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    U.S. National Debt Tops $32 Trillion for First Time

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    The milestone follows a recent congressional showdown over lifting the debt ceiling. Another spending fight looms this year.The gross national debt exceeded $32 trillion for the first time on Friday, underscoring the country’s unsettling fiscal trajectory as Washington gears up for another fight over government spending.A Treasury Department report noted the milestone weeks after Congress agreed to suspend the nation’s statutory debt limit, ending a monthslong standoff.The $32 trillion mark arrived nine years sooner than prepandemic forecasts had projected, reflecting the trillions of dollars of emergency spending to address Covid-19’s impact along with a run of sluggish economic growth.Republicans and Democrats have expressed concern about the nation’s debt, but neither party has shown an appetite to tackle its biggest drivers, such as spending on Social Security and Medicare.The recent bipartisan agreement suspending the debt limit for two years cuts federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by essentially freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025. But the debt is on track to top $50 trillion by the end of the decade even after newly passed spending cuts are taken into account.Mark Zandi, the chief economist of Moody’s Analytics, said during the standoff in May that spending cuts proposed by lawmakers failed to address the costs of social safety net programs. While avoiding a default would prevent an immediate crisis, he said, the ballooning debt is a persistent problem that needs to be addressed.“The nation’s daunting long-term fiscal challenges remain,” Mr. Zandi said.This week, the House Appropriations Committee began considering its next spending bills and, to appease the Republican majority’s ultraconservative wing, signaled that it would fund federal agencies at levels lower than President Biden and Speaker Kevin McCarthy had agreed to.A failure to pass and reconcile House and Senate bills by Oct. 1 could lead to a government shutdown. And if the individual bills are not approved by the end of the year, a 1 percent automatic cut will take effect.At the same time, House Republicans started considering a new round of tax cuts this week. The bill would expand the standard deduction for individual taxpayers and some business tax benefits that are intended to promote investment while curbing energy tax credits. The Committee for a Responsible Federal Budget, which advocates lower spending levels, estimates that the proposed legislation would cost $80 billion over a decade or $1.1 trillion if the measures were made permanent.Some have called on Congress to form a bipartisan fiscal commission to tackle the long-term drivers of the national debt.“As we race past $32 trillion with no end in sight, it’s well past time to address the fundamental drivers of our debt, which are mandatory spending growth and the lack of sufficient revenues to fund it,” said Michael A. Peterson, the chief executive of the Peter G. Peterson Foundation, which promotes deficit reduction.The Peterson Foundation expressed concern about projections that show the United States adding $127 trillion in debt over the next 30 years and interest costs consuming nearly 40 percent of all federal revenues by 2053.Treasury Secretary Janet L. Yellen defended the Biden administration’s handling of the nation’s finances at a House Financial Services Committee hearing this week, noting that the White House had released a budget this year reducing the deficit by $3 trillion. She also told the panel that interest rates were likely to decline over the medium term, making the debt burden more manageable.The Treasury secretary suggested that tax policies promoted by Republicans would worsen the fiscal situation.“They would benefit wealthy individuals and corporations and do nothing for working families,” Ms. Yellen said. “It’s not paid for, and it would exacerbate the debt.” More

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    Oregon Town’s Marijuana Boom Yields Envy in Idaho

