Troubling provisions to watch in the new debt limit deal

The debt limit deal that Congress passed and President Biden will sign tonight may avert the economic crisis that would be caused by the U.S. government defaulting on its payments. But it’s worth reiterating that we shouldn’t be in this deal-making situation to begin with.

“Debt limit deals” are a way to force policy change through a backdoor by holding the U.S. (and global) economy hostage. Accepting that “debt limit deals” are just business as usual every time we approach the ceiling basically means that one political party can gain access to an inordinately powerful “hack” around the normal democratic process so long as some arbitrary conditions prevail.

Republicans have a majority in just one chamber of Congress, and face a president of the opposing party. Normally, this would mean they would have to argue their case for policy changes on the floor of the House, and compromise more often than not. However, just because we were about to cross over the utterly arbitrary debt limit, Republicans magically gained enormous amounts of leverage to dictate policy—including a lot of policy divorced from the specific conversation of addressing the debt and deficits. This is not a sensible way to govern.

This deal looks significantly less harmful than the original McCarthy proposal that passed the House last month, but it still contains several worrying provisions. Notably, it still includes a concession to expand and tighten work reporting requirements for some of the most vulnerable Americans to access the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF). These should never have been part of a debt ceiling discussion.

While the deal includes new exemptions that could actually extend access to SNAP to people in certain categories (like veterans), it would needlessly still put a large number of older adults ages 49–54 at risk of losing their food stamps if they can’t meet the new burdensome requirements to report on work activities. (This is despite the fact that we know workers over 50 already face difficult working conditions and a tougher labor market than younger workers.)

Paperwork and reporting for these programs are already excessively burdensome and deny aid to those in need. The fact that the deal’s new exemptions for certain groups might actually expand receipt of food stamps just highlights the damage being done by current work requirements. They increase red tape and increase the risk of getting kicked out of much-needed safety net support—they do not boost job opportunities or employment for individuals in need. The inclusion of this provision from conservatives has nothing to do with reducing federal spending or encouraging work, and everything to do with punishing poor people.

While less severe than the original Republican proposal, the deal will also place a cap on non-defense discretionary spending at current levels for the next two years, meaning that federal spending will not keep up with inflation. This is effectively a spending cut to nearly every spending area outside of the military, from housing and child care assistance to environmental protection.

It’s ridiculous that Republicans claim to care about fiscal responsibility in this debate, but also completely took tax increases off the table in negotiations. This is despite the fact that tax cuts passed in recent years are prime contributors to the deficit, offering little to no economic benefit to the rest of us in return.

In fact, the Republicans did not just take tax increases off the table; they demanded constraints on the Internal Revenue Service’s (IRS) ability to enforce tax laws by taking away the budgetary resources needed to modernize their systems and to audit wealthy tax cheats. While Republicans didn’t get everything they wanted, the final deal will claw back some of the boost to IRS resources provided by the Inflation Reduction Act. This is essentially an attempt to return to the era of “do-it-yourself tax cuts”—something we’ve allowed for the richest Americans since the last harmful debt limit deal in 2011 decimated IRS funding.

Ultimately, we need to abolish the debt ceiling, and, at minimum, we should have had a clean debt limit increase. The administration should never have been in a position of negotiating the ability for the government to meet its basic existing obligations. As long as we have a debt limit, we will continue to risk forcing unpopular, harmful cuts to federal investment at the expense of the economic well-being of low- and middle-income people.

Short of getting votes for abolishing the debt limit altogether, we can at least have the Treasury Department start experimenting with measures that would allow workarounds in the future. For example, Treasury could issue and auction a small amount of consols or premium bonds. If Treasury begins doing so early, they could ensure that a market for these premium bonds exists before they need to be used, when the debt limit threatens to bind us again in 2025. This would make issuing them much more credible in the next debt ceiling crisis, and could shift leverage away from those attempting to weaponize the debt limit in future.