On January 19, 2023, the United States hit its
debt ceiling
A debt limit or debt ceiling is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions.
Description
A debt limit is a l ...
, leading to a debt-ceiling crisis, part of an ongoing political debate within
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
about
federal government spending and the
national debt that the U.S. government accrues.
In response,
Janet Yellen
Janet Louise Yellen (born August 13, 1946) is an American economist serving as the 78th United States secretary of the treasury since January 26, 2021. She previously served as the 15th chair of the Federal Reserve from 2014 to 2018. Yellen is ...
, the
Secretary of the Treasury
The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...
, began enacting temporary "extraordinary measures". On May 1, 2023, Yellen warned these measures could be exhausted as early as June 1, 2023; this date was later pushed to June 5.
The debt ceiling had been increased multiple times since the
2013 debt ceiling standoff, all without budgetary preconditions attached; the most recent increase was in December 2021.
In the 2023 impasse, Republicans proposed cutting spending back to 2022 levels as a precondition to raising the debt ceiling, while Democrats insisted on a "clean bill" without preconditions, as had been the case in raising the ceiling three times during the
Donald Trump administration
Donald Trump's tenure as the 45th president of the United States began with his inauguration on January 20, 2017, and ended on January 20, 2021. Trump, a Republican from New York City, took office following his Electoral College victory o ...
.
In the event the government runs out of funds, the Treasury would have to either default on payments to bondholders or immediately curtail payment of funds owed to various companies and individuals that had been mandated but not fully funded by Congress. Both situations would be expected to result in a global economic meltdown. Additionally, if the federal government were unable to issue new debt, it would have to balance its budget by imposing budget cuts that, in total, would equal 5% of the size of the American economy.
Constitutional scholar
Laurence Tribe
Laurence Henry Tribe (born October 10, 1941) is an American legal scholar who is a University Professor Emeritus at Harvard University. He previously served as the Carl M. Loeb University Professor at Harvard Law School.
A constitutional law sc ...
said that a default would be unconstitutional due to the
14th Amendment and the government would be required to repay its debts despite hitting the debt ceiling. President
Joe Biden said that he was considering invoking the 14th because he felt he had authority to do so, but questioned whether it could be done in time to avoid default given the possibility that it might be appealed.
On May 27, Biden and House speaker
Kevin McCarthy
Kevin Owen McCarthy (born January 26, 1965) is an American politician, serving as House Minority Leader in the United States House of Representatives since 2019. A member of the Republican Party, he served as House Majority Leader under spea ...
struck a deal to increase the debt-ceiling but cap federal spending; the resulting bill, the
Fiscal Responsibility Act of 2023, passed the House on May 31 and the Senate on June 1. Biden signed it into law on June 3, bringing the crisis to an end.
Background
The deficit and the national debt
![United States Federal Government debt](https://upload.wikimedia.org/wikipedia/commons/c/cd/United_States_Federal_Government_debt.webp)
Federal budget and deficit
In 2019, just over 60% of the
federal budget went to mandatory spending for programs like Social Security, Medicare, and Medicaid, with another 30% going to discretionary spending (half of which went to defense). The remaining 9% went to pay for interest on the debt. Meanwhile, both mandatory spending programs and interest on the debt were expected to take up increasing shares of the federal budget, while tax revenues were expected to be stagnant.
In the
fiscal year
A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ...
2022, the federal government brought in $4.90 trillion but spent $6.27 trillion, with a net budget deficit of $1.38 trillion (the fourth-highest of the 21st century). In addition, it has run deficits every year since 2001, when it last ran a surplus. Financing a deficit requires that the government borrow money.
However, based on
Article 1, Section 8, Clause 2 of the
United States Constitution, only Congress has the authority to borrow money "on the Credit of the United States".
Debt ceiling
The
United States debt ceiling
The United States debt ceiling or debt limit is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury, thus limiting how much money the federal government may pay on the debt they already borrowed. The ...
is a legislative limit that determines how much debt the Treasury Department may incur.
It was introduced in 1917, when Congress voted to give Treasury the right to issue bonds for financing America participating in World War I, rather than issuing them for individual projects, as had been the case in the past. In 1939, Congress gave the Treasury the right to issue and manage debt—though it limited how much it could issue. From 1939 to 2018, the Treasury increased the debt ceiling 98 times, decreasing it five times. Whilst the Treasury can borrow money to pay for federal expenditures, it is limited in power by Congress.