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    Tax revenue has surged since cannabis stores opened in Ontario, Ore., fueling a push in neighboring Idaho to legalize sales and get in on the action.For John Leeds, the hour-and-a-half commute to and from his job as assistant manager at Treasure Valley Cannabis Company is exhausting, but logistically unavoidable.Like nearly half of the other employees, Mr. Leeds, 39, lives in Idaho and travels along Interstate 84, past sprawling alfalfa and onion fields, to the marijuana shop just across the Oregon state line, where cannabis is legal.“It’s really two different worlds,” Mr. Leeds said. “A lot of whiplash on this issue just in a car ride up and down the highway.”Every day, hundreds of customers and workers like Mr. Leeds make the pilgrimage from Idaho to Ontario, Ore., a small city nestled along the Snake River that is home to 11 dispensaries — roughly one for every 1,000 residents. They can compare the aromas of various strains of marijuana and gather the staff’s insights on THC levels in edibles.The cannabis boom is helping to drive a thriving local economy — and tax revenues that have paid for new police positions, emergency response vehicles, and park and trail improvements.Missing out on the action has become increasingly frustrating to some politicians and longtime residents in Idaho, where the population and living costs have surged in recent years.Because the sale or possession of marijuana remains illegal at the federal level, many states — and in this case neighboring ones — have landed on drastically different approaches for whether and how to decriminalize, regulate and tax cannabis. Since 2012, 23 states have legalized it for recreational use, and more than three dozen allow medical marijuana.Eleven states, mostly conservative-leaning, have enacted extremely limited medical marijuana laws. Aside from cannabis-derived drugs approved by the U.S. Food and Drug Administration for limited medical use, Idaho has not legalized any cannabis sales — a prohibition that has helped its more progressive neighbors.“Our cannabis market caters almost exclusively to Idaho residents,” said Ontario’s mayor, Debbie Folden. “This has been an economic boom unlike any this city has seen.”The patchwork of laws, which vary by state and often by county, have created similar commuter-propelled booms in other parts of the country as well, said Mason Tvert, a partner at VS Strategies, a national cannabis policy and public affairs firm in Denver.Texans travel to Colorado to stock up on their favorite strains or edibles, and Indiana residents make the trek to Michigan, he said. “Demand will be met by either the illegal market or by a legal market in another state,” Mr. Tvert said.That proposition, and the larger economic equation, are not lost on officials in Idaho.Last year, the state approached two million residents, a swell attributed largely to people moving from California and looking for overall cheaper costs of living. Only Florida grew faster.At the same time, property taxes have increased 20 percent since 2018, according to a report from the Idaho Center for Fiscal Policy, a nonpartisan group. And the state’s budget — currently showing a surplus — is expected to come under strain, the group noted, citing legislation that cut income taxes by roughly $500 million over three years even as population growth put new demands on health care, education and transportation.Some longtime residents of the state are tired of seeing the marijuana tax dollars go elsewhere as prices increase from the newer residents arriving.Legalizing and taxing cannabis sales could bring in revenue and help offset any budgetary concerns, said Joe Evans, a lead organizer for Kind Idaho, a group pushing to legalize medical marijuana.“That money should not be leaving the state of Idaho,” said Joe Evans, who supports the legalization of medical marijuana in the state.Ellen Hansen for The New York Times“That money should not be leaving the state of Idaho,” said Mr. Evans, who noted the entrepreneurial spirit of the region, home to Joe Albertson, who started a local grocery store chain, Albertsons, and laid the foundation for a multibillion-dollar national business.But for Mr. Evans, who served with the Army in Iraq and Afghanistan and knows fellow veterans who use cannabis for pain relief, legalization is also about something bigger than money. It is long past time, he said, for his state to legalize a substance that can offer relief for some medical conditions.Patients who use marijuana, especially older or chronically ill Idahoans, shouldn’t have to drive an hour or more to Oregon, he said.“This is about patient advocacy,” said Mr. Evans, who hopes the state will next year consider a measure to legalize cannabis for medicinal use.It would not be the first try.Initiatives to legalize cannabis for medicinal use failed to qualify for the ballot in 2012, 2014 and 2016. In 2020, supporters of a ballot measure suspended efforts to gather signatures because of the onset of the Covid-19 pandemic, and the next year a bipartisan group of state lawmakers introduced a medical marijuana bill that failed to get out of committee.As those efforts foundered, customers in Idaho increasingly made the trek to Oregon, where voters legalized cannabis for medical use in 1998 and for recreational use in 2014.Ontario, Ore., is home to 11 dispensaries — roughly one for every 1,000 residents.Ellen Hansen for The New York TimesFew areas in the state have benefited as much as Malheur County, home to Ontario.The city, which voted to legalize local recreational sales of marijuana in 2018, is the only part of the county with dispensaries. Even so, Malheur County racked up roughly $104 million in total cannabis sales last year, outpacing each of the state’s 35 other counties except Multnomah, which includes Portland.In 2020, the first full year in which Ontario allowed cannabis sales, the city took in $1.8 million in resulting tax revenue. The next year, the revenue increased 65 percent.The area is a conservative pocket in a progressive state — a movement called “Greater Idaho” wants the region to secede from Oregon and become part of Idaho — and Mayor Folden, an Ontario native, calls herself a conservative Republican.That hasn’t blocked the city’s emergence as a cannabis capital. The tax revenues, the mayor said, have been a municipal lifeline. But the city is stockpiling its reserves, Ms. Folden said, because she expects that within five years, Idaho will move ahead with some form of legalization.Treasure Valley Cannabis is one of the businesses that have led to a surge in tax revenue for Malheur County.Ellen Hansen for The New York Times“We know that this will not last forever, so we’re being prudent,” Ms. Folden said. “We know the economic winds, as they say, might shift.”In the fall, a poll for The Idaho Statesman, a Boise newspaper, found that 68 percent of residents backed legalizing marijuana for medicinal purposes. For recreational use, 48 percent supported legalization, while 41 percent were opposed.Gov. Brad Little of Idaho, who is in his second term, staunchly opposes marijuana legalization. In an emailed statement, Mr. Little, a Republican, said that “legalization of marijuana triggers numerous unintended consequences.”But some local politicians in Idaho have begun to consider the economics of the issue.Patrick Bageant, a Boise councilman, said the need for alternative forms of tax revenue was increasingly urgent.“Legalizing marijuana can help bring in different forms of cash,” Mr. Bageant said. “Just look around the country — we as a state should be more forward-looking.”Adam Watkins, a software engineer and a constituent of Mr. Bageant’s, has lived in the city’s West End neighborhood for the past decade. His home value has doubled since 2018, when he paid $3,200 in property taxes; now he pays close to $4,200.“You look around at other states that have legalized marijuana decades ago, when it comes to medical marijuana, and you just cannot help but think, why are we so backward on this issue?” said Mr. Watkins, who supports legalization for philosophical and fiscal reasons.“This is a drug with proven health effects, and we are just leaving this issue to other states to solve,” he added. “We are turning blindly, like this is not an issue, when it clearly is.”Back in Ontario on a recent afternoon, red, white and blue license plates emblazoned with the phrase “Scenic Idaho” lined the parking lot of Treasure Valley Cannabis. (A federal law prohibits transporting marijuana between states.)John Leeds commutes an hour and a half to and from his job at Treasure Valley Cannabis, where he manages a staff of 45.Ellen Hansen for The New York TimesMr. Leeds manages a staff of 45 employees four days a week. He used to work five days, but made a deal with the owner, Jeremy Archie, to work four to cut back on his commute.That day, Mr. Leeds and Mr. Archie walked the floor past vape pens, various strains of cannabis, and sweatshirts acclaiming the company and the state.They greeted customers and shared stories of patients battling health issues like cancer, who use their products to ease pain. On one wall hung a poster board proclaiming a 25 percent discount for customers car-pooling with at least three people.A small gesture of thanks, Mr. Archie said, for their Idaho customers.“The Idaho market has made this a very successful business,” he said. More

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    Biden’s Debt Ceiling Strategy: Win in the Fine Print

