
Recently, a debt ceiling deal was struck between President Biden and House Speaker Kevin McCarthy. While the deal did not bring about a significant overhaul of American public policy, it did introduce some policy changes that have drawn mixed reactions.
A Congressional Deal with Familiar Dynamics:
The outcome of this debt ceiling negotiation resembled a typical congressional deal reached under the pressure of an imminent deadline. The bill managed to pass with a wide margin of support in both the House and the Senate. It is important to note that Republicans' efforts to use the debt ceiling as a bargaining chip did not seem to yield significant gains beyond what they might have achieved later.
What does matter is the cooperation that was witnessed between President Biden and Speaker McCarthy. Recognizing the need to avert an economic crisis, the leaders ultimately found a compromise for America and for American families.
The Scope of Budget Cuts and Areas of Impact:
While budget cuts resulting from the deal primarily affect domestic programs, it is worth mentioning that the deal leaves Medicare, Social Security, and Medicaid untouched. President Biden was adamant about protecting these programs regardless of what else would be negotiated. However, the remaining one-third of the budget, which is subject to congressional determination, will see some reductions.
Approximately two-thirds of the federal budget, totaling around $4 trillion, is allocated to mandatory spending on programs like Social Security, Medicare, and Medicaid. This spending remains unaffected by the debt limit deal. Consequently, only $2 trillion of the $6 trillion budget is directly influenced by the agreement. It is crucial to recognize that military and veterans' spending will see an increase, while other areas, such as child care, low-income housing, and national parks, may face cuts for the next two years. While this will greatly benefit military families and veterans’ families, the cuts to child care and low-income housing programs could prove to be severely consequential for lower-income American families.
Impact on Social Programs and Work Requirements:
The debt ceiling deal includes enhanced work requirements for programs such as the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF). These requirements already exist in these programs, but the age range has now expanded to include individuals aged 50 to 54. While exemptions were added for homeless individuals, veterans, and former foster children, this change may have unintended consequences for those applying for disability support.
Furthermore, the deal does not introduce additional work requirements for Medicaid, which had been a significant demand among GOP members, yet again, Biden prioritized protecting American families. Ultimately, the agreement is expected to result in 78,000 more people receiving SNAP benefits and an additional $2.1 billion in funding over the next ten years.
Student Loan Provisions and Borrowers' Concerns:
Under the debt ceiling deal, borrowers will have to resume repayment of student loans at the end of the summer. Additionally, the recent Supreme Court decision striking down President Biden's student loan forgiveness program further complicates the future of student loans. The pause on loan payments and the hold on interest accrual will end on August 29, with interest on loans resuming on August 30 if the current proposal becomes law.
Unspent COVID-19 Relief Aid:
Republicans have persistently urged the White House to reclaim a significant portion of unspent COVID-19 relief aid. The debt ceiling deal accommodated this demand, exempting some remaining COVID-19 funding. While the exact allocation of these funds remains unclear, public health experts express limited concern, as vital funding streams unaffected by the deal ensure ongoing support.
What Does This Mean for Biden, McCarthy, and America?
The recent debt ceiling deal between President Biden and House Minority Leader Kevin McCarthy, while not a transformative shift in public policy, introduces certain policy changes and budget cuts. Although social programs, especially those aiding lower income and disadvantaged communities, face some reductions, it is important to note that significant portions of the federal budget remain untouched. The deal also includes modified work requirements for certain social programs and has implications for student loan borrowers. As the agreement takes effect, further legislation in Congress will determine the exact cuts and allocations.
This is more or less the defense game Biden had to play against the Republicans. The GOP aimed to overhaul and completely alter how the federal budget is spent in comparison to how it has been spent for the last 3 administrations.
For context, raising the debt ceiling is not a new venture for any U.S. president. The debt ceiling has been raised 42 times in recent history across many presidential administrations. Former President Donald Trump raised the debt ceiling twice, while Presidents George H.W. Bush and Bill Clinton raised it 4 times each. Presidents George W. Bush and Barack Obama raised it 7 times each, and President Reagan raised the debt ceiling 18 times. The chart below illustrates the total national debt at the beginning and end of each administration’s term:
| Number of Times Ceiling Was Raised: | Total Debt at Start of Term: | Total Debt at End of Term: | Total Debt Accrued During Term: |
Trump | 2 | $19,900,000,00 | $27,000,000,000 | $7,100,000,00 |
Obama | 7 | $11,300,000,00 | $18,100,000,000 | $6,800,000,000 |
W. Bush | 7 | $5,950,000,000 | $11,300,000,000 | $5,350,000,000 |
Clinton | 4 | $4,100,000,00 | $5,950,000,00 | $1,850,000,000 |
H.W. Bush | 4 | $2,800,000,000 | $4,100,000,00 | $1,300,000,000 |
Reagan | 18 | $935,000,00 | $2,800,000,00 | $1,865,000,000 |