In other words, the Treasury can borrow money to pay for federal expenditures—but only as much as Congress lets it.
National debt
Since 2009, America's
national debt has nearly tripled, with annual federal deficits averaging close to $1 trillion since 2001.
During the 21st century, it has gone up for various reasons, including tax cuts under Presidents
Bush and
Trump
Trump most commonly refers to:
* Donald Trump (born 1946), 45th president of the United States (2017–2021)
* Trump (card games), any playing card given an ad-hoc high rank
Trump may also refer to:
Businesses and organizations
* Donald J. T ...
, wars in
Iraq
Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to the north, Iran to the east, the Persian Gulf and K ...
and
Afghanistan
Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...
, entitlements like
Medicare Part D
Medicare Part D, also called the Medicare prescription drug benefit, is an optional United States federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs. Part D was enacted as part of the Medi ...
, and spending in response to the
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
and the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identi ...
. Currently, the U.S. is the industrialized country with the fourth highest debt-to-GDP ratio, behind Japan, Italy and Greece. Additionally, the national debt is forecast to be double the United States' GDP by 2051.
Reducing the deficit and debt
According to both policy experts and politicians, dealing with the deficit and debt will ultimately involve both raising taxes and decreasing spending. Past plans for taxes hikes have included reducing the number of deductions, increasing rates on higher earners, and making new taxes, while proposals for reducing spending have included reducing Social Security benefits, lowering payments for Medicaid and Medicare, and cutting defense spending, among others.
However, it tends to be difficult to do so in practice, owing to citizens' reluctance to alter large programs like Social Security or the raising of taxes. Historically, no political party has been willing to reduce the deficit or debt when they have held power, although the issue is often a foundation of candidates' election campaigns.
The U.S. dollar and borrowing
The
United States dollar
The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
(used heavily in international trade) is considered to be the world's reserve currency for a variety of reasons, including the sheer magnitude of the American economy, America's geopolitical strength, the dollar's relative stability, and the market for U.S. debt.
As well, the
Compromise of 1790
The Compromise of 1790 was a compromise between Alexander Hamilton, Thomas Jefferson, and James Madison, where Hamilton won the decision for the national government to take over and pay the state debts, and Jefferson and Madison obtained the nati ...
(when Treasury Secretary Alexander Hamilton got both Secretary of State Thomas Jefferson and Representative James Madison to agree to take on Revolutionary War debts assumed by the states and the Continental Congress in exchange for locating the capital on the Potomac River by Virginia) played a role with this: Because Revolutionary War bondholders were paid 100 cents on the dollar, America made good on its debt and established good credit. This, in turn, helped contribute to the dollar becoming the world's reserve currency.
As a result, foreign creditors (including China, Japan, and the United Kingdom) are large markets for the currency. This makes it easier for the U.S. government to finance the national debt, via being charged lower interest rates for borrowing money.
Reactions
Congress and the president
The House of Representatives and the White House disagree on how to resolve this crisis.
House Speaker Kevin McCarthy
Kevin Owen McCarthy (born January 26, 1965) is an American politician, serving as House Minority Leader in the United States House of Representatives since 2019. A member of the Republican Party, he served as House Majority Leader under spea ...
(R-CA) has called for negotiations to reduce federal spending in exchange for increasing the debt ceiling,
including making possible cuts to
Medicare,
Medicaid
Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and per ...
, and
Social Security
Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
,
or otherwise possibly overhauling entitlements. In contrast, the Biden administration has declared that raising the debt ceiling is non-negotiable, and that Congress is obligated to increase it.
Senate Minority Leader
The positions of majority leader and minority leader are held by two United States senators and members of the party leadership of the United States Senate. They serve as the chief spokespersons for their respective political parties holding t ...
Mitch McConnell (R-KY) has said that there will be no default,
though he has also said that dealing with the debt ceiling will be up to President Biden and Speaker McCarthy.
As well, members of the
House Freedom Caucus (and a few other Republicans who were not part of it, such as Representative Matt Gaetz) had raised a significant portion of funding for their 2022 election campaigns from small donors, which made it easier for them to resist pressure from business groups to raise the debt ceiling. Indeed, the debt ceiling fight was viewed by some as being an example of widening divisions between corporate America and the Republican Party, which had begun during the Trump presidency.