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    The president and his negotiators believe they worked out a deal that allowed Republicans to claim big spending cuts even as the reality was far more modest.Shalanda Young couldn’t sleep.A small team of Biden administration officials had spent the past two days in intense negotiations with House Republicans in an attempt to avert a catastrophic government default. Ms. Young, the White House budget director, had been trading proposals on federal spending caps with negotiators deputized by Speaker Kevin McCarthy, whose Republican caucus was refusing to raise the nation’s $31.4 trillion borrowing limit without deep cuts.Now, as she scrolled Netflix in search of “bad television” to distract her racing mind, Ms. Young had a sinking feeling. What if she cut a deal to reduce spending and raise the debt limit, only to see Republicans attempt to force through much deeper cuts when it came time to pass annual appropriations bills this fall?At work the next morning, Ms. Young asked her staff how to stop that from happening. They settled on a plan, which in essence would penalize Republicans’ most cherished spending programs if they failed to follow the contours of the agreement. Then they forced Republicans to include that plan in the legislative text codifying the deal.That approach reflected a broader strategy President Biden’s team followed in the debt limit negotiations, according to interviews with current and former administration officials, some Republicans and other people familiar with the talks.On Saturday, that strategy reached its conclusion as Mr. Biden signed the Fiscal Responsibility Act of 2023 into law, just days before a potential default and following weeks of talks and a revolt from right-wing lawmakers in the House that put an agreement at risk of collapse.In pursuit of an agreement, the Biden team was willing to give Republicans victory after victory on political talking points, which they realized Mr. McCarthy needed to sell the bill to his conference. They let Mr. McCarthy’s team claim in the end that the deal included deep spending cuts, huge clawbacks of unspent federal coronavirus relief money and stringent work requirements for recipients of federal aid.But in the details of the text and the many side deals that accompanied it, the Biden team wanted to win on substance. With one large exception — a $20 billion cut in enforcement funding for the Internal Revenue Service — they believe they did.The way administration officials see it, the full final agreement’s spending cuts are nothing worse than they would have expected in regular appropriations bills passed by a divided Congress. They agreed to structure the cuts so they appeared to save $1.5 trillion over a decade in the eyes of the nonpartisan Congressional Budget Office. But thanks to the side deals — including some accounting tricks — White House officials estimate that the actual cuts could total as little as $136 billion over the two enforceable years of the spending caps that are central to the agreement.Much of the $30 billion in clawed-back Covid-19 money was probably never going to be spent, Biden officials say, including dollars from an aviation manufacturing jobs program that had basically ended.At one point in the talks, administration officials offered to include in the deal more than 100 relief programs from which they were willing to rescind money. The final list spanned 20 pages of a 99-page bill, and Mr. McCarthy championed it on the House floor. But because much of the money was repurposed for other spending, the net savings added up to only about $11 billion over two years. One of the programs had a remaining balance of just $40.Many Democrats remain furious that the deal included new work requirements that could push 750,000 people off food stamps, which the Biden team begrudgingly concluded it had to accept.That measure alone could have tanked Democratic support for the deal in Congress, officials knew. So they sought to counterbalance it with efforts to expand food stamp eligibility for veterans, the homeless and others, which Republicans agreed to do. The budget office concluded that the changes would actually add recipients to the program, on net.Some Democrats and progressive groups have sharply criticized Mr. Biden for negotiating over the debt limit at all, denouncing the spending cuts and work requirements and saying he cemented Republicans’ ability to ransom the borrowing limit whenever a Democrat occupies the White House.Republican negotiators sold the deal as a game-changing blow to Mr. Biden’s spending ambitions. “They absolutely have tire tracks on them in this negotiation,” Representative Garret Graves of Louisiana said before the House vote on Wednesday.Mr. Biden views it differently. As the Senate prepared to pass the agreement on Thursday evening, he huddled with his chief of staff, Jeffrey D. Zients, along with Steve Ricchetti, counselor to the president, and other aides, in Mr. Zients’s office in the West Wing of the White House. Mr. Biden asked them what you might call a scorecard question: What percentage of Democrats in the House had voted for the deal, and what share were expected to in the Senate?When Mr. Ricchetti told him the number of Democrats would be larger, in both chambers, than the share of Republicans supporting the deal, Mr. Biden was pleased. It was validation, in his view, that he had cut a good deal.Mr. Zients referred to that vote share in an interview on Friday. “If you go back a few months ago, no one would have thought this was possible,” he said.It was not an assured outcome. The negotiating teams came to the table with divergent views of the drivers of federal debt in recent years. White House negotiators blamed Republican tax cuts. Republicans blamed Mr. Biden’s economic agenda, including a debt-financed Covid relief bill in 2021 and a bipartisan infrastructure bill later that year.The dispute occasionally grew profane. At one point, after Mr. Biden’s negotiators criticized the 2017 Republican tax cuts, a “very mild-mannered” aide to Mr. McCarthy stood up, shook his finger at the Biden team and hotly responded that their argument was nonsense, using a vulgarity, Mr. Graves recounted.Mr. Biden had insisted for months that he would not negotiate over raising the borrowing limit. But privately, many aides had been planning on talks all along — though they refused to admit those talks were linked to the debt limit. The Biden team reasoned that it would have to negotiate fiscal issues this year anyway, both on appropriations bills and on programs like food stamps that are included in a regularly reauthorized farm bill.Mr. Biden’s economic advisers, including Lael Brainard, the director of the National Economic Council, and Treasury Secretary Janet L. Yellen, were warning of catastrophic damage to the economy if the government could no longer pay its bills on time.The president appeared to score wins before the talks even started. He goaded Republicans into agreeing, in the midst of his State of the Union address, that Social Security and Medicare would be off limits in the talks — thanks to a spontaneous riff that grew out of a passage in his speech that he had worked on extensively in the days beforehand. He proposed a budget filled with tax increases on the rich and corporations that were meant to reduce debt, but he refused to engage Mr. McCarthy in serious talks until Republicans offered a spending plan of their own.In late April, the House passed a bill that included $4.7 trillion in savings from spending cuts, canceling clean-energy tax breaks and clawing back money for Covid relief and the I.R.S. It featured work requirements and measures to speed fossil fuel projects, and it raised the debt limit for one year.Mr. Biden, under fire from business groups and others who feared the standoff could result in the United States running out of money before the debt limit was raised, soon agreed to designate a team of negotiators. The White House team was led by officials including Ms. Young and one of her top aides, Michael Linden, who delayed his departure from the White House to help negotiate along with Louisa Terrell, the legislative affairs director, and Mr. Ricchetti.Mr. McCarthy’s negotiators gave Biden officials the impression that to reach agreement, they needed at least one talking point from every major aspect of the House Republican debt limit bill.The talks took a few surprising turns. Multiple White House officials say the Republican team briefly entertained relatively modest proposals to raise tax revenue, including closing loopholes that benefit some real-estate owners and people who trade cryptocurrency. Those discussions stalled quickly.Democrats agreed to fast-track a natural gas pipeline, in what officials concede was making good on a promise to Senator Joe Manchin III, Democrat of West Virginia, for backing Mr. Biden’s signature climate law last year.The spending caps ended up roughly where many Biden aides had predicted they would in private discussions months ago. But few White House officials believed they would have to give up $20 billion of the $80 billion that Democrats approved last year to help the I.R.S. crack down on tax cheats. Mr. Biden hammered out the amount in a final call with Mr. McCarthy.Ms. Young said that cut was painful. “And not just for me,” she added. “It’s something we talked to the president about many times. He cares deeply about this.”On Thursday evening in Mr. Zients’s office, the president and his team were focused on upsides. They had beaten back Republican attempts to cancel the climate law, to add new work requirements on Medicaid recipients and to impose binding spending caps for a decade. Mr. Biden was particularly pleased to spare key veterans’ programs from cuts.On Friday morning, Mr. Zients gathered core officials in his office, as he had every day, seven days a week, for several weeks running. Ms. Brainard and the economic team were relieved to have cleared the threat of default not just for this year, but through the next presidential election. Aides worked on honing Mr. Biden’s planned remarks in an Oval Office address on Friday evening.The speech started at 7:01 p.m., unusually promptly for Mr. Biden. By then, his staff was already celebrating. An hour earlier, happy hour had begun in Mr. Zients’s office.Catie Edmondson More

