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.