On May 5, 2023 the president's senior advisor, Mitch Landrieu, appeared on TV to field questions on the White House response to the debt-ceiling crisis and the
banking crisis
A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system (where banks no ...
. A week later, Landrieu held a press conference at the White House to underscore the serious threat to the national economy of the 'manufactured crisis' of the debt-ceiling standoff.
Treasury Department
Secretary Yellen's comments
Treasury Secretary Janet Yellen told the ''
Associated Press
The Associated Press (AP) is an American non-profit news agency headquartered in New York City. Founded in 1846, it operates as a cooperative, unincorporated association. It produces news reports that are distributed to its members, U.S. ne ...
'' that, while she expected that Congress would eventually raise the debt ceiling, demanding spending cuts in exchange for doing so would be irresponsible and that increasing it was about ensuring that the federal government could pay for spending that Congress had already approved, rather than about new spending. Yellen made similar points in her January 13, 2023, letter to Congress, also warning that if they did not suspend or raise it, they would harm the American economy, the American people, and the global financial system's stability.
"Extraordinary measures"
As a result of reaching the debt ceiling, the Treasury Department began considering implementation of "extraordinary measures"
to prevent a default for a few months, so as to give Congress time to increase the debt ceiling, explained in a memo it issued on January 19, 2023.
However, it would only be able to use them for a few months. Extraordinary measures are accounting maneuvers that the Treasury uses to enable the federal government to continue to meet its various financial obligations while there is an impasse over the debt ceiling. Said measures were first used by it in 1985, and Congress granted the Treasury permission to continue using them the following year.
Secretary Yellen also initiated a "debt issuance suspension period" through June 5, and has rejected the minting of a
trillion-dollar coin
The trillion-dollar coin is a concept that emerged during the United States debt-ceiling crisis of 2011 as a proposed way to bypass any necessity for the United States Congress to raise the country's borrowing limit, through the minting of very ...
(which would have created $1 trillion in
seigniorage
Seigniorage , also spelled seignorage or seigneurage (from the Old French ''seigneuriage'', "right of the lord (''seigneur'') to mint money"), is the difference between the value of money and the cost to produce and distribute it. The term can be ...
).
Markets
Analysts were monitoring the ongoing debate over raising the debt ceiling, and were keeping investors informed of it and similarly warning about the potential consequences of a default.
However, as of January 23, 2023, markets were not reacting to the debt ceiling debate,
as the expectation was that the debt ceiling would be raised in time to prevent default.
Analysts wrote that, with the exception of the 2011 debt ceiling crisis, markets had historically not reacted to debates over raising it.
On the other hand, they wrote that if the debt ceiling wasn't increased as the deadline for doing so drew nearer, stock prices would start dropping and interest rates would begin to rise.
On May 5, 2023, European credit rating agency Scope placed the United States' AA sovereign rating under review for downgrade.
Responses and analysis
Comparisons to the 2011 debt ceiling crisis
The ''Associated Press'' has noted similarities between the 2023 debt ceiling crisis and the one in 2011, including how both involved the GOP-controlled House of Representatives demanding spending cuts in exchange for increasing the debt limit.
In 2011, both the House and the Obama administration negotiated for months on it until talks collapsed.
As a result, markets experienced turmoil, with the S&P 500 dropping by over 16% in the final month before the deadline.
In August 2011,
two days before the government would have defaulted,
there was a compromise between Democrats and Senate Republicans to create a committee to look into cutting spending,
and to also increase the debt ceiling.
As a result of the near-default, America's credit rating was downgraded
to AA+
by Standard and Poor's, as American borrowing costs went up by $1.3 billion that year.
Potential consequences of a default
Increasing political polarization since 2011 has made votes to raise the debt ceiling more contentious than before, with economists now considering what would happen if the federal government defaulted on its loans.
One analysis from September 2021 (during a previous debt limit standoff) said that, if the federal government defaulted, America's credit rating would experience a drastic downgrade, interest rates on Treasury bonds would go up sharply, interest rates both in the U.S. and worldwide would spike, and payments on benefits (such as social security) and salaries for the military would be stopped. Other potential consequences of a default would include reduced consumer confidence, a recession, immediately stopping about 10% of the American economy, increasing the cost of a 30-year mortgage, losing three million jobs in the U.S., and increasing the national debt due to higher interest rates.
