Biden Signs Debt Limit and Budget Deal Into Law

President Biden and Speaker Kevin McCarthy reached an agreement in late May to raise the federal government’s debt limit and set caps on annual government funding levels for the next two fiscal years. It was signed into law 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% 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% 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% 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% 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

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