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---
title: Here’s What’s in the Debt Ceiling Deal
description: “The agreement represents a compromise, which means not everyone gets what they want,” President Joe Biden said in a statement.
canonical: https://time.com/6283225/debt-ceiling-deal/
author: Nik Popli
article:opinion: false
article:content_tier: free
article:published_time: 2023-05-29T14:47:55.000Z
article:modified_time: 2026-10-19T07:24:00.693Z
article:section: Politics
og:title: Here’s What’s in the Debt Ceiling Deal
og:description: “The agreement represents a compromise, which means not everyone gets what they want,” President Joe Biden said.
og:url: https://time.com/6283225/debt-ceiling-deal/
og:site_name: TIME
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og:image:alt: President Biden Delivers State Of The Union Address
og:type: article
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twitter:title: Here’s What’s in the Debt Ceiling Deal
twitter:description: “The agreement represents a compromise, which means not everyone gets what they want,” President Joe Biden said.
twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/bltc37e9060b11e5833/698a3d6bdb298727192690af/Biden-McCarthy-SOTU.jpg?branch=production&width=1200&quality=75&auto=webp&crop=16:9
video:duration: 02:57
video:published: 2023-05-26
section: politics
topics: debt ceiling, federal borrowing, government default, budget deficit, congressional negotiations, Biden administration, Republican concessions, economic recession risk
genre: news explainer
tones: urgent, analytical, concerned, political
emotions: concern (high), tension (medium), urgency (medium)
sentiment: negative
audience: general news readers, voters, policy followers, financial news audiences
people: Joe Biden, Janet Yellen, Kevin McCarthy, Phil Elliott
organizations: U.S. government, Congress, Treasury Department, Republicans, Democrats, GOP
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# Here’s What’s in the Debt Ceiling Deal

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<!-- video src="https://cdn.jwplayer.com/manifests/sJUEUsSN.m3u8" -->
## Video: What to Know About the History of the Debt Ceiling

[Watch (HLS stream): What to Know About the History of the Debt Ceiling](https://cdn.jwplayer.com/manifests/sJUEUsSN.m3u8) (2:57)

![What to Know About the History of the Debt Ceiling](https://cdn.jwplayer.com/v2/media/sJUEUsSN/poster.jpg?width=720)

_Published 2023-05-26. The Biden Administration remains locked in a standoff with congressional Republicans over raising the federal debt ceiling, just two weeks before the nation is set to default on its obligations for the first time. The U.S. government hit its congressionally imposed $31.4 trillion borrowing limit in January, and Treasury Secretary Janet Yellen has warned that the country could run out of cash as early as June 1 if Democratic President Joe Biden and Republican House Speaker Kevin McCarthy are unable to reach a deal to raise the debt ceiling._
Description, summary, key points, chapters, key quotes, questions and transcript, where present, were produced automatically from the video or its captions and were not reviewed.

## Summary
The video explains the U.S. debt ceiling as a cap on federal borrowing and describes the political standoff over raising it. It notes the government could be unable to pay its bills as early as June 1 without a deal. It outlines Congress's history of acting on the limit and how partisan division has made the current negotiation more difficult. It also suggests the outcome could affect the economy and the political landscape heading into 2024.

## Key points
- The debt limit is a cap on the total amount of money the federal government is authorized to borrow to fulfill its financial obligations. (00:51)
- Government spending on military, Social Security and Veterans Benefits must be funded either through tax revenue or debt. (01:02)
- The U.S. has run a budget deficit for the last two decades, adding 25 trillion dollars in debt. (01:08)
- The Treasury Department says the government could be unable to issue new debt and pay its bills as early as June 1st. (01:17)
- Congress has acted 78 separate times since 1960 to permanently raise, temporarily extend or revise the debt limit. (01:24)
- Republicans control the House while Democrats control the presidency and the Senate, making the debt ceiling more politically contentious. (01:36)
- Defaulting on legal obligations for the first time in history could create a financial crisis and threaten jobs for everyday Americans. (00:31)
- The outcome of the debt limit discussions could shape what happens in 2024, depending on whether Biden raises the limit or accepts concessions. (02:24)

## Chapters
- [00:00 to 00:47] Warnings of economic calamity from a default. The video introduces the risk of a first-ever U.S. default if the debt limit is not raised and the potential economic fallout.
- [00:47 to 01:21] What the debt ceiling is and why it matters. The segment explains the debt limit as a borrowing cap and how government spending is funded through taxes or debt.
- [01:21 to 01:36] Congress's history of raising the limit. The video notes Congress has repeatedly acted to raise, extend or revise the debt limit since 1960.
- [01:36 to 02:01] Partisan standoff over the current negotiation. Divided control of Washington and Democratic insistence on no concessions shape the current impasse.
- [02:01 to 02:57] Political stakes for Biden and the 2024 race. The segment discusses the approaching June 1 deadline and how the outcome could affect Biden's political standing.