''Moody's Analytics'' warned that Congress may not be able to avoid breaching the debt limit. This warning was based on both the difficulty the House had in electing Kevin McCarthy as Speaker, and how some lawmakers (mostly Republican) were wondering if the Treasury would be able to prioritize paying bondholders if it was breached.
Fundraising off of the debt ceiling fight
Even with the ongoing fight over raising the debt ceiling, party leaders in Congress were busy raising money, with Republican Congressional leaders raising about $10.4 million and Democratic ones raising $5.7 million during the first three months of 2023.
A number of moderate and progressive Democrats in the House and Senate had explicitly brought up the current debt ceiling fight in fundraising appeals to their supporters, and had framed it in terms of warning about potential consequences of a default. Messages about this came from Senate Majority Leader
Chuck Schumer
Charles Ellis Schumer ( ; born November 23, 1950) is an American politician serving as Senate Majority Leader since January 20, 2021. A member of the Democratic Party, Schumer is in his fourth Senate term, having held his seat since 1999, an ...
, moderates like senators
Jon Tester
Raymond Jon Tester (born August 21, 1956) is an American farmer and politician serving as the senior United States senator from Montana, a seat he has held since 2007. A member of the Democratic Party, Tester is the dean of Montana's congressi ...
and
Sherrod Brown
Sherrod Campbell Brown (; born November 9, 1952) is an American politician serving as the senior United States senator from Ohio, a seat which he has held since 2007. A member of the Democratic Party, he was the U.S. representative for Ohio's ...
, and progressives like Representative
Alexandria Ocasio-Cortez and Senator
Elizabeth Warren
Elizabeth Ann Warren ( née Herring; born June 22, 1949) is an American politician and former law professor who is the senior United States senator from Massachusetts, serving since 2013. A member of the Democratic Party and regarded as a ...
.
Meanwhile, Republican Senator Tim Scott explicitly brought up the debt ceiling fight in his fundraising emails, though he wrote about it in terms of limiting government spending.
At the same time, far Right Republicans in Congress had been using the debt ceiling over the past few years to galvanize their supporters and to do fundraising based on it.
Possible scenarios for how the impasse would end
In March 2023, economists with Moody's Analytics analyzed five different scenarios for dealing with the debt limit. They included the following in their report on this:
* Increasing it right before x-date without any conditions (possibly by suspending it until October 1, and then increasing it again to last until sometime in early 2025), thereby avoiding damage to the economy. This would also be what they had done on previous occasions when there was debate over increasing the debt ceiling, and which report indicated would be the most likely possibility for resolving it this time.
* Unilateral action by the executive branch to avert default, which could include:
# President Biden invoking the 14th Amendment (Section 4) in case no agreement had been made by x-date to increase the debt ceiling. Though it would avert default, it could cause a constitutional crisis and the Supreme Court could have to intervene.
# The Treasury minting a
trillion-dollar coin
The trillion-dollar coin is a concept that emerged during the United States debt-ceiling crisis of 2011 as a proposed way to bypass any necessity for the United States Congress to raise the country's borrowing limit, through the minting of very ...
with its authority under 31 U.S.C. Section 5112, depositing it at the Federal Reserve, and drawing it down to pay the government's bills.
# The Treasury issuing premium bonds rather than par bonds as Treasury debt comes due, lowering the face amount of debt outstanding and subject to the debt limit.
* The Treasury prioritizing payments for a few days, which would cause interest rates to spike, would cause chaos in the markets, and would increase the odds of a mild recession starting in late 2023. As well, it is unknown if the Treasury Department would be legally allowed to do this, or if it would be able to, plus effects on the United States' credit rating are unknown.
* Adopting ideas the House Republicans were suggesting in March 2023, including cutting both Medicaid and nondefense-related discretionary spending. Results of this would include a recession and reduced economic growth for the next decade (the borrowing would be significantly reduced, so interest rates would be lower), with people with lower incomes being more likely to suffer financially due to losing both government benefits and jobs.
* A lengthy default that would last for weeks. Results of this would include Treasury debt being downgraded by credit rating agencies, reduced treasury spending, a severe recession, higher interest rates, and a long-term diminution of the U.S. dollar's status as the world's reserve currency, among other effects.
