The debt ceiling vote has 8 important lessons for us

The agreement secures some GOP priorities on spending, permits and the safety net, but left the heart of President Joe Biden's agenda intact — at least until the next fight.

Late Thursday, Congress passed a deal on the debt limit that made modest progress towards Republicans’ goals to cut spending, streamline red tape and add more work requirements for federal safety net programs.

The Democrats consoled themselves by thinking that the bargain was not even worse.

Here are the highlights of the policy and spending provisions. This compromise leaves the major White House priorities in tact, but provides a roadmap for what conservatives might demand during future fiscal battles.

Spending limits

The deal: Although the fight was about the debt, it resulted in a deal which locks in spending caps for two years.

The total discretionary funding for programs other than defense would remain about the same, whereas the funding for defense would increase by about 3 percent. One year later, these funding ceilings will increase by less that 1 percent.

The bill also includes funding levels for an additional four years. Congress does not have to adhere to these totals.

What Republicans Got: Democrats accepted funding that was essentially static for non-defense programmes, which is a far cry away from the 7 percent budget increase requested by President Joe Biden.

A consolation to Democrats: They got Republicans to back down from their demands of substantial spending reductions. The bill that House Republicans passed back in April would have reduced non-defense spending by over 20 percent, if defense funding was not cut.

The Democrats won the debate on long-term budget restrictions. Republicans wanted 10 years of totals that were binding, but only got two.

There is some streamlining of permits, but not on the top priority for Democrats

What it does: This bill takes modest steps to accelerate the review of federal permits issued under the National Environmental Policy Act (one of the country’s most important regulatory laws). The bill could help both fossil fuels and clean energy projects but it falls short of what each party wanted.

What Republicans Got: This deal limits environmental reviews to one or two years, limits the pages of environmental analyses by agencies, and gives developers the right to sue if the agencies fail to meet deadlines.

Republicans did not achieve the regulatory changes that they wanted. The agreement, for example, does not restrict the ability of project opponents to sue.

Consolation for Democrats: One of the biggest consolations is that the $369 billion worth of clean-energy incentives included in Biden’s Act to Reduce Inflation are left intact, despite House Republicans demanding that the spending be cut. This result allowed the White House boast about protecting the core of President Biden’s climate change agenda. Its passage last year may have been Biden’s greatest legislative accomplishment.

But progressive Democrats are furious . The progressive Democrats are furious that the deal does not include the provisions that they requested, which would have made building interstate electrical transmission systems easier — an urgent need to ensure the spread of renewable energy projects such as wind and solar.

The White House has also given in to the demands of West Virginia’s Democratic congressional delegation led by Sen. Joe Manchin to speed up federal approvals for Mountain Valley Natural Gas Pipeline.

The IRS haircut

The deal: It rolls back $21.4billion from the $80billion windfall the Internal Revenue Service received last year as a result of the Inflation Reduction Act. However, only $1.4billion will be rescinded instantly.

Negotiators have agreed to redirect $10 billion more from the IRS to federal agencies as part of the annual appropriations act for fiscal years 2024 and 2025, which begin this October.

What Republicans Got: Since they gained control of the House in 2010, Republicans have been adamant about rescinding funding for the IRS, arguing the IRS will inevitably increase audits against small businesses and middle-class families. Speaker Kevin McCarthy insists the IRS cuts were a clear victory for the GOP.

Consolation for Democrats: The cuts will only make a small dent in IRS’s budget. White House officials claim they do not expect them to have an impact on IRS plans within the next 5 years. This explains the dissatisfaction of members of House Freedom Caucus.

The fight is not over. Democrats who want more money for the IRS so it can crack down on tax cheats wealthy may be able to push Congress into providing an additional injection sooner than expected. Republicans will likely seek to cut even further.

Safety net programs require more work

The deal makes some of the most significant changes in recent decades to the work requirements for federal aid. It also makes exceptions for veterans, homeless people and recent foster children for the first-time. This concession was made to Biden’s staff because the Congressional Budget Office predicted that it would raise overall spending.

What Republicans Got:The agreement imposes additional work requirements to adults aged 50-54 who do not have children living in their household. This is an extension of the existing requirements for those between 18-49 years old. The Supplemental Nutrition Assistance Program (formerly known as Food Stamps) is subject to new restrictions.

CBO reports that more than 275,000 people could lose food aid.

The final agreement phase-in the SNAP requirements, and they will sunset by 2030. The bill includes new restrictions for emergency cash assistance known as Temporary Aid for Needy Families. This will affect low-income families and children.

McCarthy and other Republican legislators argue that the requirements will increase the workforce as well as provide resources for older Americans to find work.

Democrats strongly dispute this, and the White House claims that such requirements “tie up the most vulnerable in bureaucratic paper” and have “shown no benefit to bring more people into employment.”

