President Biden and Speaker McCarthy Strike Debt Ceiling Deal

After weeks of negotiations, President Biden and Speaker McCarthy have reached a much-anticipated compromise on the US debt ceiling. While compromises often leave both sides dissatisfied, this deal seems to have struck the right balance. Some conservative Republicans express disappointment that the cuts weren’t deeper, and similar sentiments have been voiced by some Democrats. However, Speaker McCarthy claims success, citing the prevention of new tax proposals, significant spending reductions, and the slashing of the promised $80 billion in funding to the IRS under the Inflation Reduction Act. Furthermore, the compromise includes the implementation of new work requirements for welfare recipients, as revealed by Speaker McCarthy in a recent news conference.

Dubbed the Fiscal Responsibility Act of 2023, the bill that achieves the necessary debt ceiling compromise spans around 150 pages. Speaker McCarthy humorously quipped that it wouldn’t be necessary to pass the bill to discover its contents. However, despite the one-liners, confusion is expected to linger, particularly regarding the funding of the IRS. The compromise entails a reduction of $1.39 billion in IRS funds, previously allocated under the Inflation Reduction Act. While this cut may seem relatively small, an additional $20 billion in appropriations funding for the IRS is set to be reallocated between 2024 and 2025. Thus, the total reduction in IRS funding exceeds $21 billion. Speaker McCarthy faced criticism from his own party for initially stating that he aimed to cut $1.8 billion in IRS funding—an amount that conservative Republicans wished to slash much more substantially.

The debate surrounding the anticipated army of 87,000 new IRS agents has resurfaced, with certain conservative Republicans calling on Speaker McCarthy to halt their recruitment. In light of the necessity to compromise with the White House, McCarthy asserts that his deal will prevent over $1 billion from being “wasted on hiring Biden’s new army of IRS agents.” The Republicans’ ambitious Limit, Save, Grow Act of 2023 (H.R. 2811) sought to repeal the funding for the 87,000 agents, reclaiming $71 billion out of the $79 billion earmarked for the IRS. Last year’s Inflation Reduction Act provided the IRS with billions of dollars, allowing it to go into what the Wall Street Journal dubbed “beast mode.” The law allocated roughly $80 billion to the IRS for increased enforcement, operational enhancements, customer service, and systems modernization—an amount exceeding six times the IRS’s 2022 annual budget of $12.6 billion. Of this $80 billion, a staggering $45.6 billion was allocated to enforcement. Initial reports had suggested the hiring of 87,000 new agents. Unfortunately, the phrase “87,000 new IRS agents” became a rallying cry for certain groups, and these sentiments may resurface in light of recent developments.