Potential debt ceiling workarounds
Fourteenth Amendment
While the Fourteenth Amendment, ratified in 1866, is more widely known for its provisions granting citizenship to freed slaves and establishing equal rights, it also contains a long-forgotten provision, Section 4, that states, in part, "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." With former Confederate states being admitted back into the Union at the time of the 14th amendment's ratification, many pro-Union members of Congress feared that if the South were to take back a significant amount of Congress, or were to retake the Presidency, they would refuse to pay the debt incurred by the Union during the Civil War, or pay debts incurred by the Confederacy to support its war effort against the United States. Section 4 confirmed the legitimacy of all U.S. debt to stop this from ever happening.
While Section 4's original purpose has long become moot, many constitutional legal scholars believe that Section 4 of the 14th amendment makes the debt ceiling unconstitutional. President Biden could, in theory, end the crisis by avoiding Congress altogether, issuing an executive order invoking Section 4 and ordering the Treasury to continue making payments, even if that pushed the public debt above $31.4 trillion.
However, an invocation of the 14th amendment by President Biden would come with serious pitfalls. Legal scholars are divided as to whether or not it would be legally permissible for Biden to take such an action.
His executive order might not be accepted by the courts, and even if it were eventually upheld by the United States Supreme Court, the uncertainty leading up to a decision might cause turmoil in the markets and a spike in interest rates.
Trillion-dollar coin
In 1997, Congress passed a law that vested power to the Treasury to mint commemorative platinum coins of any denomination. The law, 31 U.S.C. Section 5112, was originally intended to help the Treasury make money off of coin collectors, an idea penned by Delaware's at-large representative, Republican
Mike Castle
Michael Newbold Castle (born July 2, 1939) is an American lawyer and politician who was governor of Delaware (1985–92) and the U.S. representative for (1993–2011). He is a member of the Republican Party.
The district includes the entire ...
. The text of the statute did not specify any limitations on how high the denomination of the coin could be.
An idea, which first emerged just prior to the 2011 debt ceiling crisis, is that the
Treasury Secretary
The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...
could instruct the
US Mint to issue a trillion-dollar coin, and deposit it with the Federal Reserve.
According to economist
Mark Zandi
Mark M. Zandi is an Iranian-American economist who is the chief economist of Moody's Analytics, where he directs economic research.
Zandi's research interests encompass macroeconomics, financial markets and public policy. He analyzes the economi ...
, using the coin in such a way would be inflationary. An opinion article in ''
National Review
''National Review'' is an American conservative editorial magazine, focusing on news and commentary pieces on political, social, and cultural affairs. The magazine was founded by the author William F. Buckley Jr. in 1955. Its editor-in-chief ...
'' likened it to the government "printing money" to pay off debt. However, according to economist
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was ...
, the move would not be inflationary, saying on Twitter, "The Fed would surely sterilize any impact on the monetary base by selling off some of its huge portfolio of US debt."
Current Treasury Secretary
Janet Yellen
Janet Louise Yellen (born August 13, 1946) is an American economist serving as the 78th United States secretary of the treasury since January 26, 2021. She previously served as the 15th chair of the Federal Reserve from 2014 to 2018. Yellen is ...
dismissed the plan as a "gimmick", saying that the Federal Reserve isn't required to accept the coin for deposit, and likely would not. Krugman expressed a different opinion, saying on Twitter, "As for claims that
Powell would refuse to accept the coin, or the
Supremes
The Supremes were an American girl group and a premier act of Motown Records during the 1960s. Founded as the Primettes in Detroit, Michigan, in 1959, the Supremes were the most commercially successful of Motown's acts and the most successful ...
would block premium bonds — well, nobody knows. But my guess is that nobody wants to be the guy who destroys the world economy. Even people happy to see it burn don't want their fingerprints on it."
Attempts to raise the debt ceiling
Having recently regained control of the House, Republicans demanded deep spending cuts as a precondition to raising the debt ceiling, while Democrats insisted on a "clean bill" without preconditions, as had been the case in raising the ceiling in 2017, 2018, and 2019, during the Trump administration.
Meetings between Biden and McCarthy
February
On Wednesday, February 1, 2023 President Biden and Speaker McCarthy met for an hour in the
Oval Office to discuss how to raise the debt ceiling. The two did not reach agreement – the president called for a clean debt ceiling increase, while the speaker demanded cuts to spending in exchange for raising it – though both agreed they would continue talking about it.
May
Biden and McCarthy met several times in May to try and find a way to solve the crisis, ultimately coming to an agreement on May 27.