## Key quotes
- [01:36] interviewer: "Republicans control the house and Democrats control the presidency in the Senate."
- [01:47] Biden: "I have insisted from the beginning that they won't accept any concessions attached to a deal"
- [02:07] Biden: "falling on a national debt is not an option"
- [02:24] interviewer: "So, the outcome of these debt limit discussions, could shape. What happens in 2024"
- [02:39] interviewer: "If he accepts, the GOP is proposed, work requirements for federal aid."

## Questions this video answers
- What is the debt ceiling? [00:51]
- Why could the U.S. run out of money to pay its bills? [01:17]
- How often has Congress acted on the debt limit since 1960? [01:24]
- Why has the debt ceiling become more political in recent years? [01:36]
- How could the debt limit outcome affect the 2024 election? [02:24]

## Content suitability
- financial distress [00:00-00:39]: Discusses the risk of a first-ever federal default, a financial crisis and threats to jobs.
- politics [00:18-02:57]: Covers a partisan standoff between the Biden administration and congressional Republicans.


![Nik Popli](https://static.time.com/v3/assets/bltea6093859af6183b/blt93f3bbc295d4b776/698a3ddf0116820b4098323a/Nik-Popli-headshot-e1686941034109.jpeg?branch=production&width=1200&quality=75&auto=webp&crop=1:1)

by 

[Nik Popli](https://time.com/author/nik-popli/)


![Nik Popli](https://static.time.com/v3/assets/bltea6093859af6183b/blt93f3bbc295d4b776/698a3ddf0116820b4098323a/Nik-Popli-headshot-e1686941034109.jpeg?branch=production&width=96&quality=75&auto=webp)

## Nik Popli


Staff Writer

May 29, 2023 2:47 PM UTC

The Biden Administration remains locked in a standoff with congressional Republicans over raising the federal debt ceiling, just two weeks before the nation is set to default on its obligations for the first time. The U.S. government hit its congressionally imposed $31.4 trillion borrowing limit in January, and Treasury Secretary Janet Yellen has warned that the country could run out of cash as early as June 1 if Democratic President Joe Biden and Republican House Speaker Kevin McCarthy are unable to reach a deal to raise the debt ceiling. 

![Nik Popli](https://static.time.com/v3/assets/bltea6093859af6183b/blt93f3bbc295d4b776/698a3ddf0116820b4098323a/Nik-Popli-headshot-e1686941034109.jpeg?branch=production&width=1200&quality=75&auto=webp&crop=1:1)

by 

[Nik Popli](https://time.com/author/nik-popli/)


![Nik Popli](https://static.time.com/v3/assets/bltea6093859af6183b/blt93f3bbc295d4b776/698a3ddf0116820b4098323a/Nik-Popli-headshot-e1686941034109.jpeg?branch=production&width=96&quality=75&auto=webp)

## Nik Popli


Staff Writer

May 29, 2023 2:47 PM UTC

President Joe Biden and House Speaker Kevin McCarthy released Sunday evening the [legislative text](https://docs.house.gov/billsthisweek/20230529/BILLS-118hrPIH-fiscalresponsibility.pdf) for a bill to lift the nation’s [debt ceiling](https://time.com/6281003/debt-ceiling-history/) and fund the government for two years in exchange for new limits on federal spending, moving one step closer to ending a [partisan standoff](https://time.com/6277301/debt-limit-politics-hearing/) that has brought the government to the verge of defaulting for the first time in U.S. history.

The compromise deal, which now faces an uncertain future in the House and Senate, is far from the “clean” debt ceiling increase Democrats had initially sought, but it also leaves out many of the provisions that Republicans pushed for in their [House-passed debt ceiling bill](https://time.com/6274973/mccarthy-debt-ceiling-bill-holdouts/).


“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement. He urged both chambers to pass the deal quickly, saying it would prevent “what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”

**_Read more:_** [_What to Know About the History of the Debt Ceiling_](https://time.com/6281003/debt-ceiling-history/)

But some conservatives have expressed early concerns that the agreement does not do enough to cut future deficits, while [liberals](https://time.com/6282188/democrats-biden-folding-debt-limit/) see it as a major concession. If passed by Congress, the deal to raise the debt ceiling would enact changes in environmental permitting, institute tighter work requirements for food stamps, and claw back some money from the Internal Revenue Service (IRS), according to the 99-page legislative text.

With the health of the economy hanging in the balance and financial markets watching closely, lawmakers said they expect a vote in the House on Wednesday, in hopes of enacting the legislation before a looming June 5 deadline to avert a default.


