What’s Inside McCarthy’s Debt Ceiling Deal With Biden

U.S. President Joe Biden sits next to Speaker of the House Kevin McCarthy (R-Calif.) during the National Prayer Breakfast at the Capitol on Feb. 2, 2023. The National Prayer Breakfast is a yearly bipartisan event that brings together religious leaders and politicians for a morning of prayer and reflection. Kevin Dietsch/Getty Images

After a months-long standoff, Speaker of the House Kevin McCarthy (R-Calif.) and President Joe Biden have reached a final deal to raise the debt ceiling, which now heads to Congress.

Both McCarthy and Biden have praised the deal, calling it a compromise agreement, and have expressed confidence that it would pass both chambers of Congress. The deal would suspend the debt ceiling until 2025. The full text of the bill was released on May 28 (pdf).

The package meets several key Republican demands, including spending cuts, work requirements for government assistance, and other measures.

Although many in the GOP caucus are unhappy with the package, thinking it doesn’t go far enough, McCarthy shot back during a May 28 appearance on Fox News, saying that “there’s so much in this that’s positive.”

“This is really a step in the right direction,” McCarthy said, contrasting this package with previous debt ceilings that saw no spending cuts. “It puts us on a trajectory that’s different.”

Here’s what’s inside the package.

Nondefense Spending Caps

The deal meets a crucial Republican demand to cap spending on nondefense items.

Under the provisions of the deal, nondefense spending will remain at roughly the same level as the year prior, capping at about $637 billion. This will see an approximately 1 percent increase in fiscal year (FY) 2025.

However, this is far from Republicans’ original aspirations; the Limit, Save, Grow Act would have slashed spending by roughly $130 billion, as well as limited nondefense spending over the next decade. In contrast, this package keeps spending levels constant and does little to head off future changes to nondefense expenditures.

The bill will also see an increase in defense spending.

The Pentagon is set to get $886 billion in FY 2024, approximately a 3.5 percent increase that’s in line with Biden’s original budget request.

The Pentagon in Washington, on Jan. 26, 2020. Pablo Martinez Monsivais/AP Photo

Likewise, the package meets Biden’s request for veterans’ medical care, appropriating approximately $121 billion to that end.

McCarthy praised the tentative deal for its provisions cutting federal expenditures.

“Think about this: We were finally able to cut spending,” he said. “We’re the first Congress to vote for cutting spending year-over-year.

“So, you cut that back, you fully fund the veterans, you fully fund defense, but you take that nondefense spending all the way back to lower than ’22 levels.”

Stricter Work Requirements for Government Aid

The package will also bolster work requirements to receive some types of government assistance.

Specifically, the deal tightens requirements to receive benefits from the Supplemental Nutrition Assistance Program (SNAP), colloquially known as food stamps, and Temporary Assistance for Needy Families (TANF), otherwise known as welfare.

The bill will ensure that families with children don’t have their benefits cut. It also carves out exemptions for the homeless and veterans.

Jonathan Weiss/Shutterstock

Thus, several groups will see no changes to requirements to continue receiving aid.

However, single people without children up to 54 years old will see tighter requirements to continue receiving the aid and a shorter space of time that they can receive it if they don’t meet these requirements.

Republicans have said that this provision is necessary due to a startling decrease in the number of able-bodied young men willing to work since the start of the COVID-19 pandemic.

“We’re going to get America working again,” McCarthy said during his appearance on Fox.

IRS Funding Cut

The deal would also cut a portion of funding for the IRS, approved last year as part of the Inflation Reduction Act.

That bill gave the IRS $80 billion—more money than the agency had ever received from Congress and six times its previous budget.

Democrats presented the funding as a way to go after the wealthy, update IRS systems, and make other internal improvements.

But Republicans warned that it could be used to hire as many as 87,000 new IRS agents—a swarm of agents that they said would descend on middle America, increasing audit rates of small businesses and middle-class earners.

Republicans’ Limit, Save, Grow Act initially would have cut almost all of this funding, reducing it by $70 billion.