March 9 presidential budget
On March 9, 2023, President Biden released a potential budget for 2023. At 184 pages, this budget included $3 trillion to reduce the deficit, with savings largely coming from increased taxes on the wealthy and corporations.
Limit, Save, Grow Act
On April 19, Speaker McCarthy unveiled the Limit, Save, Grow Act, a 320-page House bill which would have raised the debt ceiling by $1.5 trillion (enough to last until at least March 31, 2024), while at the same time providing for significant spending cuts. More specifically, the proposals contained in the draft law included eliminating the partial federal student loan forgiveness program started by the Biden administration, introducing work requirements for Medicaid, eliminating IRS enforcement funding for audits, and getting rid of many clean energy subsidies.
In its April 25 analysis of the bill, the
Congressional Budget Office
The Congressional Budget Office (CBO) is a List of United States federal agencies, federal agency within the United States Congress, legislative branch of the United States government that provides budget and economic information to Congress.
Ins ...
estimated that it would reduce federal budget deficits from 2023 to 2033 by a total of around $4.8 trillion, with two-thirds of that coming from reduced discretionary outlays and the rest coming from lower mandatory spending, increased Revenue, and lower interest payments on the national debt.
Responses to the bill were mixed. House Budget Committee Chairman
Jodey Arrington
Jodey Cook Arrington (born March 9, 1972) is an American politician serving as the U.S. representative for . The district includes a large slice of West Texas, centered around Lubbock and Abilene. He is a member of the Republican Party.
Arrin ...
, who filed the bill, criticized the Biden administration's spending while saying that the plan would address that. Meanwhile, the House Budget Committee's Democratic members referred to it as "The Default on America Act", or
DOA for short. President Biden said on April 25 that, should the bill pass Congress, he will veto it.
It was originally reported that a considerable amount of Republican Representatives would not have supported the bill. However, on April 26, following several days of negotiations and last-minute changes to the bill, the latter managed to pass in the House of Representatives by a vote of 217 to 215,
with Republicans
Andy Biggs
Andrew Steven Biggs (born November 7, 1958) is an American attorney and politician who represents in the United States House of Representatives. The district, which was once represented by U.S. Senators, John McCain and Jeff Flake, is in the ...
of
Arizona
Arizona ( ; nv, Hoozdo Hahoodzo ; ood, Alĭ ṣonak ) is a state in the Southwestern United States. It is the 6th largest and the 14th most populous of the 50 states. Its capital and largest city is Phoenix. Arizona is part of the Fou ...
,
Ken Buck
Kenneth Robert Buck (born February 16, 1959) is an American lawyer and politician who has represented Colorado's 4th congressional district in the United States House of Representatives since 2015. From March 30, 2019, to March 27, 2021, Buck s ...
of
Colorado
Colorado (, other variants) is a state in the Mountain states, Mountain West subregion of the Western United States. It encompasses most of the Southern Rocky Mountains, as well as the northeastern portion of the Colorado Plateau and the wes ...
,
Tim Burchett of
Tennessee
Tennessee ( , ), officially the State of Tennessee, is a landlocked state in the Southeastern region of the United States. Tennessee is the 36th-largest by area and the 15th-most populous of the 50 states. It is bordered by Kentucky to th ...
and
Matt Gaetz
Matthew Louis Gaetz II ( ; born May 7, 1982) is an American lawyer and politician who has served as the U.S. representative for since 2017. A Republican, he has been described as an ally of former president Donald Trump, as well as a proponen ...
of
Florida
Florida is a state located in the Southeastern region of the United States. Florida is bordered to the west by the Gulf of Mexico, to the northwest by Alabama, to the north by Georgia, to the east by the Bahamas and Atlantic Ocean, and to ...
joining all Democrats in voting against it.
The bill was highly unlikely to pass in the Senate. However, it was viewed by House Republicans as a stepping stone for further negotiations with President Biden on the debt ceiling and spending cuts.
Discharge petition
On May 17, Democratic Representative
Brendan Boyle
Brendan Francis Boyle (born February 6, 1977) is an American politician serving as a Democratic member of the United States House of Representatives, representing a district in the Philadelphia area since 2015. He represented the 13th district ...
introduced a
discharge petition
In United States parliamentary procedure, a discharge petition is a means of bringing a bill out of committee and to the floor for consideration without a report from the committee by "discharging" the committee from further consideration of a bil ...
to force a vote o
House Resolution 350 a
special rule providing for immediate consideration of the so-called Breaking the Gridlock Act and of one amendment to the same, which is to be offered by the most senior ranking minority member of the Committee on Ways and Means. Democrats intended to use the amendment to replace the original text of the draft law in its entirety, turning it into a bill raising the debt ceiling
By May 27, all 213 Democratic representatives had signed the petition. Nonetheless, the petition failed to obtain the 218 signatures needed in order for it to be successful because no Republican signed it.
