Legislation includes spending caps for next two years and incorporates conservative measures such as reclaiming unspent Covid relief funds
President Joe Biden has signed a bill extending the debt ceiling for two years, preventing a potentially disastrous debt default.
The Fiscal Responsibility Act of 2023 suspends the public debt limit until January 1, 2025. If an agreement had not been reached, America would have faced default on its national debt for the first time in history. The Senate passed the bipartisan budget deal with a 63-36 vote, and the House passed it with a vote of 314 to 117, following months of political battles over government spending.
The legislation includes spending caps for the next two years and incorporates conservative measures such as reclaiming unspent Covid relief funds, reducing IRS funding, and reallocating funds from the Inflation Reduction Act. It also reintroduces federal student loan payments and adds work requirements for individuals up to the age of 55 seeking benefits from certain assistance programs.
Initially, President Biden refused to negotiate over the debt ceiling, but Republican House Speaker Kevin McCarthy insisted on significant budget cuts. McCarthy was able to pass a partisan bill that imposed budget cuts in exchange for raising the debt ceiling, which prompted Biden to engage in negotiations. The deal was reached just days before the June 5 deadline, following weeks of discussions.
The Treasury Department had been using "extraordinary measures" to meet the country's financial obligations since January, but Treasury Secretary Janet Yellen warned of the risk of breaching the debt ceiling. Yellen emphasised that failing to raise or suspend the debt limit would cause severe hardship for American families, harm the country's global leadership position, and raise questions about national security.
By extending the debt ceiling, the United States has averted an economic disaster. The bill sets spending limits, addresses unspent funds, reinstates student loan payments, and introduces work requirements.
The agreement represents a compromise between the Biden administration and Republican lawmakers, resolving contentious debates over government spending.