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    Biden Praises Debt-Ceiling Deal in Address to the Nation

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    President Biden hailed a rare example of bipartisan cooperation in Washington on Friday, saying in his first prime-time address from the Oval Office that this week’s legislative budget deal averts economic calamity from a default on the nation’s debt.The legislation, known as the Fiscal Responsibility Act, passed the Senate late Thursday after receiving broad support in the House earlier in the week. The bill suspends the debt ceiling for two years and cuts back on spending.Seated behind the Resolute Desk, Mr. Biden said he would soon sign the measure into law and sought to reassure Americans that robust job growth — the economy added 339,000 jobs in May alone — would not be sidetracked by global fears about whether the United States is willing to pay its bills.“Essential to all the progress we’ve made in the last few years is keeping full faith and credit of the United States,” Mr. Biden said, adding: “Passing this budget agreement was critical. The stakes could not have been higher.”The speech was designed to double down on Mr. Biden’s longtime brand as a political deal-maker who is able to reach compromise with his rivals. His advisers believe that reputation is critical to his ability to win a second term in the White House.But Mr. Biden also used his remarks, which lasted about 12 minutes, to highlight achievements by his administration that are fiercely opposed by Republicans, and vowed to continue pushing a Democratic agenda that includes higher taxes on the wealthy, more spending on climate change and veterans and no cuts to health care or the social safety net.“No one got everything they wanted, but the American people got what they needed,” he said. He added that “we protected important priorities from Social Security to Medicare to Medicaid to veterans to our transformational investments in infrastructure and clean energy.”Mr. Biden went out of his way to praise House Speaker Kevin McCarthy, his chief Republican rival.“He and I, we and our teams, we were able to get along, get things done,” Mr. Biden said. “We were straightforward with one another, completely honest with one another and respectful with one another. Both sides operated in good faith.”The president said he would sign the bill on Saturday, two days before the so-called X-date, when the Treasury secretary said the government would run out of cash to pay its bills, a situation that economists have predicted would cause global uncertainty and turmoil.Presidents often reserve the Oval Office for addresses to the nation about war, economic crises or natural disasters. President Ronald Reagan delivered somber remarks from there after the space shuttle Challenger exploded in 1986. President Donald J. Trump announced pandemic restrictions from the Oval Office in early 2020.Mr. Biden’s decision to use the same venue on Friday underscores how close he believes the nation veered toward economic disaster.Mr. Biden and lawmakers had expressed optimism for weeks that they would reach an accord to avoid that outcome, but the deep disagreements between Democrats and Republicans kept the country — and the rest of the world — on edge until the votes were cast in both chambers.In the House, conservative Republicans initially revolted against Mr. McCarthy for failing to win more spending concessions from the president. Several threatened Mr. McCarthy’s speakership, but backed down amid robust support for the speaker from other Republicans.Some Democrats in the House and Senate also resisted the compromise, but the White House made the decision to largely keep quiet as the votes proceeded this week, hoping to avoid inflaming the conservative opposition and making Mr. McCarthy’s job harder.Mr. Biden has said on several occasions that he hoped to find a way to avoid a similar crisis over the debt ceiling in the future and has mentioned the 14th Amendment to the Constitution, which says the debt of the United States “shall not be questioned.”Some legal experts believe that a president could use that passage to ignore the statutory debt limit, thereby avoiding the regular clashes between the parties. Mr. Biden said last month that he hoped to “find a rationale to take it to the courts to see whether or not the 14th Amendment is, in fact, something that would be able to stop it.”On Sunday, he said, “That’s another day.”Before the Oval Office speech, Mr. Biden was faced with anger among some progressives in his party that he had agreed to too many Republican demands during the negotiations.Some Democratic lawmakers voted against the debt ceiling legislation because of new work requirements that it imposes on some recipients of food assistance. White House officials have argued that the legislation removes work requirements for others, including the homeless and veterans.The president also angered some environmentalists by agreeing to approve construction of a natural gas pipeline through West Virginia and Virginia. Critics say the 300-mile Mountain Valley Pipeline will hurt wildlife and the environment as it cuts across the Appalachian Trail.For Mr. Biden, the debt ceiling deal helps to avoid undercutting the strong economy, which is a key selling point for his campaign.But his political advisers also have to be concerned about maintaining support from the coalition of voters who put him in office in 2020, some of whom have been disappointed with his achievements in climate, criminal justice and other areas. More

