House Republicans in the United States are preparing to advance a debt-ceiling deal with Democratic President Joe Biden, aiming to pass it through Congress before the government faces a potential funding shortfall early next week. The House Rules Committee has announced its intention to consider the agreement on Tuesday afternoon, paving the way for a vote in the Republican-controlled chamber. However, the deal must also secure approval from the Democratic-controlled Senate before it can be signed into law by President Biden.
According to the U.S. Treasury Department, the country could default on its financial obligations as early as June 5 if Congress fails to act. The prospects for the deal remain uncertain as lawmakers from both ends of the political spectrum have expressed objections. Progressive Democrat Representative Raul Grijalva took to Twitter to voice his concerns about the deal's alterations to environmental regulations, calling them disturbing and profoundly disappointing.
Preliminary estimates from the nonpartisan Congressional Budget Office (CBO), cited by the newsletter Punchbowl, suggest that the deal could save up to $2 trillion if spending caps remain in effect for six years. However, the official estimate from the CBO is yet to be released, leaving the potential impact of the deal uncertain. The proposed 99-page bill seeks to suspend the debt limit until January 1, 2025, effectively deferring any contentious debates until after the 2024 presidential election. Additionally, it includes provisions to limit discretionary spending over the next two fiscal years, reclaim unused COVID-19 funds, expedite the approval process for certain energy projects, and strengthen work requirements for food aid programs. The bill also reallocates some funding away from the Internal Revenue Service, although White House officials assert that enforcement will not be compromised in the short term.
House Speaker Kevin McCarthy, who negotiated the deal with President Biden, has expressed confidence in gaining support from most fellow Republicans. House Democratic Leader Hakeem Jeffries also anticipates support from his party. However, the deal may encounter resistance in the Rules Committee, which typically aligns closely with House leadership. McCarthy had to include skeptical conservatives on the panel as a concession to secure the speaker's position. Despite the initial positive reaction from financial markets, there are concerns among investors about the potential impact of spending cuts on U.S. economic growth. Volatility in the U.S. bond market is also anticipated.
Republicans argue that substantial spending cuts are necessary to address the growth of the national debt, currently standing at $31.4 trillion, roughly equivalent to the annual economic output. Government forecasts indicate that interest payments on the debt will consume an increasing share of the budget in the coming decades due to rising healthcare and retirement costs driven by an aging population. However, the proposed deal does not address the growth of these programs. Instead, the majority of savings would come from capping spending on domestic programs, such as housing, border control, and scientific research, categorized as discretionary spending. Military spending, however, would be permitted to rise over the next two years.
