June 02, 2023
Congress Passes Debt Ceiling Deal; Package Will Limit Spending
After months of waiting and weeks of negotiating, the House of Representatives, in a bipartisan vote, passed the Fiscal Responsibility Act of 2023, which raises the debt ceiling for next year. The Senate, also with bipartisan support, quickly followed suit last night and the bill is off to President Biden for signature just a few days before the June 5 default deadline.
Congressional approval came after President Biden and Speaker of the House Kevin McCarthy (R-CA) finalized a deal over the Memorial Day weekend. The deal suspends the debt ceiling until January 1, 2025, then readjusts it to the amount incurred up to that point. The deal gets both parties through the 2024 presidential election cycle.
The bill also reinstates statutory spending caps for two years and puts spending limits on the next 10 years. The Congressional Budget Office projects the spending caps will reduce the deficit by $1.5 trillion over 10 years. For FY 2024 and FY 2025, separate caps are included for defense and non-defense spending, with defense having higher spending limits. For future limits, government spending is allowed to grow up to 1% each year. To encourage Congress to write spending bills on time for the next ten years, the Fiscal Responsibility Act includes a trigger for a temporary 1% reduction in funding if final federal funding is not enacted by December 31 each year.
This pressure to reduce domestic spending will pit the student aid programs against other programs in the Labor-HHS-Education Subcommittee bill to maintain at least FY 2023 funding levels, much less secure increased funding for programs such as the Pell Grant.
The bill also includes a provision to stop the pause on student loan repayments effective August 30, which mirrors the 2022 White House announcement proclaiming that student loan repayments will resume 60 days after June 30, 2023.
While the bill will be debated for months in Washington, the most striking aspect of this week’s debate was how unusual it seemed to have members of opposite parties negotiating and voting together to see a controversial bill sent to the president for his signature.
Congressional approval came after President Biden and Speaker of the House Kevin McCarthy (R-CA) finalized a deal over the Memorial Day weekend. The deal suspends the debt ceiling until January 1, 2025, then readjusts it to the amount incurred up to that point. The deal gets both parties through the 2024 presidential election cycle.
The bill also reinstates statutory spending caps for two years and puts spending limits on the next 10 years. The Congressional Budget Office projects the spending caps will reduce the deficit by $1.5 trillion over 10 years. For FY 2024 and FY 2025, separate caps are included for defense and non-defense spending, with defense having higher spending limits. For future limits, government spending is allowed to grow up to 1% each year. To encourage Congress to write spending bills on time for the next ten years, the Fiscal Responsibility Act includes a trigger for a temporary 1% reduction in funding if final federal funding is not enacted by December 31 each year.
This pressure to reduce domestic spending will pit the student aid programs against other programs in the Labor-HHS-Education Subcommittee bill to maintain at least FY 2023 funding levels, much less secure increased funding for programs such as the Pell Grant.
The bill also includes a provision to stop the pause on student loan repayments effective August 30, which mirrors the 2022 White House announcement proclaiming that student loan repayments will resume 60 days after June 30, 2023.
While the bill will be debated for months in Washington, the most striking aspect of this week’s debate was how unusual it seemed to have members of opposite parties negotiating and voting together to see a controversial bill sent to the president for his signature.
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Stephanie T. Giesecke