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    Here’s What’s in the Debt Ceiling Deal

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    Two years of spending caps, additional work requirements for food stamps and cuts to I.R.S. funding are among the components in the deal.The full legislative text of Speaker Kevin McCarthy’s agreement in principle with President Biden to suspend the nation’s borrowing limit revealed new and important details about the deal, which House lawmakers are expected to vote on this week.The centerpiece of the agreement remains a two-year suspension of the debt ceiling, which caps the total amount of money the government is allowed to borrow. Suspending that cap, which is now set at $31.4 trillion, would allow the government to keep borrowing money and pay its bills on time — as long as Congress passes the agreement before June 5, when Treasury has said the United States will run out of cash.In exchange for suspending the limit, Republicans demanded a range of policy concessions from Mr. Biden. Chief among them are limits on the growth of federal discretionary spending over the next two years. Mr. Biden also agreed to some new work requirements for certain recipients of food stamps and the Temporary Aid for Needy Families program.Both sides agreed to modest efforts meant to accelerate the permitting of some energy projects — and, in a surprise move, a fast track to construction for a new natural gas pipeline from West Virginia to Virginia that has been championed by Republican lawmakers and a key centrist Democrat.Here’s what the legislation would do:Temporarily suspends the debt limitThe deal suspends the nation’s $31.4 trillion borrowing limit until Jan. 2025. Suspending the debt limit for a period of time is different than setting it at a new fixed level. It essentially gives the Treasury Department the latitude to borrow as much money as it needs to pay the nation’s bills during that time period, plus a few months after the limit is reached, as the department employs accounting maneuvers to keep up payments.That’s different than the bill passed by House Republicans, which raised the limit by $1.5 trillion or through March 2024, whichever came first.Under the new legislation, the debt limit will be set at whatever level it has reached when the suspension ends. For political reasons, Republicans tend to prefer suspending the debt limit rather than raising it, because it allows them to say they did not technically green-light a higher debt limit.The suspension will kick the next potential fight over the nation’s debt load to 2025 — past the next presidential election.Caps and cuts spendingThe bill cuts so-called nondefense discretionary, which includes domestic law enforcement, forest management, scientific research and more — for the 2024 fiscal year. It would limit all discretionary spending to 1 percent growth in 2025, which is effectively a budget cut, because that is projected to be slower than the rate of inflation.The legislative text and White House officials tell different stories about how big those cuts actually are.Some parts are clear. The proposed military spending budget would increase to $886 billion next year, which is in line with what Mr. Biden requested in his 2024 budget proposal, and rise to $895 billion in 2025. Spending on veterans’ health care, including newly approved measures to assist veterans exposed to toxic burn pits, would also be funded at the levels of Mr. Biden’s proposed budget.Legislative text suggests nondefense discretionary outside of veterans’ programs would shrink in 2024 to about last year’s spending levels. But White House officials say a series of side deals with Republicans, including one related to funding for the Internal Revenue Service, will allow actual funding to be closer to this year’s levels.Although Republicans had initially called for 10 years of spending caps, this legislation includes just 2 years of caps and then switches to spending targets that are not bound by law — essentially, just suggestions.The White House estimates that the agreement will yield $1 trillion in savings over the course of a decade from reduced discretionary spending.A New York Times analysis of the proposal — using White House estimates of the actual funding levels in the agreement, not just the levels in the legislative text — suggests it would reduce federal spending by about $55 billion next year, compared with Congressional Budget Office forecasts, and by another $81 billion in 2025. If spending then returned to growing as the budget office forecasts, the total savings over a decade would be about $860 billion.Speaker Kevin McCarthy has said he believes a majority of his conference would vote for the deal.Haiyun Jiang for The New York TimesClaws back I.R.S. fundingThe legislation takes aim at one of President Biden’s biggest priorities — bolstering the I.R.S. to go after tax cheats and ensure companies and rich individuals are paying what they owe.Democrats included $80 billion to help the I.R.S. hire thousands more employees and update its antiquated technology in last year’s Inflation Reduction Act. The debt limit agreement would immediately rescind $1.38 billion from the I.R.S. and ultimately repurpose another $20 billion from the $80 billion it received through the Inflation Reduction Act.Administration officials said on Sunday that they had agreed to reprogram $10 billion of extra I.R.S. money in each of the 2024 and 2025 fiscal years, in order to maintain funding for some nondefense discretionary programs.The clawback will eat into the tax collection agency’s efforts to crack down on rich tax cheats. It is also a political win for Republicans, who have been outraged by the prospect of a beefed up I.R.S. and approved legislation in the House to rescind the entire $80 billion.Still, because of the leeway that the I.R.S. has over how and when it spends the money, the clawback might not affect the agency’s plans in the next few years. Officials said in a background call with reporters that they expected no disruptions whatsoever from the loss of that money in the short term.That’s likely because all of the $80 billion from the 2022 law was appropriated at once, but the agency planned to spend it over eight years. Officials suggested the I.R.S. might simply pull forward some of the money earmarked for later years, then return to Congress later to ask for more money.New work requirements for government benefitsThe legislation would impose new work requirements on older Americans who receive food stamps through the Supplemental Nutrition Assistance Program and who receive aid from the Temporary Assistance for Needy Families Program.The bill imposes new work requirements for food stamps on adults ages 50 to 54 who don’t have children living in their home. Under current law, those work requirements only apply to people age 18 to 49. The age limit will be phased in over three years, beginning in fiscal year 2023. And it includes a technical change to the T.A.N.F. funding formula that could cause some states to divert dollars from the program.The bill would also exempt veterans, the homeless and people who were children in foster care from food-stamp work requirements — a move White House officials say will offset the program’s new requirements, and leave roughly the same number of Americans eligible for nutrition assistance moving forward.Still, the inclusion of new work requirements has drawn outrage from advocates for safety net assistance, who say it punishes vulnerable adults who are in need of food.“The agreement puts hundreds of thousands of older adults aged 50-54 at risk of losing food assistance, including a large number of women,” Sharon Parrott, president of the Center on Budget and Policy Priorities, said in a statement.President Biden also agreed to some new work requirements for certain recipients of food stamps.Pete Marovich for The New York TimesPermitting reformThe agreement includes new measures to get energy projects approved more quickly by creating a lead agency to oversee reviews and require that they are completed in one to two years.The legislation also includes a win for Senator Joe Manchin III of West Virginia, a Democratic centrist, by approving permitting requests for the Mountain Valley Pipeline, a natural gas project in West Virginia. The $6.6 billion project is intended to carry gas about 300 miles from the Marcellus shale fields in West Virginia across nearly 1,000 streams and wetlands before ending in Virginia.Environmentalists, civil rights activists and many Democratic state lawmakers have opposed the project for years.The bill declares that “the timely completion of construction and operation of the Mountain Valley Pipeline is required in the national interest.”Mr. Manchin said on Twitter that he is proud to have secured the bipartisan support necessary to “get it across the finish line.” Republican members of the West Virginia delegation also claimed credit.Student loans and unspent Covid moneyThe bill officially puts an end to Mr. Biden’s freeze on student loan repayments by the end of August and restricts his ability to reinstate such a moratorium.It does not move forward with the measure that House Republicans wanted to include that would halt Mr. Biden’s policy to forgive between $10,000 and $20,000 in student loan debt for most borrowers. That initiative, which the Biden administration rolled out last year, is currently under review by the Supreme Court and could ultimately be blocked.The bill also claws back about $30 billion in unspent money from a previous Covid relief bill signed by Mr. Biden, which had been a top Republican priority entering negotiations. Some of that money will be repurposed to boost nondefense discretionary spending.According to an administration official, the deal leaves intact funding for two key Covid programs: Project NextGen, which aims to develop the next generation of coronavirus vaccines and treatments, and an initiative to offer free coronavirus shots to the uninsured.Preventing a government shutdownThe agreement only sets parameters for the next two years of spending. Congress must fill them in by passing a raft of spending bills later this year. Large fights loom in the details of those bills, raising the possibility that lawmakers will not agree to spending plans in time and the government will shut down.The agreement between Mr. Biden and Mr. McCarthy attempts to prod Congress to pass all its spending bills and avoid a shutdown, by threatening to reduce spending that is important to both parties. If lawmakers have not approved all 12 regular funding bills by the end of the year, the agreement tightens its spending caps. Nondefense discretionary spending would be set at one percent below current year levels, and it is possible that the I.R.S. would not see its $10 billion in funding for next year repurposed for other programs.The same levels would apply to defense and veterans’ spending — which would be, in effect, a significant cut to those programs compared to the agreed-upon caps. Democrats see the looming military cuts as a particularly strong incentive for Republicans to strike a deal to pass appropriations bills by the end of the year.What’s not in the billThe final agreement includes far less reduction in future debt than either side proposed.Republicans wanted much deeper spending cuts and stricter work requirements. They also wanted to repeal hundreds of billions of dollars in tax incentives signed by Mr. Biden to accelerate the transition to lower-emission energy sources and fight climate change. Mr. Biden wanted to raise taxes on corporations and high earners, and to take new steps to reduce Medicare’s spending on prescription drugs. None of those made it into the deal. More

