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Tracking the Debt Deal

Here’s what we know on the Biden/McCarthy deal to suspend the debt ceiling for two years.

President Joe Biden addresses the nation from the White House in Washington, D.C. on the debt ceiling agreement on May 28, 2023. Source: White House
President Joe Biden addresses the nation from the White House in Washington, D.C. on the debt ceiling agreement on May 28, 2023. Source: White House
SLGS Window Reopens

On Monday, June 5, the U.S. Department of Treasury announced it would resume sales of state and local government series (SLGS) securities effective June 5, 2023, at 12 Noon ET.

On Saturday, May 27, the White House announced a tentative deal to suspend the federal borrowing limit and reduce federal spending for two years. Legislative text followed shortly thereafter on that Sunday. The proposal would suspend the debt ceiling until January 1, 2025— making it one of the first priorities for the 119th Congress.

Treasury Secretary Yellen had identified June 5, 2023, as the date by which Congress must act to address the debt ceiling in order to avoid potential market risks. Negotiators and proponents of the deal rushed to ensure its swift passage. The House and Senate passed the bill onto the President’s desk by the evening of Thursday, June 1.

Official Title

An act to provide for a responsible increase to the debt ceiling.

Short Title

“The Fiscal Responsibility Act”

What’s Included

DefenseNon-DefenseTotal
FY 2024$886.349 B$703.651 B$1.590 T
FY 2025$895.212 B$710.688 B$1.606 T

Topline for Bond Lawyers

Addressing the federal debt limit in a timely manner is critical to the health of financial markets, including the municipal market. The included budget caps are likely the biggest focus for market participants. While the topline budget numbers represent slight increases in nominal terms, the growth caps will likely mean cuts in real dollars for federal programs when accounting for higher than normal rates of inflation. The caps do not target mandatory spending, such as the tax-advantages afforded to qualified municipal bonds, but they may put downward pressure on future federal grant opportunities available to municipal issuers and borrowers.

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