Explained: What is the new Debt-Ceiling Deal? Know about the key announcements
After weeks of stress, negotiations, and confusion, Joe Biden has finalized to suspend the debt ceiling till 1 January 2025, after making a collective decision with House Speaker Kevin McCarthy. Read further to know what decisions were made.
What Agreement was reached on the US Debt Ceiling?
The Speaker and I made clear from the start that the only way forward is with a bipartisan agreement.— President Biden (@POTUS) May 29, 2023
This agreement is an important step forward, and now it will go to the United States House and Senate.
Here’s my update: pic.twitter.com/u6vgKtSzvd
The measures revolving around the debt ceiling have come to a conclusion as Joe Biden and House Speaker Kevin McCarthy had a telephone conversation to suspend the debt ceiling till January 1, 2025.
Both of them had a telephonic conversation on Saturday 27 May 2023 to finalize a middle ground and compromise so that people don’t suffer.
This measure was taken under the Bipartisan Budget Agreement where Joe Biden stated that this would “take the threat of catastrophic default off the table; it protects our hard-earned and historic economic recovery.”
He also mentioned that “this is a deal that’s good news for, I believe you’ll see, for the American people.”
The agreement includes some spending cuts, but they are relatively modest. The deal includes some spending cuts, but they are relatively modest.
According to the White House Briefing of the call, upon being asked if the debt limit extension was until January 1, 2025, the White House Official stated “It’s a suspension through January 1st, 2025. And then, as you all know, the Secretary of the Treasury can then employ extraordinary measures.”
Biden also stated “I strongly urge both chambers to pass that agreement."
Why was this decision made?
In the recent letter from the Secretary of the Treasury Janet L. Yellen, it was stated that the Treasury will not have sufficient funds to fund the government’s obligations if the Congress doesn’t raise or suspend the debt limit till June 5.
Here is what the letter states: “Since January, I have highlighted to you the risk that Treasury would be unable to satisfy all of our obligations by early June if Congress did not raise or suspend the debt limit before that time.
In my letters, I also noted that I would continue to update Congress as more information became available. Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”
The Treasury had to take some extreme measures and transferred about $2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.
The letter reads “we used an additional extraordinary measure that Treasury has employed in a number of past debt limit episodes: a swap of approximately $2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.
“While this measure has not been used since 2015 due to its limited size, the extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments.”
What Spending Cuts were introduced in the new bill?
The US government plans to keep the non-defense expenditure roughly flat. Here is what the statement reads “The first main point to make here is that this is a two-year appropriations agreement.
“Non-defense spending roughly flat with the 2023 levels in 2024, when you factor in agreed-upon appropriations adjustments. In 2025, it increases the non-defense spending levels and the defense spending levels by 1 percent.”
Further, no changes were made to Medicaid in the new bill. However, it would utilize the unused COVID funds and the bill has been amended to speed up the permitting process for some energy projects.
According to the agreement, the revised security category would have $886 billion of funds allocated.
The agreement to raise the US debt ceiling is a major step forward in avoiding a debt crisis. It is a reminder that, even in the most divided of times, the US government is still capable of working together to address the most pressing challenges facing the nation.