The tentative debt ceiling agreement may affect you more than you think

President Joe Biden and House Speaker Kevin McCarthy (R-California) reached a tentative deal over the weekend to raise the US debt ceiling, sparking a glimmer of hope through the fiscal cloud that had hung over DC A potential default, which many economists consider catastrophic. Here's what you need to know about the deal.

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Basics of the debt ceiling deal

The debt ceiling is simply the maximum amount that the US government can legally owe. The current credit limit is a whopping $31.4 trillion. This number was reached in January.

In an interesting twist, the proposed deal includes a two-year suspension of the debt ceiling, rather than just raising it. This would mean that the contentious question of the national debt ceiling would remain off the table until after the 2024 presidential election.

A bipartisan effort with significant implications

If that deal gets the approval of lawmakers on both sides of the aisle, it would give the federal government the ability to borrow money to pay its bills through 2025. However, the path to gaining this support is not without its challenges.

The proposed deal brings with it a slew of provisions, including several Republican-favored spending cuts and increases in defense and veterans spending.

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Neither the Republicans nor the Democrats got exactly the deal they wanted, so both parties will have to sell their tougher members if they agree to this proposal.

The deal's impact on programs and services

One of the salient aspects of this debt ceiling agreement is full funding for veterans' medical care, a provision consistent with Biden's proposed 2024 budget. Revisions to the Supplemental Nutrition Assistance Program (SNAP, or “food brands” as they're commonly known) are also proposed.

At the same time, the deal includes some funding cuts. These include rolling back hiring for the Internal Revenue Service and recovering an estimated $30 billion in unspent COVID-19 relief funds.

controversies and consequences

The specter of a possible default poses the risk of significant global economic disruption should the deal fail.

Experts warn of the consequences of such a situation, which could range from an international financial crisis to a domestic recession. A domino effect that would likely lead to job losses, increased borrowing and possible erosion of household wealth.

The conclusion

A possible deal on the debt ceiling has been reached between House Speaker Kevin McCarthy and President Joe Biden. The deal would save some spending, but not nearly as much as Republicans initially wanted. If the deal is approved, the debt ceiling would be removed for the next two years.

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Photo credits: ©iStock/Douglas Rising, ©iStock/wildpixel

What the interim debt ceiling agreement means for you post appeared first on the SmartAsset blog.

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