Agreement
On May 29, Patrick McHenry introduced the Fiscal Responsibility Act of 2023, a bipartisan piece of legislation implementing the agreement between Biden and McCarthy. The bill, which was endorsed by both Republican and Democratic leadership, includes the following provisions:
* The debt limit is suspended until January 1, 2025.
*
Discretionary spending
In American public finance, discretionary spending is government spending implemented through an appropriations bill. This spending is an optional part of fiscal policy, in contrast to social programs for which funding is mandatory and determine ...
is capped during
fiscal years 2024 and 2025.
* All unused funds appropriated during the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identi ...
are rescinded.
* About a quarter of the $80 billion of additional funding for the
Internal Revenue Service provided for in the
Inflation Reduction Act of 2022
The Inflation Reduction Act of 2022 (IRA) is a landmark United States federal law which aims to curb inflation by reducing the deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean en ...
are rescinded.
* The
administration
Administration may refer to:
Management of organizations
* Management, the act of directing people towards accomplishing a goal
** Administrative Assistant, traditionally known as a Secretary, or also known as an administrative officer, admini ...
is required to operate under a
PAYGO system: any executive regulation whose implementation costs more money than it brings in can only be made if an equal or greater amount of money is rescinded from other federal programs; this system is waivable by the
Office of Management and Budget
The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, pol ...
.
* The
student loans
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest ...
payment moratorium enacted in 2020 ends on September 1, 2023; the partial student loan forgiveness plan introduced by the Biden administration remains unaffected.
* Work requirements for adult
SNAP recipients with no dependents are broadened so as to apply to those aged under 51 in fiscal year 2023, to those aged 53 in fiscal year 2024, and to those aged under 55 in fiscal years 2025 to 2030 (currently, only those under 50 are required to work in order to be eligible). Veterans and homeless people are exempt from this provision.
* Obtaining a federal permit for energy projects is made easier, especially for what concerns the
Mountain Valley Pipeline
The Mountain Valley Pipeline (MVP) is an under-construction natural gas pipeline in the United States from southern Virginia to northwestern West Virginia. The MVP is , and there is also a proposed Southgate Extension to the pipeline which runs 75 ...
.
On May 30, the
Rules Committee agreed to send the bill to the Floor of the House by a vote of 7 to 6, with Republicans
Ralph Norman
Ralph Warren Norman Jr. (born June 20, 1953) is an American real estate developer and politician serving as the U.S. representative for since 2017. His district includes most of the South Carolina side of the Charlotte metropolitan area, alo ...
and
Chip Roy
Charles Eugene "Chip" Roy (born August 7, 1972) is an American attorney and politician serving as the U.S. representative for Texas's . A member of the Republican Party, Roy took office on January 3, 2019. Before his election to Congress, he s ...
joining all Democratic members of the Committee in voting against. The bill passed the House on May 31 and the Senate on June 1. Biden signed it into law on June 3.
Vote summaries
House of Representatives
Senate
See also
*
History of the United States debt ceiling
*
1995–1996 United States federal government shutdowns
The United States federal government shutdowns of 1995 and 1995–96 were the result of conflicts between Democratic President Bill Clinton and the Republican Congress over funding for education, the environment, and public health in the 1996 ...
, which included a dispute about the debt ceiling
*
2011 United States debt-ceiling crisis
The 2011 United States debt-ceiling crisis was a stage in the ongoing political debate in the United States Congress about the appropriate level of government spending and its effect on the national debt and deficit. The debate centered on the ...
*
2013 United States debt ceiling crisis
Notes
References
{{Reflist
External links
Report
How America Amassed $33 Trillion in Debt 2023 in economics
2023 in American politics
2023 controversies in the United States
May 2023 events in the United States
June 2023 events in the United States
Economy of the United States
United States federal budgets
Government finances in the United States
Presidency of Joe Biden
Biden administration controversies
Kevin McCarthy