A consolation to Democrats: It could have been much worse. They have largely praised Biden’s team for expanding SNAP benefits to new vulnerable populations despite Republican demands that other groups be restricted.

Covid clawbacks

The deal:The White House agreed with House Republicans to take back nearly $28 billion of Covid-19 relief money. This includes money for highway infrastructure and strengthening the supply chain.

What Republicans Got:They claim they recovered funds that were appropriated for responding to an acute health crisis, which is no longer. The public health crisis officially ended on 11 May, and Covid-19 weekly hospitalizations have reached their lowest levels since the beginning of the pandemic.

Consolation for Democrats: They say that they protected several programs designed to maintain readiness in the event of a Covid infection, hospitalizations or deaths. The agreement includes $5 billion for research on new Covid treatments and vaccines, as well as $800 million to invest in Defense Production Act, which includes efforts to strengthen pharmaceutical supply chain.

The agreement also includes money for people who do not have health insurance to access vaccines and treatments. It also provides funds for the Centers for Disease Control and Prevention (CDCP) to continue genomic surveillance, which is intended to detect emerging variants that are of concern and to conduct other activities.

The unemployment reform is over

What it does: Withdrawing funding from the Covid era also means that $1 billion was removed to help states upgrade their creaky unemployment insurance system. These systems were found to be weak when states could not deal with the flood of benefits claims at the height the pandemic or stop widespread fraud.

Congress initially provided $2 billion to the program. After the debt agreement takes effect, after money has been spent and obligated to pay for other obligations, there will only be about $500 million left.

Last week, the Labor Department announced $653 million in grants. The clawback calls into question the money and raises questions about other tranches which could be affected.

What Republicans Got:The cutbacks are aimed at a program that had raised objections among GOP legislators, who were concerned about its structure and the goal to address inequalities in the unemployment insurance scheme.

The GOP also focused on the way acting Labor Secretary Julie Su managed California’s unemployment programs when she was top official in this state and made it one their main arguments against Su being confirmed as a full-time secretary.

A consolation to Democrats: Look above — it could’ve been worse.

Return of Student Loan Payments

What it does: The legislation ends the Education Department’s suspension of federal student loans and interest payments as of August 30.

The Biden administration must resume monthly payments for approximately 40 million Americans and charge interest to them for the first since the pause in March 2020, at the start of the pandemic.

The executive actions of the Trump administration, and the Biden administration have repeatedly extended the pause.

What Republicans got They enacted a law that codified the Biden administration’s stated plan to resume student loan payments this year, preventing the White House from offering further extensions.

The GOP lawmakers hail the end of payment pause, calling it a win for the taxpayers. They cite the $5 billion a month cost of keeping payments stopped and interest rates at 0%.

Many conservatives are still unhappy with the fact that Biden’s plan of cancelling large portions of outstanding student loans was not blocked. This plan would erase up to $20,000 in debt for each American.

A consolation for Democrats They were able to fend off House GOP demands which would have ended payment pauses, prevented student debt cancellation and prevented Biden moving forward with a new income driven repayment plan that aimed to lower monthly payments. Republicans wanted to limit the Education Department’s ability to change the Student Loan Program.

Officials in the Biden administration argue that this compromise maintains the president’s agenda for student loans and codifies the preexisting plan of restarting payments.

Progressives are concerned that the administration is committing itself to restarting payments, even if in the next few weeks the Supreme Court rules that it cannot cancel student loans for tens and millions of borrowers. Sen. Bernie Sanders, (I-VT), said that he wouldn’t vote to end the student loan pause. “This has been a lifeline for millions of working families in the middle of the pandemic,” he added.

Spending limits on defense (for the moment)

The deal: It caps the Pentagon’s defense budget for the next two-year period, ending the growth of the past two years. The deal does not preclude Congress giving a boost to military spending in the future, Senate Majority Chuck Schumer told reporters on Thursday.

The agreement caps defense spending for fiscal 2024 at $886 billion, which is a 3.2 per cent increase over current levels. This was in line with Biden’s request. The military spending in fiscal 2025 would only increase by 1 percent, to $895 Billion.

What Republicans Got: GOP Defense Hawks avoided cuts. But the fact that Biden’s preferred budget was endorsed by the deal is a lose. Defense spending is still increasing despite concerns that the effort to cut spending would result in a reduction of the Pentagon.

Defense hawks continue to push for additional funding. Schumer did not promise that such a supplemental would be voted on, but he said in a public statement that the debt agreement does not prevent the Senate from authorizing additional emergency spending – for national security needs or domestic ones.

Consolation for Democrats: They get the level of defense funding the administration proposed in the short term, despite the fact that some Democrats would have supported more money for military. Deal also differentiates between defense and non-defense spending levels, so a rise in military funding wouldn’t mean cutting domestic programs.

Jennifer Scholtes and Josh Siegel contributed to the report. Meredith Lee Hill was also involved.

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