Skip to main content

Biden Signs Debt Limit and Budget Deal Into Law

President Biden and Speaker McCarthy reached an agreement in late May to raise the federal government’s debt limit and sets caps on annual government funding levels for the next two fiscal years, which was signed into law by President Biden on June 3. The debt limit suspension runs through January 1, 2025, past the next congressional and presidential elections.  

The law also allows for a 3.3 percent increase in defense spending (up from $858.4 billion to $886.3 billion, matching the amount in President Biden’s budget) for fiscal year 2024. It caps nondefense spending that is authorized via annual funding bills at $703.7 billion, a 5.4 percent cut compared to the current fiscal year (2023). However, according to both sides, there’s an unwritten agreement to repurpose unspent COVID-19 relief funds, adjust amounts dedicated to the Internal Revenue Service, and rescind unused budget authority within other mandatory spending programs to permit the total level for nondefense discretionary spending to remain roughly even to the current fiscal year. For fiscal year 2025, annual defense and nondefense spending would increase about 1 percent from the fiscal year 2024 level.  

The law also provides a mechanism to lessen the likelihood of a government shutdown, allowing for a continuing resolution with 1 percent across the board cuts if lawmakers fail to pass, by the end of the calendar year, the annual funding bills consistent with the budget caps in the bill. This provides an incentive for defense hawks to support passage of nondefense appropriations, or otherwise face a substantial decrease in defense spending from the agreed-upon caps.  

Finally, the law includes additional policy provisions: adjustments to work requirement rules (and exemptions) for the Supplemental Nutrition Assistance Program, some reforms to streamline environmental permitting for energy projects, and a statutory prohibition on extending the suspension of student loan repayments beyond this summer (when the administration had planned to end its pause).  

The good news for NARFE is that the debt limit and budget deal stayed clear of federal retirement and health benefits. And with the threat of default off the table, federal retirement annuities and Social Security benefits will continue to be delivered.    

The House passed the bill, H.R. 3746, the Fiscal Responsibility Act of 2023, by a vote of 314-117 on May 31, followed by Senate passage via a 63-36 vote on June 1, with significant bipartisan support in each chamber.