Debt Ceiling Suspended Until 2025

After weeks of negotiation, President Joe Biden signed into law on Saturday a bipartisan bill to suspend the U.S. debt ceiling until January 1, 2025, avoiding a first U.S. government default.

The House of Representatives and the Senate passed the Fiscal Responsibility Act of 2023 (H.R. 3746) last week after Biden and Speaker Kevin McCarthy, R-California, reached an agreement. The Department of the Treasury warned that the government could no longer pay its bills if an agreement was not reached by June 5.

The Republican-controlled House voted 314 to 117 to approve the bill, and the Democrat-controlled Senate voted 63 to 36.

“Passing this budget agreement was critical,” Biden said in a statement Friday night. “If we had failed to reach an agreement on the budget, there were extreme voices threatening to take America, for the first time in our 247-year history, into default on our national debt. … Nothing would have been more catastrophic.”

The $31.4 trillion public debt limit is now suspended until after the 2024 presidential election.

In addition, the law requires the rescission of unspent money from past appropriations, other cuts to domestic spending and a 3% cap on increases in military spending in fiscal 2024.

It also does not permit the extension of a three-year freeze on federal student loan payments, which is set to expire on August 29.

Meanwhile, Biden’s forgiveness plan to cancel up to $20,000 in student loan debt for 40 million eligible borrowers is expected to be ruled on by the Supreme Court before the end of June. The Senate approved a House resolution last week to repeal the student loan forgiveness plan, but Biden has vowed to veto the decision.

The debt ceiling legislation also speeds up energy and infrastructure projects and raises to 54 the age that low-income earners without dependents must work to receive food aid.

In Friday’s remarks, Biden said a default would have “destroyed [the] nation’s credit rating, which would have made everything from mortgages to car loans to funding for the government much more expensive.” He argued it would have taken the country years to climb out of that hole.

“We’re protecting important priorities, from Social Security to Medicare to Medicaid to veterans to our transformational investments in infrastructure and clean energy,” Biden stated.

In the release, Biden thanked McCarthy, Senate Majority Leader Chuck Schumer, D-New York, and Minority Leader Mitch McConnell, R-Kentucky, for their partnership in negotiating the bill.

With the debt ceiling crisis averted, Congress will turn to other matters, including calls for further clarity of SECURE 2.0 retirement legislation going into effect in 2024. Last week, the Senate Committee on Health, Education, Labor and Pensions issued a letter urging the Department of Labor to prioritize implementation of certain provisions in the SECURE 2.0 Act of 2022, including those regarding employer ownership, defined benefit annual funding notices and emergency savings.

The nomination of Julie Su for Secretary of Labor, a post she is currently filling on an acting basis, is still pending approval from the full Senate. The HELP Committee approved her nomination in April.