However, the deal reached includes an agreement “to repurpose $10 billion in the FY24 appropriations process and $10 billion in FY25 to be used to secure higher resources for non-defense priorities,” according to a document obtained from a White House source.

Student Loans

Although Republicans hoped to rescind an executive action by Biden canceling up to $20,000 in federal student loan debt, the package will leave the program untouched.

On the other hand, it will end the Biden administration’s pause on student loan payments at the end of the summer.

The Limit, Save, Grow Act would have permanently rescinded the Department of Education’s ability to order pauses on student loan payments. However, the budget deal would leave this power intact in the case of future emergencies.

Although the debt ceiling deal won’t touch Biden’s cancellation program, the matter is still set to go before the Supreme Court, where its fate is uncertain.

COVID Aid Clawbacks

The agreement would rescind about $30 billion in unspent coronavirus relief money that Congress approved through previous bills, with exceptions made for veterans’ medical care, housing assistance, the Indian Health Service, and about $5 billion for a program focused on rapidly developing the next generation of COVID-19 vaccines and treatments.

No Fossil Fuel Permitting Reform

Although there were bipartisan hopes that the package would include reforms to the permitting process for fossil fuel projects, the package contains very few provisions.

Republicans, joined by Sen. Joe Manchin (D-W.Va.), have long called for the government to ease its requirements to get approval for new fossil fuel ventures.

Oil pump jacks at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquén, Argentina, on Jan. 21, 2019. Agustin Marcarian/Reuters

As is, it can take years for such projects to be approved because of environmental and climate regulations.

However, McCarthy said on May 28 that the deal would “streamline” the process of building new infrastructure such as roads. Where it currently can take years to get government authorization to build a new road, the agreement would limit that review period to only a year, he said.

The 99-page deal agreed to ease the permitting approval process for energy projects, including fossil fuel endeavors. Biden and McCarthy inserted a one-year deadline for submitting environmental impact assessments and a two-year maximum for environmental impact statements. It also eases transmission deployment and expedites federal permitting for infrastructure projects.

Biden and House Republican leaders added to the bill approval of the Mountain Valley Pipeline (MVP), a natural gas pipeline in West Virginia. The agreement shortens the environmental reviews that are a part of federal environmental laws.

Manchin celebrated the news, saying that he “fought for this critical project.”

“I am pleased Speaker McCarthy and his leadership team see the tremendous value in completing the MVP to increase domestic energy production and drive down costs across America and especially in [West Virginia],” he said in a statement.

Bipartisan Opposition

The package leaves neither side happy and has faced backlash from members of both parties.

Among Democrats, progressives, such as Rep. Pramila Jayapal (D-Wash.), consider the deal to be too right-wing.

Many Republicans, likewise, view it as conceding too much to Democrats. In a comment indicative of the attitude toward the package, Rep. Ken Buck (R-Colo.) called it a “surrender.”

Many others, including Reps. Lauren Boebert (R-Colo.), Ralph Norman (R-S.C.), Dan Bishop (R-N.C.), Chip Roy (R-Texas), and Andy Biggs (R-Ariz.) have also indicated that they won’t support the package.

During an appearance on CBS’s Face the Nation on May 28, House Minority Leader Hakeem Jeffries (D-N.Y.) was noncommittal on his party’s support for the deal but indicated that he supported it for “avoiding a catastrophic default.”

It’s unclear whether the package will have enough votes to cross the finish line in the House.

However, McCarthy said on Fox that “95 percent” of his caucus supported the measure, and he indicated that he was unfazed by the opposition.

It’s also unclear if Senate Republicans, who control enough votes to derail the package in the upper chamber, will support the measure.

Earlier, 43 Senate Republicans said they wouldn’t support a package that fails to make spending cuts.

Nevertheless, Biden expressed confidence about the package’s prospects on May 28.

“I’m about to go in and call [McCarthy] now at 3 o’clock to make sure all the T’s are crossed and the I’s are dotted. I think we’re in good shape,” he said.

The president said there were no further sticking points about the package.

The Associated Press contributed to this report.