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Debt Ceiling Deal Closes 

June 5, 2023
 
After Memorial Day weekend negotiations, the President and House Speaker Kevin McCarthy announced a debt ceiling deal that suspends the limit until January 2025 and implements a number of spending and policy reforms. The House and Senate passed the bill in short order, and Biden signed the legislation on June 3 before the June 5 “X date.”

Why it matters: The deal averts an economic crisis where the U.S. government would run out of cash and potentially default on its debt.

By the numbers: This bill increases the federal debt limit, establishes new discretionary spending limits, rescinds unobligated funds, and expands work requirements for federal programs. Highlights include:

• Debt ceiling is suspended until January 1, 2025 and increases the limit on January 2 to accommodate what has been spent. But that doesn’t mean Jan. 2 is the X date. Treasury will be able to use extraordinary measures to continue paying bills after hitting the limit.
• Spending caps for 2024 and 2025 budgets and suggested (not mandated) targets for the next 8 years. 2024 discretionary spending (non-defense) would be ~last years levels. FY 2025 would be capped at 1% growth, which amounts to a spending cut when considering inflation. The savings over 10 years is ~$1 trillion.
• Automatic spending cuts to the 2024 and 2025 budgets will occur if Congress doesn’t pass the 12 appropriation bills by end of year. This raises the stakes for Congress to get its work done, but it won’t automatically prevent a government shutdown if no agreement is reached. However, Congress could always change the rules in a continuing resolution.
• Student loan payments will restart by the end of August, but the Biden administration may still implement its $10,000 to $20,000 loan forgiveness program if the Supreme Court allows it to proceed.
• The remaining items include expanded work requirements for food and income assistance, clawing back $30 billion in unspent COVID funds, energy project permitting reform, and rescinding part of the funding increase to the IRS passed through the Inflation Reduction Act.

What they’re saying: After the deal was announced, the conservative wing of the House started to push back on the deal and complained it did not go far enough. Similarly, some Senate conservatives threatened to use procedural objections to bog down the process in that chamber. The House conservatives were unable to block the bill and the Senate negotiated votes on several amendments in order to speed up the time to vote.

Yes, but: Democratic support has always been part of the vote math here. And Dem support was critical in both chambers. The Senate passed it 63-36, with 32 GOP and 4 Dems voting “no.” The House passed it 314-117 with the following breakdown.

What’s next: The debt ceiling debacle is resolved for the next two years, but the discussion on government spending will continue as Congress rolls up its sleeves to pass appropriations.

The bottom line: The press is sorting through the political winners and losers, but Speaker McCarthy seems to have emerged without a challenge to leadership. While Biden and Democrats ultimately had to move from their hard line of a clean debt ceiling increase, some are optimistic that this deal could pave the way for other bipartisan action in a divided government.

Contact David McCarthy (dmccarthy@crefc.org)with questions. 

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President Biden signed a bipartisan debt ceiling agreement that suspends the limit until 2025.

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2024 Republican Presidential Primary Field Takes Shape

June 5, 2023

Three more Republican candidates jumped or are about to jump into the presidential race after months of “will they” or “won’t they”.

The New Candidates:

Sen. Tim Scott (R-SC): Officially launched his presidential bid on May 22, after launching an exploratory committee in April. Sen. Scott is running on a positive message as a true conservative. While Scott has a presence in the Senate and is the lead Republican on Senate Banking, he does not have a national brand. This lack of recognition could be an opportunity for Scott to introduce himself to voters with Trump fatigue and those seeking a conservative alternative to former Vice President Mike Pence.

Gov. Ron DeSantis (R-FL): The popular Florida Governor announced his bid on May 24 via Twitter. Despite a few technical difficulties, DeSantis’s format eschewed traditional media and sought to place him as the new face of the Republican party, a more palatable version of Trump. He has built a national reputation by championing conservative issues on K-12 education, abortion, and combatting “wokeness”. DeSantis has the opportunity to bring together a coalition of Republican voters who are skeptical of another Trump nomination and MAGA wing of the party, if he is willing to go after Trump directly.

Former Vice President Mike Pence (R) is set to announce his Presidential Bid on June 7th in Des Moines, IA. As a long-time ally of the evangelical wing of the party, Pence will run on a platform of traditional conservative values on both social and economic issues. Pence’s biggest challenge will be to redefine himself to voters beyond his association with Trump.

With the White House and both chambers at stake, the diverse field of candidates and how they fare in the presidential election will shape the next four years for Republicans.

The bottom line: There is still plenty of time for candidates to jump in and out of the race. August will feature the first televised debate, but candidates will introduce themselves to key primary states and voters over the summer.

If you have any questions, contact Chelsea Neil at cneil@crefc.org. 

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Congressional Committee Preview 

June 5, 2023

The House Financial Services Committee will continue its packed agenda in June with a number of committee and subcommittee hearings. The Senate Banking Committee will likely hold several panels in the slower-paced chamber.

House hearings will include testimony from Treasury Secretary Janet Yellen on June 13 and a June 21 hearing with Fed Chair Jay Powell. Later on the 21st, an oversight subcommittee will focus on the SEC. Powell likely will appear before the Senate Banking Committee that week, as well.

Week of June 5th

• 6/6 - 10:00 am: Subcommittee on Financial Institutions and Monetary Policy hearing titled, “Uncertain Debt Management: Treasury Markets and Financial Institutions.”
• 6/7 - 10:00 am: Subcommittee on National Security, Illicit Finance, and International Financial Institutions hearing titled, “Dollar Dominance: Preserving the U.S. Dollar’s Status as the Global Reserve Currency.”

 Week of June 12th

• 6/13 - 10:00 am: Full committee hearing with Secretary Yellen.
• 6/13 - 2:00 pm: Full committee hearing titled, “The Future of Digital Assets: Providing Clarity for the Digital Asset Ecosystem.”
• 6/14 - 10:00 am: Full committee hearing titled, “The Semiannual Report of the Bureau of Consumer Financial Protection.”  

Week of June 19th

• 6/21 – 10:00am: Full committee hearing – Powell and 2:00pm: Subcommittee on Oversight and Investigations hearing titled, “SEC Oversight.”
•  6/22 – 10:00am: Subcommittee on Capital Markets hearing on equity market structure and 2:00 pm: Subcommittee on Housing and Insurance hearing with HUD IG.

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