Here’s a look at what’s in the deal:

## New work requirements for federal aid programs

In a major win for Republicans, the debt ceiling deal institutes new [work requirements](https://time.com/6276193/republicans-work-requirements-debt-ceiling/) for low-income Americans who receive food assistance under the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

The deal raises the age limit until which able-bodied, low-income adults without dependents would be required to work to receive food stamps, from 50 to 54\. The expanded restrictions would expire in 2030.

Biden’s negotiators were able to secure some exemptions for homeless people and veterans, whose circumstances can make it difficult to comply with the program’s work requirements. But the agreement on work requirements is seen as a significant concession by Democrats, who had initially rejected the proposed change and said it would lead to fewer people being able to afford food but not actually increase job participation. 

The deal also modifies the formula used by states to calculate cash assistance for low-income households under the Temporary Assistance for Needy Families program, but no changes to Medicaid were made.

## Clawing back money from the IRS

In another concession to Republicans, the Biden Administration agreed to claw back $20 billion of the $80 billion in new IRS funding that was designed to crack down on wealthy Americans and corporations that evade taxes. 

That $80 billion in funding was included in the [Inflation Reduction Act](https://time.com/6204537/inflation-reduction-act-whats-in-it/), Biden’s signature economic bill, in order to increase government revenue and help pay for the climate and health-care spending in the measure. But it has since become an attack line for congressional Republicans, who have warned, despite the claim having been debunked, that tens of thousands of new IRS agents would be hired to pry into the lives of hard-working Americans.

**_Read more:_** [_Why Republicans Keep Spreading the ‘87,000 IRS Agents’ Lie_](https://time.com/6260075/irs-87000-agents-republican-lie/)


Democrats say the money is meant to modernize the tax collection agency, which has been plagued by understaffing, and could yield $200 billion in additional revenue over the next 10 years. Since the fall, the IRS has hired 5,000 customer service agents to assist Americans throughout tax season, upgraded its phone and online chat features, and fully staffed 361 Taxpayer Assistance Centers around the nation, a Treasury Department official told TIME in March. 

## Rescinding unspent COVID-19 rescue money

The deal takes back around $30 billion in unspent COVID-19 relief funds that were approved by Congress during the Biden and Trump presidencies, with exceptions made for veterans’ medical care, housing assistance, and the Indian Health Service. The rollbacks also include slashing $400 million from the Centers for Disease Control and Prevention’s Global Health Fund.

Some Democrats and public health advocates have warned that such cuts would hurt efforts to prepare for [the next big virus](https://time.com/6278415/covid-19-pandemic-end-next-pandemic/) and take money away from the persistently underfunded public-health system, affecting vulnerable populations the most. The spending cuts would also delay the replenishment of the Strategic National Stockpile, raising the possibility that the U.S. could face a shortage of essential medical supplies should another pandemic emerge, creating a repeat of the early days of COVID-19 when masks, swabs, ventilators, and other supplies had to be rationed.


The White House says the deal, however, would protect critical funding to prepare for future pandemics.

**_Read more:_** [_Why the Debt Ceiling Matters and What Happens if Congress Refuses to Raise It_](https://time.com/6247877/what-is-debt-ceiling-congress/)

## A faster approval process for energy projects

Biden’s agreement with McCarthy also includes a provision intended to speed up the approval process for energy projects, which can sometimes drag on for years. As part of the deal, only a single federal agency will be required to take charge of a project’s environmental review, rather than having multiple agencies each perform their own environmental assessments, as it currently stands. 

Both parties have expressed support for the change, though Republicans also sought new restrictions on lawsuits from project opponents, which is not part of the deal.

In addition, [Sen. Joe Manchin](https://time.com/6198779/joe-manchin-democrats-fate-biden/), a centrist Democrat from West Virginia, managed to slip into the deal a provision meant to accelerate the construction of the Mountain Valley Pipeline—a multi-billion-dollar natural gas pipeline in his state that’s been repeatedly stalled on environmental concerns.


## Funding for veterans 

The deal boosts spending for the military next year by about 3% and also increases funding to improve medical care for military veterans, including a $20.3 billion fund dedicated to veterans who have been exposed to toxic substances or environmental hazards.

## An end to the freeze on monthly student loan payments

Biden refused to retreat on his plan to cancel up to $20,000 of [student debt](https://time.com/6261104/student-loans-how-to-pay-back/) for tens of millions of Americans, but the deal reached Saturday does codify his plan to end the ongoing freeze on monthly student loan payments and interest[ at the end of the summer. ](https://time.com/6259839/student-loan-repayments-supreme-court/)

The move comes amid calls from GOP lawmakers, who have blasted the roughly $5 billion cost each month of keeping nearly all federal student loans paused, to resume collecting payments. In their own House-passed debt ceiling bill, Republicans would have permanently curtailed the Education Department’s authority to freeze student payments.


