Republicans and Democrats thankfully came together on a last-minute deal to suspend the Debt Limit and avoid catastrophic default on the country’s financial obligations. There has been extensive coverage of the terms of this compromise, The Fiscal Responsibility Act of 2023 (HR 3746).  However, little has been written about the underlying takeaways.  Does the deal signal a new receptiveness to bipartisanship and middle ground solutions?  Does it move the needle in terms of actually addressing deficits, the national debt, and financing the federal government?  Or is it simply a variation of hyper-partisan politics—a fig leaf—that does nothing to actually solve problems, while allowing both sides to declare a measure of victory?  

Let’s address these questions and explore the takeaways of what appears to be a promising departure from hyper-partisan politics.

1. The Fiscal Responsibility Act of 2023 (HR 3746) is a compromise developed through true bipartisan negotiations.

The compromise on suspending the Debt Limit was not developed by one of the political parties and then foisted on the other.  Both sides agreed early on that a default on financial obligations must be avoided.  They recognized that neither party had the power to impose its will.  They further recognized that Speaker McCarthy and President Biden were the two key parties to lead the negotiations.  President Biden and his negotiators could represent the Democrats in the House and Senate; while Speaker McCarthy and his negotiators could represent the Republicans.  Senate Minority Leader Mitch McConnell recognized that Speaker McCarthy had the biggest challenge in keeping his caucus together, especially with the strong presence of The Freedom Caucus.  

It is also important that the negotiators chosen by each side were low key and pragmatic in nature.  

Another important factor is that President Biden and Speaker McCarthy engaged in ongoing dialogue about the status of the negotiations, including what they could and couldn’t live with in terms of compromise. Once the negotiations began in earnest, both Speaker McCarthy and President Biden refrained from using their party’s hyper-partisan narratives to blame or demonize one another or the other side. 

2. The vote on HR 3746 reflects strong bipartisan support, with opposition mostly coming from the far right and far left of each party.

HR 3746 passed the House of Representatives by a vote of 314 to 117. There were 149 Republicans (68% of Republicans) and 165 Democrats (78% of Democrats) who voted for the bill.  There were 71 Republicans and 46 Democrats who voted against it.  Of those who voted against the bill, most of the “no” votes from Republicans came from the House Freedom Caucus; and of the Democrats who voted against the bill, the bulk came from the Congressional Progressive Caucus.   

As to the Senate, the bill passed by a 63-36 margin.  46 Democrats and 17 Republicans voted to pass the bill, while 31 Republicans, 4 Democrats, and Independent Senator Bernie Sanders voted to oppose the bill.  While a majority of Republican Senators voted against the bill, enough voted “aye” to enable it to overcome a filibuster and easily pass.  Democrats voting against the bill were liberal or progressive leaning. 

The outcome of the vote is significant because it reflects a focus on finding middle ground.  Neither side caved to its more extreme caucuses or members.

3. The timing as to the development and passage of the bill indicates that both sides used the June 5th deadline to ensure the negotiated deal would not be amended or derailed.

By reaching agreement on a deal at the last possible minute, Speaker McCarthy and President Biden knew there was just enough time to consider the agreed-upon proposal, but not enough time to consider and act upon revisions to that proposal. 

In the House of Representatives, procedures were changed to limit floor debate.  On May 31 (Wednesday), a rule changed was approved.  Speaker McCarthy knew he did not have enough Republican votes to pass the rule change, but 52 Democrats voted for the change to overcome the 29 Republicans who voted against it.  Passage of the rule enabled the final House vote on the bill later the same day.

The procedure used to quickly pass the bill in the Senate also clearly shows that members were willing to cooperate on producing a timely solution.  Ordinarily the bill would have had to clear a series of procedural hurdles that, without unanimous consent, must be applied.  These hurdles would have pushed action on the bill past the Monday (June 5^th) deadline.  Instead, in exchange for agreeing to vote on the bill quickly, Senators were enabled to propose amendments to be voted on by the entire body.  A total of 11 amendments were considered and rejected.  This alternate procedure enabled a very quick vote on the bill without having to secure unanimous consent to waive procedural rules.

4. While President Biden and the Democrats relented on their demand for a “clean” Debt Limit bill, the adopted compromise provides a significant framework for the Fiscal 2024 and 2025 Federal Budgets.

