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Nation’s debt limit bill more a financial reprieve than resolution

Last-ditch negotiations to spare the nation a first-ever debt collapse resulted in Congress passing a legislative remedy that attracted bipartisan support. But exactly what the bill known as the Fiscal Responsibility Act actually accomplished and its effects on America’s people is still largely unknown.

Instead of a final resolution on America’s borrowing ability, the enacted bill provides a two-year window for the Treasury Department to borrow – as needed – funds to pay the nation’s already more than $31 trillion of debt. When January 2025 arrives, a new session of Congress will face the deferred problem. Until then, according to the Congressional Budget Office, cutbacks on discretionary spending would result in a drop in projected budget deficits of about $4.8 trillion over the next decade, and a savings of $0.5 trillion in interest.

On June 2, President Joe Biden briefed the nation in a televised appearance.

“No one got everything they wanted, but the American people got what they needed,” said the President. “We averted an economic crisis, an economic collapse. We’re cutting spending and bringing the deficits down at the same time… [O]ver the next ten years, the deficit will be cut by more than $1 trillion. And that will be on top of the record $1.7 trillion — $1.7 trillion I already cut the deficit in my first two years of office”

“We’re on a much more fiscally responsible course than the one I inherited when I took office,” Biden added. “When I came to office, the deficit had increased every year the previous four years. And nearly $8 trillion was added to the national debt during the previous administration.”

Connecticut U.S. Senator Richard Blumenthal characterized the new law more candidly. “It could have been absolutely devastating and I think the nation has dodged a bullet.”

For millions of Americans, however, a ‘financial bullet’ will hit home soon – especially for Black Americans, other people of color, and the poor.

“The deal avoids the calamity of default, but weakens environmental protection, IRS capacity needed to collect revenue, and adds burdensome requirements for Americans seeking public assistance,” stated Derrick Johnson, NAACP President and CEO. “The debt ceiling should never be used to pass legislation that would fail to stand on its own merit.”

For example, 45 million people now carrying $1.7 trillion in student loans will resume monthly payments, including interest charges, beginning in late August. That monthly payment translates into an average of $393, according to the College Investor’s analysis of updated research by the Federal Reserve Bank of New York. This report also states that 45 percent of borrowers still grapple with growing debt balances.

“There’s some concern now that, as those loan repayments restart at the end of August, you’re going to see higher delinquency rates on credit cards and other types of loans. That is one of the big concerns I think economists are paying close attention to,” Michael Jones, an economics professor at the University of Cincinnati, said in a recent interview with New York Magazine.

Additionally, the enacted bill imposes new work requirements for older Americans ages 50-54 receiving food stamps, technically known as the Supplemental Nutrition Assistance Program or SNAP. Until now, work requirements for food stamp recipients affected those aged 49 or younger.

According to the Center on Budget and Policy Priorities, this change will harm its already financially-challenged population:

“Beginning October 1, 2023, almost immediately after the first change would take effect, the work-reporting requirement would expand further to also apply to 51- and 52-year-olds; it would then expand to apply to 53- and 54-year-olds beginning October 1, 2024. Once fully phased in, this requirement would remain in place until October 1, 2030.”

“We estimate that almost 750,000 older adults aged 50-54 would be newly subject to SNAP’s work-reporting requirement and at risk of losing benefits under this bill,” continued the Center. “Nearly half (48 percent) of those who would be newly at risk of losing SNAP are women.”

Long-time older American advocates like the National Council on Aging (NCOA)made plain their opposition to this new food stamp requirement.

“NCOA appreciates that the agreement protects Medicare, Social Security, and Medicaid, which serve as the bedrock of retirement and health security for tens of millions of Americans, said Ramsey Alwin, its President and CEO. “However, the agreement fails to include revenue to reduce the deficit by requiring wealthy Americans and large corporations to pay their fair share. We live in the same society, and we all need to contribute to it.”

Alwin makes an important point. Unfortunately, public policy trends still tend to shortchange the millions of people who do most of the living, working, and dying in this country. This lack of equity – specifically racial equity – ought to be addressed at every level of government.

Charlene Crowell
Charlene Crowell

Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at [email protected].

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