Biden-McCarthy Deal Likely To Boost Defense Spending
The debt limit extension schedule means Congress would not need to address the deeply polarizing issue again until after the November 2024 election.
President Biden and Speaker Kevin McCarthy have reached an agreement to lift the US debt ceiling for two years while cutting and capping some government spending over the same period1.
The agreement would suspend the $31.4tn debt ceiling until January 2025, allowing the government to pay its bills2.
Boost in Defense Spending
In exchange, non-defense discretionary spending would be “roughly flat” at current year levels in 2024 and would increase by only 1% in 2025. The deal is also expected to boost defense spending to about $885bn, in line with Biden’s 2024 budget spending proposal.
The debt limit extension schedule means Congress would not need to address the deeply polarizing issue again until after the November 2024 election.
If the US were to default on its debt, it would essentially stop paying the money it owed US Treasury bond holders3.
This could have far-reaching effects that are hard to fully predict: from shock waves in financial markets to bankruptcies, recession and potentially irreversible damage to the nation’s long-held role at the center of the global economy4.
Economists say consequences of a default on the national debt could include higher interest rates, a stock market crash, a recession and massive job losses5.
The probability of a default remains low, at least based on opposing lawmakers’ assurances that a deal will be done to raise or suspend the debt limit and the long odds implied by trading in certain financial markets.