President Biden and the Democrats rejected the notion of conditioning a Debt Limit extension or suspension on spending cuts or other Republican demands.  They maintained that the consequences of default were too dire to risk, and that the Debt Limit extension was about paying bills for spending obligations that were already in existence.  The proper venue for negotiating spending cuts, deficit reduction, and other fiscal matters was the annual Federal Budget process.  Biden and the Democrats signaled their willingness to negotiate and decide such matters, which for the 2024 Budget, would have to be decided by September 30, 2023. 

Rather than incur the catastrophic effects of default—which was just weeks away—on May 9 President Biden initiated a series of meetings with Speaker McCarthy. Over the next several days, these two, along with their proxies, negotiated the conditions and details for the Debt Limit suspension that was eventually enacted. 

Now that spending caps have been established for 2024 and 2025, this should simplify and expedite agreement on the Federal Budgets for these years. Also, there won’t be a battle over tax increases.  In essence, disputes over federal spending and taxes will be put off until after the November 2024 elections.  

5. The deal on suspending the Debt Limit will modestly limit federal spending over the next few years but will do very little to reduce huge annual budget deficits or the ballooning national debt.

In my 10-part series on federal spending, deficits, and the national debt, I predicted Republicans would threaten, but most likely relent on the condition of major cuts in exchange for extending the debt limit.  Instead, they would demand that spending be cut back to a prior level or to some specified metric, and that they’d be successful in flattening spending over the next few years.  I noted that Republicans would be successful in preventing any tax increases.  Thus, because spending reductions were likely to be modest, without an increase in revenue, I predicted that annual deficits would remain high, and that the national debt will continue to climb, along with interest costs.

The deal (HR 3746) suspends the Debt Limit for two years (until January 1, 2025, just after the November 2024 elections). It caps non-defense spending to current fiscal year levels for fiscal year 2024, and will allow it to increase it by 1% in fiscal year 2025.  Defense spending would not be subject to these limits. After fiscal year 2025 there would be appropriations targets for the next six years, but they would not be enforceable.  The deal also claws back unspent Covid-19 relief funds, reduces spending augmentations for the Internal Revenue Service, and temporarily expands work requirements for certain adults receiving food stamps (SNAP benefits).  Finally, there are no new taxes on individuals or corporations. 

The Congressional Budget Office (CBO), has projected the levels of discretionary (non-defense spending) and deficit reduction for the next 10 years under HR 3746.  Discretionary spending is projected to decrease by $64 billion in 2024, $107 billion in 2025, $126 billion in 2026, and eventually to $160 billion by 2033.  These annual reductions are modest, given that total discretionary spending is projected at $1.795 trillion in 2024, $1.818 trillion in 2025, and $1.858 trillion in 2026.  In terms of deficit reduction, the 2024 deficit would be reduced by about $70 billion, the 2025 deficit would be reduced by about $112 billion, and the 2026 deficit would be reduced by about $132 billion. Again, these amounts are modest, as the annual deficits for these years are projected to range from $1.57 trillion (2024) to $1.7 trillion (2026).  In terms of the total national debt, which is currently at almost $31.5 trillion, the CBO estimates that the deal could save a total of $1.5 trillion over 10 years.  Again, this is not much of a dent.

Another reason the deal is not likely to have a significant impact on deficits and the national debt is because it only caps a portion of discretionary spending (exempting defense), and because it doesn’t affect mandatory spending for such programs as Social Security, Medicare, and Health Care. These programs constitute the lion’s share of federal spending, and they are left untouched by the legislation. 

Conclusion: Bipartisan cooperation and solutions are possible, but we haven’t turned the corner on hyper-partisan blame game politics.

The compromise on the Debt Limit suspension tells us that President Biden, along with Republicans and Democrats in both chambers of Congress, know how to behave in a bipartisan problem-solving manner if they want to. True, this behavior was precipitated by a self-imposed crisis.  But once the chips were down, both sides knew enough to find the right negotiators, to lower the temperature of negotiations, and to find middle ground.  Neither side got all that it wanted.  Both sides knew how to use the clock to ensure the compromise had just enough time to be enacted, but not amended or derailed.  And, both sides adopted procedural changes to ensure their chambers acted in a timely manner.

The compromise, while averting a crisis, will do little to erase huge annual deficits and a skyrocketing national debt.  If we are to get serious about these matters, increased federal revenues must be included in the solution.  

With the upcoming elections in 2024, we can expect hyper-partisan blame game politics to be the order of the day. Still, we should recognize, encourage, and celebrate bipartisan, middle ground problem-solving whenever we see it.  Kudos to President Biden and Speaker McCarthy, along with all the House and Senate members who embraced the necessity of compromise.  May this behavior become the rule, rather than the exception, in the years ahead.