The Biden-McCarthy debt ceiling deal.

Text of the debt ceiling deal was released on Sunday.

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

Are you new here? Get free emails to your inbox daily. Would you rather listen? You can find our podcast here.

Today's read: 11 minutes.

🤝

President Biden and House Speaker Kevin McCarthy have a deal. What is in it? And who "won"? Today, we explore. Plus, a reader question about who is running for vice president.

From our advertiser: Count me as one of over 4 million people who start their day by reading Morning Brew — the free daily email covering the latest news across business, finance, and tech. Morning Brew is a great compliment to Tangle if you're looking to cover your bases outside of politics, and it's my go-to for all things business and finance. Recent headlines:

It’s giving dystopia: How personal finance advice misses the mark on the economy.
Can AI defame you? Australian mayor brings first defamation suit over ChatGPT.
Chicago man takes the debate over boneless wings to court. (Hey, it’s not all tech and business).

The best part? It’s free and only takes 5 minutes to read so that you can get all of the most relevant updates and move on with your day. Sign up for free here.

Quick hits.

Stewart Rhodes, the founder of the far-right militia group Oath Keepers, was sentenced to 18 years in prison on seditious conspiracy charges for his role in January 6. It is the longest prison sentence yet related to the riots at the Capitol building. (The sentence)
On Thursday, the Supreme Court cut back the federal government's ability to regulate wetlands under the Clean Water Act, ruling in favor of an Idaho couple who had sued the EPA. The ruling on the specific case was unanimous, though the five conservative justices went further in narrowing the scope of the Clean Water Act. (The ruling)
Gov. Ron DeSantis (R) raised $8.2 million in the first 24 hours after his presidential announcement. (The numbers)
The Texas House of Representatives voted to impeach state Attorney General Ken Paxton (R) on allegations of bribery, obstruction of justice, and misusing public funds. (The impeachment)
Turkey's President Recep Tayyip Erdoğan won a runoff election by a 52-48 percent margin, securing a third term in office. (The results)

Today's topic.

The debt ceiling deal. Days before a potential default, President Biden and House Speaker Kevin McCarthy announced an agreement to suspend the debt limit for two years. The Fiscal Responsibility Act will cut spending, speed up permitting for some energy projects, enact new work requirements for food stamps and TANF, recover $28 billion in unspent Covid money, and redirect roughly $20 billion of IRS funds to other agencies.

While party leaders have agreed to the deal, it still faces an uncertain path in the House and Senate, where some opposition has popped up on both sides of the aisle.

Biden and McCarthy are both framing the outline of the agreement as a victory. Biden is emphasizing that the deal has avoided any potential default while refusing to make major cuts to domestic spending; McCarthy is pointing to new restrictions on federal spending and an increase in some work requirements. Here are the major highlights of what made it into the deal:

Debt ceiling suspended until 2025: This is a major win for Biden, who wouldn't have to face any debt ceiling standoffs again until after his potential re-election.
Funding held flat: The deal would keep nonmilitary spending roughly flat for the 2024 fiscal year and cap any spending increase in 2025 at 1%. It also includes a provision that would force a 1% cut in spending if all 12 appropriations bills aren't passed at the end of this year.
IRS funding reduced: Last year, Biden passed about $80 billion of increased IRS funding through the Inflation Reduction Act to help increase enforcement. $21.4 billion of that funding would be cut as part of the deal, and Biden says the money would be reallocated to other domestic programs.
Covid funds: About $30 billion of unspent Covid-19 funds that were approved during the pandemic would be recovered. Congress has approved about $4.6 trillion in Covid funding since 2020.
Work requirements: Under existing law, adults up to 49 years old who don't have children must meet work requirements to receive SNAP (food stamps). The new agreement would raise that age to 54, putting an estimated 275,000 people at risk of losing their benefits, according to the Congressional Budget Office. However, Biden says new exemptions waiving the requirements for all homeless people and veterans would keep the number of people receiving SNAP roughly flat.
Student loan payments: The deal would force the Biden administration to resume collecting student loan payments on August 30, which the administration said it was already planning to do. The deal would not impact Biden's plan to forgive up to $20,000 of debt per borrower, which is currently under review by the Supreme Court.
Gas pipeline: In a surprise detail, Sen. Joe Manchin (D-WV) won approval for the remaining permits to complete the stalled Mountain Valley Pipeline, an Appalachian natural gas project that has been a Manchin priority. Neither side had disclosed the project's inclusion in the negotiations.
Permitting rules: There were some modest updates to environmental permitting rules for both fossil fuel and clean energy projects. The deal would set one- or two-year time limits on environmental reviews of projects and allow developers to go to court if agencies miss those deadlines. It also designates a lead federal agency to conduct reviews of projects. Congress will be left to resolve larger reforms.
Military funding: The deal would allow for increased spending on the military and veterans affairs in line with inflation.

