FMHI - Debt ceiling deal: What's in the bill as the fight moves to Congress
2023-05-30 04:32:01 ET
Investors are bracing for a week of political wrangling in Washington after President Biden and House Speaker Kevin McCarthy inked a deal on the debt limit. Both sides now have to muster enough votes to win Congressional approval, despite some opposition from the likes of the Republican Freedom Caucus and progressives in the Democratic Party. While enough bipartisan support is expected to be eventually garnered, the measure could still run into some procedural obstacles, as the clock ticks down to avoid a catastrophic default by June 5.
Legislative text: The agreement lifts the current $31.4T deal ceiling into 2025, meaning the limit on government borrowing would be extended until after the next presidential election. Non-defense spending would be capped at current levels for the next fiscal year, and would only rise by 1% in 2025. Congress will also need to approve 12 annual spending bills or risk facing a snapback to spending limits from the previous year, which would mean an overall cut of 1%.
Other changes that were central to the compromise include limiting some food stamp provisions to encourage recipients to find jobs. The agreement also halts some funds to hire new IRS agents, claws back billions of dollars in unspent COVID relief, and would speed up big energy projects through permitting reform. In addition, a pause on student-loan repayments will come to an end in August, though Biden's student loan forgiveness plan will end up being decided by the Supreme Court.
Go deeper: U.S. stock index futures advanced following the release of the bill, with SA Investing Group Leader ANG Traders forecasting new market highs , though Mott Capital Management sees the potential for a deal draining a massive amount of liquidity from the market . The measure will be taken up this afternoon by the House Rules Committee, which will determine the framework for considering the legislation before a vote takes place in the House on Wednesday. If approved, a decision in the Senate would follow, and could happen by the weekend.
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More on the Debt Ceiling:
- Market Weekly Indicators: After the Debt Ceiling Drama Ends, What Next?
- U.S. Debt Ceiling Game Of Chicken And Default Risk
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Debt ceiling deal: What's in the bill as the fight moves to Congress