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    How to Enforce a Debt Deal: Through ‘Meat-Ax’ Cuts Nobody Wants

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    The debt-limit legislation includes a provision meant to force both sides to pass additional bills following through on their deal: the threat of automatic cuts if they fail to do so.The bipartisan legislation Congress passed this week to suspend the debt ceiling and impose spending caps contains an arcane but important provision aimed at forcing both sides to follow through on the deal struck by President Biden and Speaker Kevin McCarthy.The 99-page measure suspends the $31.4 trillion borrowing limit until January 2025. It cuts federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025.But it also contains a number of side deals that never appear in its text but that were crucial to forging the bipartisan compromise, and that allowed both sides to claim they had gotten what they wanted out of it. To try to ensure that Congress abides by the agreement, negotiators used a time-tested technique that lawmakers have turned to for decades to enforce efforts to reduce the deficit: the threat of automatic, across-the-board spending cuts if they do not finish their work.Here’s how it works.A 1 percent cut unless spending bills are passed.Congress is supposed to pass 12 individual spending bills each year to keep the government funded. But for decades, lawmakers, unable to agree on those measures, have lumped them together into one enormous piece of legislation referred to as an “omnibus” spending bill and pushed them through against the threat of a shutdown.The debt-limit agreement imposes an automatic 1 percent cut on all spending — including on military and veterans programs, which were exempted from the caps in the compromise bill — unless all dozen bills are passed and signed into law by the end of the calendar year. Mandatory spending on programs such as Medicare and Social Security would be exempt.A wrinkle is that, because the fiscal year that drives Congress’s spending cycle ends before the calendar year does — on Sept. 30 — Congress would still need to pass a short-term bill to fund the government from October through December to avoid a shutdown.Republicans and Democrats both dread the cuts.The measure is a version of a plan offered by Representative Thomas Massie, Republican of Kentucky, a key vote to advancing the bill through the Rules Committee, who said he believed it would help avoid the Democratic-controlled Senate using the specter of a shutdown to force the House to swallow a bloated spending bill at the end of the year.“You get threatened and ransomed with a shutdown,” Mr. Massie said in an interview in late April describing the plan. “They’ll tell you, ‘If you don’t pass the Senate bill, there’s going to be a shutdown.’ I think we need to take that leverage away from anybody who would risk a shutdown to get more spending. Just take that off the table.”Some Republicans, including defense hawks, are livid about the measure, arguing that it would subject the Pentagon to irresponsible cuts. Senator Susan Collins of Maine, the top Republican on the Appropriations Committee and its defense subcommittee, called it a “harmful” provision that would leave a “threat hanging over” the Defense Department.“It would trigger an automatic, meat-ax, indiscriminate, across-the-board cut in our already inadequate defense budget and in the domestic, discretionary nondefense funding,” Ms. Collins said.Democrats, too, have a major incentive to avoid the cuts, since they have resisted reducing funding for federal programs all along.Without spending bills, major parts of the debt deal will die.Both parties stand to lose victories gained through handshake agreements during negotiations if Congress cannot pass its appropriations bills. Neither the White House nor House Republicans have published a full accounting of the agreements that do not appear in legislative text, but some have become clear.The deals allow Republicans to claim they are making deep cuts to certain spending categories while letting Democrats mitigate the pain of those cuts in the funding bills.One unwritten but agreed-upon compromise allows appropriators to repurpose $10 billion a year in 2024 and 2025 from the I.R.S. — a key priority of Republicans, who had opposed the additional enforcement funding championed by Mr. Biden and Democrats.Another side agreement, sought by Democrats, that would evaporate if the spending bills were not written designated $23 billion a year in domestic spending outside military funding as “emergency” spending, basically exempting that money from the caps in the deal.Jim Tankersley More

