US debt ceiling Bill passed: What’s in it?

The US Senate will vote on the Bill later this week, before President Joe Biden can sign it into the law. PHOTO: NYTIMES

A Bill to suspend the US$31.4 trillion (S$42.5 trillion) debt ceiling was passed by the United States House of Representatives on Wednesday.

The Bill suspends the federal debt limit through Jan 1, 2025, and allows the government to borrow unlimited sums as necessary to pay its obligations.

The 314-117 vote comes days comes ahead of the June 5 deadline, when the country was set to exhaust its borrowing limit.

The US Senate will vote on the Bill later this week, before President Joe Biden can sign it into law.

With the timeline, Mr Biden and Congress can set aside the politically risky issue until after the November 2024 presidential election.

Over the next two years, the Bill would also cap some government spending, claw back unused Covid-19 funds and speed up the permitting process for certain energy projects, among other things.

The Straits Times looks at what is in the new Bill.

1. Temporarily suspends the debt limit

As the debt limit will be suspended until Jan 1, 2025, the Treasury Department will be given the latitude to borrow as much money as it needs to pay the nation’s bills during that time period, and a few months after the limit is reached.

2. Cuts federal spending

Federal spending would be cut by US$1.5 trillion (S$2 trillion) over a decade, according to the Congressional Budget Office.

This is done by effectively freezing some funding that had been projected to increase in 2024, and then limiting spending to 1 per cent growth in 2025. It is considered a cut because it would be at a lower level than inflation.

3. Claws back Internal Revenue Service (IRS) funding

The legislation strikes at one of President Joe Biden’s biggest priorities, which is to support the IRS to go after tax cheats and ensure that rich individuals and companies are paying what they owe. But the debt limit agreement would immediately rescind US$1.38 billion from the IRS and repurpose another US$20 billion from the US$80 billion it received through the Inflation Reduction Act.

4. New work requirements for government benefits

Older Americans who receive food stamps through the Supplemental Nutrition Assistance Programme and aid from the Temporary Assistance for Needy Families Programme would be imposed with new work requirements with the legislation.

The new work requirements for food stamps apply to those aged between 50 and 54 who do not have children living in their home. The Bill would also exempt the homeless, veterans and people who were children in foster care from food-stamp work requirements.

5. Student loans and unspent Covid-19 money

Mr Biden’s freeze on student loan repayments will be put to an end with the Bill by the end of August, which will also restrict his ability to reinstate such a moratorium.

The Bill will also claw back about US$30 billion in unspent money from a previous Covid-19 relief Bill that was signed by Mr Biden.

Some of that money will be repurposed to boost non-defence discretionary spending.  

6. Speeds up approval for new energy projects

Under the agreement, there are new measures to get energy projects approved more quickly. This is done by creating a lead agency to oversee reviews and require that the reviews are completed in one to two years.

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