The full legislative text of Speaker Kevin McCarthy’s agreement in principle with President Biden to suspend the nation’s borrowing limit revealed new and important details about the deal, which House lawmakers are expected to vote on this week.
Temporarily suspends the debt limit
The deal suspends the nation’s $31.4 trillion borrowing limit until Jan. 2025. Suspending the debt limit for a period of time is different than setting it at a new fixed level. It essentially gives the Treasury Department the latitude to borrow as much money as it needs to pay the nation’s bills during that time period, plus a few months after the limit is reached, as the department employs accounting maneuvers to keep up payments. The suspension will kick the next potential fight over the nation’s debt load to 2025 — past the next presidential election.
Caps and cuts spending
The bill cuts so-called non-defense discretionary, which includes domestic law enforcement, forest management, scientific research and more — for the 2024 fiscal year. It would limit all discretionary spending to 1 percent growth in 2025, which is effectively a budget cut, because that is projected to be slower than the rate of inflation.
Claws back I.R.S. funding
The legislation takes aim at one of President Biden’s biggest priorities — bolstering the I.R.S. to go after tax cheats and ensure companies and rich individuals are paying what they owe.
Democrats included $80 billion to help the I.R.S. hire thousands more employees and update its antiquated technology in last year’s Inflation Reduction Act. The debt limit agreement would immediately rescind $1.38 billion from the I.R.S. and ultimately repurpose another $20 billion from the $80 billion it received through the Inflation Reduction Act.
New work requirements for government benefits
The legislation would impose new work requirements on older Americans who receive food stamps through the Supplemental Nutrition Assistance Program and who receive aid from the Temporary Assistance for Needy Families Program.
The agreement includes new measures to get energy projects approved more quickly by creating a lead agency to oversee reviews and require that they are completed in one to two years.
Student loans and unspent Covid money
The bill officially puts an end to Mr. Biden’s freeze on student loan repayments by the end of August and restricts his ability to reinstate such a moratorium. The bill also claws back about $30 billion in unspent money from a previous Covid relief bill signed by Mr. Biden,. the deal leaves intact funding for two key Covid programs: Project NextGen, which aims to develop the next generation of coronavirus vaccines and treatments, and an initiative to offer free coronavirus shots to the uninsured.
What’s not in the bill
We are watching how mortgage rates will respond once the debt ceiling is passed. High mortgage rates remain the main challenge in our market. Sellers, who have low mortgage rates locked in, are hesitant to sell their properties even if their home is no longer the right fit. Buyer demand is lower as a result of high mortgage rates. We will keep you updated on all.