“The agreement also represents a compromise, which means no one got everything they want. But that’s the responsibility of governing,” President Biden said on Sunday.

Speaker McCarthy struck a similar tone. "It is not everything everybody wanted, but I think it is a very positive bill,” McCarthy said. “We raised the debt ceiling, we negotiated in good faith with the president... There's a lot in here for both sides."

Not included in the deal were the closing of certain tax loopholes requested by the White House, the repeal of clean energy tax credits requested by Republicans, or the blocking of the White House's student debt cancellation plans requested by Republicans.

You can find our previous coverage of the debt limit here.

Today, we’re going to break down some reactions from the right and left, then my take.

What the right is saying.

The right is strongly divided on the deal, with some celebrating it as a win for McCarthy and others criticizing him for not getting enough concessions.
Some argue the deal meaningfully slows down spending and gives Republicans some wins on their agenda.
Others say Biden gave up none of his priorities, while Republicans won very little in the deal.

The Wall Street Journal editorial board said "divided government is rarely pretty, but sometimes it can yield good results."

"The deal is a significant victory for GOP priorities, in return for raising the debt ceiling that had to be raised anyway," the board wrote. Biden tried to "jam" the GOP into a clean debt limit increase, but Republicans forced him to the table when they passed the Limit, Save, Grow bill. "The lesson is that political unity pays." The deal caps non-discretionary spending at $704 billion for fiscal year 2024, a "significant cut" from the projected 2024 baseline of $757 billion.

"If the House and Senate fail to enact the 12 appropriations bills by the end of this calendar year, all discretionary accounts are subject to a 1% cut," the board added. "This automatic sequester would apply to accounts Democrats have disguised as 'emergency' (infrastructure dollars, etc.). This is protection against the Democratic Senate that wants another year-end omnibus spending blowout. The first 'regular order' budget in years would give the House GOP leverage to win more policy victories in negotiations with the Senate."

In The Daily Caller, Steve Cortes said the deal "is not everything conservatives want, but it's a great start."

Conservatives should welcome the deal, which "represents tangible success and a key starting marker for fiscal sanity in Washington," Cortes said. Republicans clawed back "tens of billions of dollars of unspent Covid allocations," which "not only saves taxpayers in the near term, but it also helps to stem the pernicious tide of inflation that was unleashed by exactly this kind of exorbitant borrowing and spending." McCarthy even realized "actual cuts in non-defense discretionary spending" as part of the negotiations.

"Historically, even when the GOP exerted control over all three bodies, debt limit raises always accompanied spending increases. But not now," Cortes said. The deal "forces Biden to begin student loan repayments again, saving taxpayers an estimated $5 billion per month. The agreement also slashes $400 million in taxpayer funds from the CDC’s 'Global Health Fund' that sent money to China and to globalist bureaucracies." None of this comes at the expense of seniors or veterans. "Understandably, many on the political Right want more," but this is the first step toward taking back the Senate and White House.

In RedState, Joe Cunningham said McCarthy "somehow did worse" than doing nothing at all.

The text of the bill "confirms that spending is frozen at Fiscal Year 2022 levels, but there doesn’t appear to be a dollar limit to the debt ceiling increase that comes along with that," Cunningham said. "Conservatives are upset about this fact, as well as just how little the White House ultimately had to give up in exchange for the increase." The savings Republicans won "pale in comparison to the one percent non-military spending increase allowed next year, much less other problematic spending initiatives like the green subsidies in the (so-called) Inflation Reduction Act."