The White House didn’t go that far, but the future of the program remains uncertain as the [Supreme Court prepares](https://time.com/6258411/supreme-court-debt-forgiveness-decision/) to decide in the coming weeks about the legality of Biden’s student loans plan.

**Read More**: [_When To Refinance Student Loans?_](https://time.com/6284294/debt-ceiling-student-loan-borrowers/)

## A two-year cap for discretionary spending

Negotiators agreed to cap annual discretionary spending for two years, keeping non-defense spending levels flat next year and raising them by 1% in 2025\. That means funding for most domestic programs—such as housing, education and road safety initiatives—will stay the same next year at around $936 billion.

Over the course of negotiations, spending caps had emerged as a major sticking point for Republicans, who initially sought 10 years of annual spending limits before ultimately settling on two years.

## A higher debt ceiling beyond the 2024 election

In exchange for the spending cuts, the deal would raise the limit on how much the government can borrow through the end of 2024, meaning that Biden will not have to deal with the debt ceiling again until [after the next presidential campaign.](https://time.com/6256382/who-is-running-for-president-2024/)


This was a top priority for the Biden Administration, since debt limit negotiations during a period of divided government often create a major headache for the president. If the deal passes, it will ensure that the U.S. does not have to go through debt limit talks again until the next House term.


## Transcript

[00:00] Condiments are warning that the US is on the precipice
[00:02] of economic Calamity.
[00:03] If the government can't come together and raise the federal
[00:06] debt limit, now, this isn't the first time,
[00:08] the US has been in this situation.
[00:09] We've been here before and the debt-limit crisis has always
[00:13] been resolved by Congress, but this year's B is turning out to
[00:16] be a lot more messy than previous years.
[00:18] And since this debt ceiling is one of the few must pass pieces
[00:21] of legislation. Both parties have to use this issue as an opportunity
[00:25] to take a political stand and exact concessions to cut back
[00:29] on government spending, it would cause the government to
[00:31] default on its legal obligations for the first time in history,
[00:35] creating a financial crisis and threatening jobs for everyday
[00:39] Americans. It could even potentially put the US get risk of a recession.
[00:47] The only country that has a debt ceiling is Denmark the debt
[00:51] limit or the debt.
[00:51] Ceiling is a cap on the total amount of money that the federal
[00:55] government is authorized to borrow to fulfill its Financial Obligations.
[00:58] Everything at the government spends, money on military
[01:02] to Social Security, and Veterans Benefits has to be funded,
[01:06] either through tax revenue, or debt.
[01:08] And for the last two decades, the US has been running a budget
[01:11] deficit. Adding 25 trillion dollars in debt.
[01:14] So the treasury Department now says that the government
[01:17] could be unable to issue new debt and pay its bills as early
[01:20] as June 1st.
[01:21] But Congress has always acted when called upon to raise.
[01:24] The debt limit has 1960 Congress.
[01:27] Acted 78 separate times to permanently raise temporarily
[01:30] extend a revised the debt limit.
[01:32] The debt ceiling has become an increasingly political issue
[01:36] in recent years, especially when power in Washington is divided
[01:39] as it is right now, Republicans control the house and Democrats
[01:43] control the presidency in the Senate.
[01:44] Democrats have been very United on this front.
[01:47] I have insisted from the beginning that they won't accept
[01:50] any concessions attached to a deal and continue to blame Republicans
[01:54] for taking the country's credit hostage in our stash.
[02:01] Continue to me as we speak is not a fact and they're making
[02:03] progress I made clear time and again to falling on a national
[02:07] debt is not an option but that no negotiation strategy,
[02:11] may be impractical with the June 1st deadline approaching
[02:14] in less than two weeks.
[02:14] The number of places that we are still far apart.
[02:17] I mean, it didn't seem like the economy,
[02:21] plays a pivotal role in how Americans cast their ballots.
[02:24] So, the outcome of these debt limit discussions,
[02:27] could shape. What happens in 2024, particularly if Biden was
[02:31] unable to raise the debt limit before defaulting,
[02:33] or if he accepts concessions that undo,
[02:35] his legislative accomplishment, for instance, progresses.
[02:38] My see him as weak.
[02:39] If he accepts, the GOP is proposed,
[02:41] work requirements for federal aid.
[02:43] This is a very big moment for Joe Biden.
[02:45] And as my colleague, Phil Elliott, remarkably little of it is
[02:49] under his sole control.

```json
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