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The Guardian - US
The Guardian - US
Guardian staff and agency

Biden, McCarthy agree to raise US debt ceiling – what’s in the deal?

Kevin McCarthy and Joe Biden. The debt ceiling deal will affect discretionary spending, Covid funds and social programs.
Kevin McCarthy and Joe Biden. The debt ceiling deal will affect discretionary spending, Covid funds and social programs. Photograph: Alex Brandon/AP

Joe Biden and Kevin McCarthy have reached an agreement to lift the US debt ceiling and avoid a disastrous and unprecedented default. Prior to the details being presented to lawmakers, ahead of an expected vote on Wednesday, here is what sources familiar with negotiations have revealed:

Cap on discretionary spending

The deal would suspend the $31.4tn debt ceiling until January 2025, allowing the government to pay its bills. In exchange, non-defense discretionary spending would be “roughly flat” at current year levels in 2024, “when factoring in agreed-upon appropriations adjustments”, a source said. It would increase by only 1% in 2025.

Republicans have told their members that non-defense discretionary spending, apart from military veterans’ healthcare, would be cut to 2022 levels.

What about the 2024 presidential election?

The debt limit extension schedule means Congress would not need to address the deeply polarizing issue again until after the November 2024 election. This would prevent another political showdown that rattles global investors and markets until after either a Republican is elected president or Biden wins a second term.

Increased defense spending

The deal is expected to boost defense spending to about $885bn, in line with Biden’s 2024 budget spending proposal, an 11% increase from the $800bn allocated in the current budget.

Special IRS funding for federal tax authorities

Biden and Democrats secured $80bn in new funding for a decade to help the Internal Revenue Service enforce the tax code for wealthy Americans in last year’s Inflation Reduction Act. Republicans and Democrats had battled over moving that funding, which was allocated under the act as “mandatory spending” to keep it from the political fighting of the annual budgeting process, to “discretionary spending” to be allocated by Congress.

Covid clawback, cuts for the CDC

Biden and McCarthy are expected to agree to claw back unused Covid-19 relief funds as part of the budget deal, including funding that had been set aside for vaccine research and disaster relief. The estimated amount of unused funds is between $50bn and $70bn. The bill will also cut $400m from the Centers for Disease Control (CDC) global health fund “that sends taxpayer money to China”, Republicans told members, despite the risks of future pandemics.

Work requirements

Biden and McCarthy battled fiercely over imposing stricter work requirements on low-income Americans who benefit from federal food and healthcare programs.

No changes were made to Medicaid health insurance in the deal, but the agreement would impose new work requirements on low-income people who receive food assistance, up to age 54, instead of 50.

Student loans

Republicans said that they ensured borrowers would have to repay their student loans. However, other sources say the deal codifies relief from student loan payments while Biden’s executive action providing up to $20,000 of debt relief for each borrower is under review by the US supreme court, with a decision expected next month.


Republicans said they secured a budgeting mechanism known as “pay-go”, short for “pay-as-you-go”, that says new legislation or executive orders affecting revenues and spending on Medicare, social security and other key programs must be budget-neutral.

Energy permitting

The two leaders agreed to new rules to make it easier for energy projects – including fossil fuel-based ones as well as renewable energy – to gain permit approval.

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