But the drama isn’t over yet. To end the threat of the default, the bill needs to make it through Congress.
With a potential default date just days away, lawmakers have managed to avert economic calamity by coming to a deal in principle to raise the debt ceiling and cap government spending for two years.
While the full details of the bill have not yet emerged, the reported elements of the deal included concessions from both parties, effectively ensuring that lawmakers won’t have to revisit the debt ceiling until after the 2024 presidential election.
Any deal will still have to pass both the Republican-controlled House of Representatives and will need to gain 60 votes in the Democratic-controlled Senate. Some conservative House Republicans have already objected to the bill. On Twitter Saturday night, Rep. Chip Roy (R-Texas) wrote, “I do not like the ‘deal’ as I understand it from the cheerleading so far… I will have more to follow once I see more details.”
In the end, President Joe Biden, though he long said he would not negotiate on government spending alongside the debt ceiling, wound up doing just that and, according to The New York Times, reportedly agreeing to both short-term discretionary spending caps and new limits and work requirements for social programs like food stamps and the Temporary Assistance for Needy Families (TANF) programs. House Republicans, meanwhile, relented on several demands to roll back Democratic policies including changes to Medicaid.
The announcement of a deal defuses longstanding fears about a potential default, which could have led to significant market volatility, spikes in interest rates, and an increase in unemployment. It indicates, too, that the debt ceiling remains a useful bargaining chip for the minority party, adding to years of brinksmanship on this issue, especially by Republicans.
The agreement also reportedly includes new rules around permitting and reviews for the construction of energy projects.
The debt ceiling has become a blunt political weapon
The standoff that led to this deal is only the latest brinksmanship over the debt ceiling. Because it is must-pass legislation, the debt ceiling has been used by both political parties as leverage for policy demands or as a messaging tool. In the last few decades, however, Republicans have become more aggressive in how close they’ve been willing to push the US toward a default to secure policy wins.
In 2011, the country came within 72 hours of defaulting as congressional leaders worked to ink a deal that included a debt ceiling increase paired with spending caps. This year, a similar scenario played out yet again as Republicans refused to approve a standalone debt increase.
As one former Republican staffer previously told Vox, many in the GOP saw the 2011 debt ceiling negotiations as successful and as one of the few opportunities the party had to push the spending cuts in a time of divided government.
“I think one of the takeaways was that running this play worked, you know, we were able to actually achieve something and use this moment for leverage,” said Brendan Buck, a staffer to House Speaker John Boehner in 2011.
This year’s outcome seems to reaffirm that approach. Although Republicans were forced to make their own serious concessions as part of the discussions, they did secure some key wins that further curb access to social programs, and that roll back investments in non-defense spending.
That said, the question remains whether McCarthy will be able to cobble together a majority of his caucus to support the deal.
The outcome of this year’s negotiations sends a message that the debt ceiling will likely continue to be used as leverage by both parties, and has reignited lawmaker conversations about proposals to change it or get rid of it altogether. (Vox has covered those proposals here and here.) Both parties’ concerns about concessions were ultimately outweighed, however, by the fear of a default and the potential of a catastrophic economic crisis. If the agreement passes, it will put the debt ceiling threat out of reach till after the next election.
