May 30, 2023

Day 861: "There's going to be a reckoning."

4 minutes

1/ Biden and Kevin McCarthy reached an agreement in principle to lift the debt limit and prevent a default on the federal debt. The plan suspends the borrowing limit for two years, caps federal discretionary spending increases at 1%, while defense spending increases would be limited to about 3.5%, as proposed in Biden’s budget. The legislation also includes new work requirements for select social safety net programs, claws back unspent Covid-19 relief funds, reduces IRS funding, reallocates funds from the Inflation Reduction Act, and streamlines the process of issuing federal permits for energy projects. As part of a debt ceiling agreement, the freeze on federal student loan repayments will end at the end of the summer, which is when the Education Department had been preparing to restart payments. To avert a default, the Fiscal Responsibility Act needs be approved by both the House and the Senate and then signed by Biden before the Treasury Department’s June 5 deadline. A vote in the House is expected as soon as Wednesday night. (New York Times / NBC News / Politico / Bloomberg / Washington Post / Wall Street Journal)

💡 Why should I care? The U.S. debt ceiling plays a critical role in maintaining global financial stability. Failing to raise or suspend the debt limit risks a default on U.S. debts, causing a loss of confidence in the U.S. dollar and higher borrowing costs, as well as disruptions to financial markets. The broader impact would be an economic downturn. Hitting the debt ceiling would also disrupt government operations and services, potentially leading to delayed payments to beneficiaries of programs like Social Security, Medicare, and veterans’ benefits.

2/ At least 20 conservative Republicans rejected the debt ceiling deal, with some members of the House Freedom Caucus threatening to force a vote to remove Kevin McCarthy as speaker if the bill is passed. Dan Bishop said McCarthy “capitulated” to Democrats and suggested that he plans to trigger the formal process to remove the speaker. “I’m fed up with the lies. I’m fed up with the lack of courage, the cowardice,” Bishop said, adding: “Nobody could have done a worse job.” Under new rules this year, a single Republican can bring a no-confidence vote to the floor to remove the speaker. Chip Roy, another member of the House Freedom Caucus, added: “Not one Republican should vote for this bill. We will continue to fight it today, tomorrow, and no matter what happens, there’s going to be a reckoning about what just occurred unless we stop this bill by tomorrow.” Several prominent conservative groups, meanwhile, publicly threatened to downgrade any Republican lawmaker who supports the bill. (NBC News / New York Times / Politico /

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