US House Passes Debt Ceiling Deal

Facts

• On Wednesday, the US House voted 314-117 to pass legislation brokered by Pres. Joe Biden and Republican House Speaker Kevin McCarthy to allow the US debt ceiling to be raised.¹
• The 99-page bill suspending the debt ceiling until January 2025 was described by McCarthy, whose party holds a slight majority, as only a "first step,” with the bill now needing to be approved by the Democrat-controlled Senate.²
• The bill was supported by 165 Democrats and 149 Republicans, with 71 Republicans voting against the measure following discontent from the House Freedom Caucus.³
• The deal caps federal spending for the next two years, greenlights major energy projects, reduces funding for the Internal Revenue Service, and establishes new requirements for social safety-net programs.⁴
• It will also see nondefense spending remain roughly level in the fiscal year 2024 before increasing by 1% the following year, and require Congress to approve 12 annual spending bills or face a 1% cut on spending limits.⁵
• The Congressional Budget Office estimates budget deficits will be reduced by $1.5T over the next decade, below the $4.8T savings House Republicans were seeking in a bill passed in April, and also less than the $3T reduction in the budget Biden proposed through new taxes.⁶

Sources: ¹NPR Online News, ²PBS NewsHour, ³FT, ⁴CBS, ⁵Associated Press, ⁶Reuters.

Narratives

• Democratic narrative, as provided by FT. This is a win for Biden, who gave up little to Republicans despite all the noise they made. The GOP continues to underestimate the president at its peril, as he has prevailed in this game of chicken and kept his agenda on track.
• Republican narrative, as provided by New York Post. Republicans won this deal and will have further opportunities to force concessions ahead of the 2024 election. Although the US will continue to spend more than it receives, this deal is a start, and McCarthy has produced a compromise closer to the GOP's vision than the Democrats’.
• Narrative C, as provided by Guardian. Both sides will continue to have questions over the quality of the deal for weeks and months, but there was no more time for negotiations and concessions. Regardless of whether it’s a good deal or a bad one, it was necessary to prevent worldwide economic chaos.

Predictions