Biden signs bipartisan debt ceiling bill into law

President Joe Biden has signed a bill into law that extends the debt ceiling for two years, effectively avoiding a catastrophic debt default. 

The Fiscal Responsibility Act of 2023 suspends the public debt limit until January 1, 2025, after the 2024 presidential elections. President Biden stressed the severity of the situation, saying that a failure to reach a budget agreement would have led to a default on the national debt, an unprecedented event in American history.

The Senate passed the bipartisan budget deal with a 63-36 vote, while the House passed it by a vote of 314 to 117. The legislation includes spending caps for the next two years and incorporates conservative measures such as reclaiming around $28 billion in unspent Covid relief funds, eliminating $1.4 billion in IRS funding, and reallocating $20 billion of the $80 billion the IRS received through the Inflation Reduction Act to nondefense funding.

The bill also addresses other issues, including the resumption of federal student loan payments that were paused during the pandemic. Additionally, work requirements are introduced for individuals up to the age of 55 seeking benefits under certain assistance programs, with exemptions for veterans and homeless people. The previous threshold for work requirements was 50 years old.

Initially, President Biden refused to negotiate with House Speaker Kevin McCarthy over the debt ceiling, emphasising the need for a "clean bill" without spending cuts or policy provisions. However, McCarthy and other Republican factions demanded significant budget cuts before voting to raise the debt limit. Eventually, a partisan bill was passed in late April, tying budget cuts to raising the debt ceiling, which prompted negotiations between President Biden and Republican lawmakers. These negotiations concluded just days before the June 5 deadline.

The Treasury Department had been utilising "extraordinary measures" since January to meet the country's financial obligations, but Treasury Secretary Janet Yellen warned that the United States was at risk of breaching the debt ceiling on June 5. 

Yellen emphasised the severe consequences of not raising or suspending the debt limit, including hardships for American families, damage to global leadership, and questions about national security defense capabilities.

By extending the debt ceiling, the United States has successfully avoided a potential debt default. The bill encompasses various issues and reflects a compromise between the Biden administration and Republican lawmakers, resolving disagreements over government spending.