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    House Set to Vote on Debt Ceiling Bill Amid Republican Resistance

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    A bipartisan coalition was set to push through the compromise struck by Speaker Kevin McCarthy and President Biden, even as lawmakers in both parties signaled their displeasure with the plan.The House on Wednesday was poised to push through legislation negotiated by President Biden and Speaker Kevin McCarthy to suspend the debt ceiling and set federal spending limits, as a bipartisan coalition lined up to cast a critical vote to pull the nation back from the brink of economic catastrophe.The bill would defer the federal debt limit for two years — allowing the government to borrow unlimited sums as necessary to pay its obligations — while imposing two years of spending caps and a string of policy changes that Republicans demanded in exchange for allowing the country to avoid a disastrous default. The vote, expected Wednesday night, was coming days before the nation was projected to exhaust its borrowing power, and after a marathon set of talks between White House negotiators and top House Republicans.With both far-right and hard-left lawmakers in revolt over the deal, congressional leaders cobbled together a coalition of Republicans and Democrats willing to drag the bill over the finish line, throwing their support behind the compromise in an effort to break the fiscal stalemate that has gripped Washington for weeks.It nearly collapsed on its way to the House floor, when hard-right Republicans sought to block its consideration, and in a suspenseful scene, Democrats waited several minutes before swooping in to supply their votes for a procedural measure that allowed the plan to move ahead.Representative Dan Bishop of North Carolina, along with other hard-right House Freedom Caucus members, tried to block the procedure to advance the debt deal to a vote on Wednesday.Haiyun Jiang for The New York TimesThe deal would suspend the $31.4 trillion borrowing limit until January 2025. It would cut federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025, which is considered a cut because it would be at a lower level than inflation. The legislation would also impose stricter work requirements for food stamps, claw back some funding for I.R.S. enforcement and unspent coronavirus relief money, speed the permitting of new energy projects and officially end Mr. Biden’s student loan repayment freeze.The compromise was structured with the aim of enticing votes from both parties, allowing Republicans to say that they succeeded in reducing some federal spending — even as funding for the military and veterans’ programs would continue to grow — while allowing Democrats to say they spared most domestic programs from significant cuts.Ahead of the series of votes on Wednesday, Mr. McCarthy urged his members to support the bill, framing it as a “small step putting us on the right track,” and promoting the spending cuts and work requirements Republicans won in the deal.“Everybody has a right to their own opinion,” he said. “But on history, I’d want to be here with this bill today.”In the Senate, both Democratic and Republican leaders said they would quickly take up the legislation and push to get the package to Mr. Biden as swiftly as possible, with Senator Chuck Schumer, Democrat of New York and the majority leader, warning that lawmakers would need to approve the bill without changes to meet the June 5 deadline when the Treasury Secretary Janet L. Yellen has said the government would default without action by Congress.“I cannot stress enough that we have no margin for error,” Mr. Schumer said. “Either we proceed quickly and send this bipartisan agreement to the president’s desk or the federal government will default for the first time ever.”Senator Chuck Schumer, Democrat of New York and the majority leader, warned that lawmakers would need to approve the bill without changes to meet a June 5 deadline to avert a default.Haiyun Jiang for The New York TimesPassage of the deal would be a major victory for Mr. McCarthy, a California Republican who faced a massive challenge in shepherding a debt-ceiling increase through a narrowly divided chamber populated by Republicans who have long refused to raise the borrowing limit. Few had expected that Mr. McCarthy would be able to unite his fractious conference around any such measure, much less one negotiated with Mr. Biden, without prompting an attempt by his right flank to oust him.As of Wednesday, no such effort had materialized, thought there still may be political consequences ahead for Mr. McCarthy. Representative Dan Bishop, Republican of North Carolina and a member of the ultraconservative Freedom Caucus, has publicly said that he considered the debt and spending deal grounds for removing Mr. McCarthy from his post. Another member of the group, Representative Ken Buck, Republican of Colorado, told CNN that its members would have “discussions about whether” to try to oust him.“I’m not suggesting the votes are there to remove the speaker, but the speaker promised that we would operate at 2022 appropriations levels when he got the support to be speaker,” Mr. Buck said. “He’s now changed that to 2023 levels plus one percent. That’s a major change for a lot of people.”Under the rules House Republicans adopted at the beginning of the year that helped Mr. McCarthy become speaker, any single lawmaker could call for a snap vote to depose him, a move that would require a majority of the House.Hard-right lawmakers were nonetheless furious over the compromise, savaging the bill and Mr. McCarthy’s handling of the negotiations as a betrayal.“No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return,” said Representative Chip Roy, Republican of Texas, who promised “a reckoning about what just occurred.”In a dramatic display of their displeasure, 29 conservative Republicans took the unusual step of breaking ranks on a procedural vote to take up the legislation, normally a formality that passes entirely along party lines.In a dramatic tableau on the House floor, as the Republican defections piled up, imperiling the deal, Representative Hakeem Jeffries of New York, the minority leader, finally raised a green voting card in the air, signaling to fellow Democrats that it was time go ahead and bail Republicans out. A stream of centrist and veteran lawmakers — 52 in all — crowded into the well of the House and voted “yes,” rescuing the deal from collapse.After a pause on the floor when Republicans came up short on votes, Representative Hakeem Jeffries, the New York Democrat and minority leader, gave the assent to a group of Democrats to help move toward a vote on the deal.Kenny Holston/The New York TimesMr. Jeffries had gathered Democrats in the Capitol on Wednesday morning, along with top White House officials who had helped broker the deal, and urged them to back the compromise. He argued that Mr. Biden had successfully fended off the worst of Republicans’ demands, and reiterated that allowing the nation to default was not an option.“I made clear that I’m going to support legislation that is on the floor today,” Mr. Jeffries told reporters at a news conference after the meeting. “And I support it without hesitation or reservation or trepidation.”But progressive Democratics bristled at the package, and said they could not support new work requirements for safety net programs or incentivize Republicans from weaponizing the debt ceiling as a political cudgel.“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, who took particular aim at changes to the Supplemental Nutrition Assistance Program and a measure to expedite production of a gas pipeline. “This was their deal, this was their negotiations. They’re the ones trying to come in and cut SNAP, cut environmental protections, trying to ram through an oil pipeline through a community that does not want it.”“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, one of a group of Democrats displeased with Republican provisions in the bill.Kenny Holston/The New York Times“This has been a hostage situation,” Representative Greg Casar, Democrat of Texas, said. “We’re going to get out of the hostage situation. I appreciate the president negotiating down the ransom payment for the hostage. But I think it’s appropriate for progressives to say we never want to be in this situation again.”Adding to progressive discontent are provisions in the deal that claw back some unspent money from a previous pandemic relief bill, and reduce by $10 billion — to $70 billion from $80 billion — new enforcement funding for the I.R.S. to crack down on tax cheats. Other measures in the bill include a provision meant to speed the permitting of certain energy projects and a provision meant to force the president to find budget savings to offset the costs of a unilateral action, like forgiving student loans — though administration officials could circumvent that requirement.The deal also includes measures meant to avert a government shutdown later this year.Carl Hulse More

