” New York Magazine, 30 May. 2023, https://nymag.com/intelligencer/2023/05/did-we-just-trade-a-debt-default-for-a-government-shutdown.html

2. “Debt-Ceiling Deal Is Done. Recession, Stock Slide May Follow.” Investor's Business Daily, 30 May. 2023, https://www.investors.com/news/economy/debt-ceiling-fight-is-just-the-start-these-big-fiscal-drags-could-derail-u-s-economy-stock-market/

3. “McCarthy Confident on Debt Vote Despite Hard-Line Ouster Threat” Yahoo Finance, 31 May. 2023, https://finance.yahoo.com/news/republican-hard-liners-threaten-reckoning-163342304.html

4. “What's in the debt limit bill? Key provisions in the Biden-McCarthy deal to avert default” CNBC, 30 May. 2023, https://www.cnbc.com/2023/05/30/whats-in-the-debt-limit-bill-key-provisions-in-the-biden-mccarthy-deal-to-avert-default.html

5. “The deal to raise the debt ceiling is being sold as a necessary compromise” NPR, 29 May. 2023, https://www.npr.org/2023/05/29/1178660890/biden-and-mccarthy-reach-a-deal-to-avoid-default-heres-whats-in-it

6. “Biden-McCarthy debt ceiling deal approved by key committee ahead of House vote” NBC News, 30 May. 2023, https://www.nbcnews.com/politics/congress/debt-ceiling-deal-faces-first-major-test-house-rules-committee-rcna86769

7. “Debt Limit Deal Would Save Feds' Paychecks, But Freeze Agency Spending” GovExec.com, 30 May. 2023, https://www.govexec.com/management/2023/05/debt-limit-deal-would-save-feds-paychecks-freeze-agency-spending/386877

8. “Here are the 6 must-know provisions of the new debt ceiling deal” POLITICO, 28 May. 2023, https://www.politico.com/news/2023/05/28/6-pillars-of-the-debt-ceiling-deal-00099108

9. “McCarthy-Biden debt ceiling deal passes big procedural hurdle in House” Fox News, 31 May. 2023, https://www.foxnews.com/politics/mccarthy-biden-debt-ceiling-deal-passes-big-procedural-hurdle-house