This week both the U.S. House of Representatives and Senate passed the Fiscal Responsibility Act, which will raise the limit on federal borrowing, suspend the debt limit for two years, and cut back on federal spending. The legislation received broad support in the House with 149 Republican and 117 Democrat votes. Though House majority leader Kevin McCarthy view it as a victory, the legislation actually had more Democratic support. With 71 Republicans and 46 Democrats voting against, 1/3 of Republican representatives votes against the bill compared to 1/4 of Democrats. The Senate then passed the bill 63 to 36.
A U.S. debt crisis would have unthinkable consequences making such legislation the focus of intense negotiations over spending and budget cuts across political parties. A default would delay social security benefits, furlough salaries for government and military employees, and hurt retirement and other investments. It would also have worldwide impact. The U.S. dollar continues to be the world’s reserve currency and U.S. Treasury securities foundational to markets worldwide. In 2011, political standoffs over raising the U.S. debt limit, markets continued to fall even after a deal had been reached. Without an increase in the amount the Treasure is allowed to borrow, the government would default on payments to bondholders or stop payments on contracts that had been mandated by not fully funded.
Much like in 2011, when Republicans had also gained control of the House, Republicans demanded that President Obama at the time, and now President Biden, negotiate over deficit reduction in exchange for an increase in the debt ceiling, or amount allowable for the U.S. Treasury to borrow against. Republicans blame the current president’s economic agenda, including a debt financed Covid relief bill in 2021 and a bipartisan infrastructure bill in 2022, while Democrats point to the 2017 tax cuts under President Trump. With this negotiation, Republicans were attempting to cancel Biden’s signature climate law, add work requirements on SNAP and Medicaid recipients, and impose spending limits for the next 10 years.
The current debt ceiling limit will be suspended through 2025, meaning that the threat of default will not impact the next presidential election. Budget cuts as structured in the legislation will save $1.5 trillion in spending over the next decade. Most of these funds come from limiting non-defense spending and rescinding funds to covid-relief and other programs that have basically ended. $5 billion, however, will be retained for covid vaccine and treatment development and vaccine and treatment for the uninsured. While Social Security, Medicare and Veteran’s benefits were off limits in negotiations, Democrats had to make two considerable concessions including work requirements for SNAP recipients and 25% of IRS funding meant to curtail tax fraud. Democrats also agreed to fast track a natural gas pipeline making good on a promise for which Sen Manchin (D-WV) back last year’s climate law.
Expanding work requirements for food stamp benefits, however, will impact over 750,000 people. The requirements increase the age limit for SNAP recipients. All individuals ages 18-49 AND ages 50-54 can only receive food stamps for three months in a three year period unless they work or participate in work training or community service programs 80 hours a month (or 20 hours a week). This expansion of work requirements will happen in phases between now and 2025. Changes that will impact TANF cash assistance will vary by state. Changes are set to end in 2030, though Republican Representatives and Senators remain committed to seeking more work requirements.
Recipients who have dependents or a documented disability continue to be exempted, as well as veterans and those experiencing homelessness of all ages as well as young adults ages 18-24 who aged out of foster care. Considering this, it is important to file for disability if you qualify, as well as file for legal guardianship for any primary caregiver of a grandchild or other relative under 18. Many organizations in the community can help you if you think you could be impacted by the changes in work requirements.