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    Debt Ceiling Deal Would Reinstate Student Loan Payments

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    The legislation would prevent President Biden from issuing another last-minute extension on the payments beyond the end of the summer.Follow for live updates as the House prepares for a vote on the debt limit deal.For millions of Americans with federal student loan debt, the payment holiday is about to end.Legislation to raise the debt ceiling and cut spending includes a provision that would require borrowers to begin repaying their loans again by the end of the summer after a yearslong pause imposed during the coronavirus pandemic.President Biden had already warned that the pause would end around the same time, but the legislation, if it passes in the coming days, would prevent him from issuing another last-minute extension, as he has already done several times.The end of the pause will affect millions of Americans who have taken out federal student loans to pay for college. Across the United States, 45 million people owe $1.6 trillion for such loans — more than Americans owe for any kind of consumer debt other than mortgages.The economic impact of the pandemic has faded since President Donald J. Trump first paused student loan payments in March 2020. Many Americans lost their jobs at the outset of the public health crisis, undercutting their ability to repay their loans on time. The number of jobs in the United States now exceeds prepandemic levels.Promoting the debt ceiling legislation over the weekend, Speaker Kevin McCarthy said on “Fox News Sunday” that it would end the pause on student loan payments “within 60 days of this being signed.”In fact, the legislation would follow the same timeline that the Biden administration had previously outlined, ending the pause on payments on Aug. 30 at the latest.A spokesman for Mr. McCarthy did not respond to an email seeking comment.Even with the pause ending, some borrowers may still see some relief if the Supreme Court allows Mr. Biden to move forward with a plan to forgive up to $20,000 in debt for some people with outstanding balances.Mr. Biden’s plan would cancel $10,000 of federal student loan debt for those who make under $125,000 a year. People who received Pell grants for low-income families could qualify for an additional $10,000 in debt cancellation.But the plan was challenged in court as an illegal use of executive authority, and during oral arguments in February, several justices appeared skeptical of the program. A ruling from the court could come at any time but is expected next month.White House officials have said repeatedly that they are confident in the legality of the president’s plan. But the debate about the plan, and the broader issue of student loans, has been fierce in Congress.Republicans have vowed to block the president’s plan if the courts do not. But they have so far failed to make good on that promise, despite repeated attempts.Last month, House Republicans passed a bill to raise the debt ceiling that would have blocked the student debt cancellation plan and ended the temporary pause on payments. That bill was shelved after negotiations began with the White House on the debt ceiling and spending cuts.Last week, the House passed a resolution that would use the Congressional Review Act to overturn the president’s debt cancellation plan. But the Senate has not taken up the measure, and Mr. Biden has said he would veto it.Instead, the compromise debt ceiling legislation now under consideration by lawmakers only requires ending the pause on payments — a move that the president had already said he would make. It would not block the debt cancellation plan.In addition, White House officials said the legislation would not deny the Biden administration the ability to pause student loan payments during a future emergency, as Republicans had sought to do.A spokesman for the White House said the president was pleased that Republicans had failed to block his debt cancellation plan in the debt ceiling legislation.“House Republicans weren’t able to take away a single penny of relief for the 40 million eligible borrowers, most of whom make less than $75,000 a year,” the spokesman, Abdullah Hasan, said. “The administration announced back in November that the current student loan payment pause would end this summer — this agreement makes no changes to that plan.” More