© Reuters. FILE PHOTO: U.S. President Joe Biden talks with House Speaker Kevin McCarthy (R-CA) as they depart following the annual Friends of Ireland luncheon at the U.S. Capitol in Washington, U.S., March 17, 2023. REUTERS/Evelyn Hockstein
By Jarrett Renshaw
WASHINGTON (Reuters) – U.S. President Joe Biden and House Republican Speaker Kevin McCarthy are nearing a deal to lift the debt ceiling that would trim some U.S. federal spending.
While talks are fluid, the general contours of the deal have taken shape. Here’s what we know so far:
A CAP ON DISCRETIONARY SPENDING
The deal under consideration would lift the debt ceiling in exchange for holding non-defense discretionary spending around current year levels.
The U.S. government will spend $936 billion on non-defense discretionary spending in 2023, the Office of Management and Budget estimates, money that goes to housing, education, road safety and other federal programs.
Keeping this figure roughly flat for two years is the equivalent of a cut, given inflationary impacts, Democrats say.
A BREATHER FOR THE 2024 ELECTION
The debt limit extension could last through 2024, which would mean Congress would not need to address the limit again until after the presidential election.
This would prevent another political showdown that rattles global investors and markets until either a Republican is elected president or Biden wins a second term.
INCREASED DEFENSE SPENDING
The deal under consideration could boost defense spending to around $885 billion, in line with Biden’s 2024 budget spending proposal.
That’s an 11% increase from the $800 billion allocated in the current budget.
MOVING SPECIAL IRS FUNDING
Biden and Democrats secured $80 billion in new funding for a decade to help the IRS enforce the tax code for wealthy Americans in last year’s Inflation Reduction Act, a move the administration said would yield $200 billion in additional revenue over the next 10 years.
The deal would transfer most of that funding, which was allocated under the act as “mandatory spending” to keep it from the political fighting of the annual budgeting process, to “discretionary spending” to be allocated by Congress.
The IRS planned to use the money to hire thousands of new agents, and the extra tax revenue they generated was expected to offset a slew of climate-friendly tax credits. Republicans have argued that auditors will eventually come after middle-class Americans, although the Treasury and Biden said they…
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