McCarthy's initial tweet touting the deal got fact-checked, since "this debt limit deal doesn’t cut spending, it just limits how fast spending grows," Cunningham wrote. "What’s more, there are reports that every Democrat in the House – including the Progressive Caucus – is ready to vote for the deal, which should be a pretty clear sign McCarthy got rolled." Getting work requirements for social welfare "is all fine and dandy," but meaningful cuts in spending "from literally anywhere else" would make that spending a smaller problem. "A deal that increases the federal debt by $4 trillion isn’t a deal at all."

What the left is saying.

The left is mostly critical of the deal, saying Republicans took a high-risk gamble that turned up only modest changes.
Some argue that the brinkmanship has already done more harm than good.
Others say the deal was a win for both sides, though more important for Speaker McCarthy politically.

In The Washington Post, Catherine Rampell said "Congress beclowned itself."

The deal is a debt limit increase until 2025, and in exchange, "Congress would expand spending on defense and veterans’ programs; leave Social Security, Medicare, Medicaid and tax rates untouched; keep most other domestic spending roughly flat; trim funding for the Internal Revenue Service; modestly amend the permitting process for energy projects; and tweak the existing work requirements in the food-stamp program," Rampell said. "This much-ballyhooed 'deal' doesn’t seem terribly different from whatever budget agreement would have materialized anyway later this year, during the usual annual appropriations process, under divided government."

To Biden's credit, the most "objectionable ransoms" from Republicans — like "sharp cuts to safety-net programs" and "measures to effectively block all agency regulations" — are all gone. Yet China and Russia "benefited from our obvious fiscal dysfunction," portraying us as unstable and unreliable. G7 discussions were "hijacked" by concerns over a possible default. Biden had to cut his diplomatic trip short to "prevent Republicans from throwing a temper tantrum," and we may have "already incurred higher borrowing costs" thanks to the delay.

In The Los Angeles Times, Jackie Calmes said "the arsonists are taking credit for putting out the fire."

This "needless brinkmanship" has "undermined global confidence in the nation’s financial reliability and in the dollar as the world’s reserve currency, and still could spark default and a recession," Calmes wrote. "All for the relatively modest spending cuts and policy concessions McCarthy extracted, which came at some immediate cost and will do little to reduce long-term debt, especially if Republicans extend the Trump tax cuts, as they propose."

What would "make this whole mess worth it" is "adding a provision to repeal or neutralize the World War I-era law that created the debt limit in the first place." Biden and others have called this irresponsible, but "what’s irresponsible is Republicans’ weaponization of the law. They’ve perverted what was originally a fiscal reform to help Congress oversee Treasury’s borrowing, making it into a recurring hostage-and-ransom scheme — when a Democrat is president." This standoff has "actually added to the deficit" and it could still get worse, especially if Congress can't pass the deal in time.

In Bloomberg, Jonathan Bernstein said that while McCarthy and Biden both won, the deal is especially important for McCarthy.

McCarthy's "aptitude and authority as House speaker have been very much in question since he was elected to the job early this year," but this result on the debt limit might help improve his standing, Bernstein said. "Most notably, McCarthy will have proved that he can bargain on behalf of his party" and "demonstrated within the Republican conference that he is willing to take the brunt of criticisms, an important part of a party leader’s job in Congress." He was already helped by passing the Republican-only bill to kick off budget negotiations, which proved he "can count votes.”

"As for Biden, he will benefit primarily from having avoided not just the consequences of a default, the threat of which is now safely pushed back until beyond the 2024 presidential election, but the possibility of a government shutdown," Bernstein wrote. "There will still be partisan squabbling in Congress, but the deal should dramatically reduce how much casual voters will notice. And voters generally don’t like partisan squabbling."

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism, or compliments, don't unsubscribe. You can reply to this email and write in. You can also leave a comment.

This is very modest legislation, and not nearly worth the risk it created.
Politically, it is a win for McCarthy, but I don't think he got many tangible concessions.
Nothing in the deal is going to meaningfully reduce our debt or deficits.

My first reaction when I saw the outline of the deal was something along the lines of Catherine Rampell's. This is it?

This is what we risked a default for? This is what all the fuss was about? What might’ve cost us our credit rating? And what could still put us at risk of default?

"Modest" is the best word to describe pretty much everything about this agreement. Coming in, I had been critical of Republicans for leveraging the debt ceiling to get the cuts they want. And now that I see the deal, I feel even more confident in that assessment. I firmly believe that, in a divided government, they could have gotten these wins through the normal legislative process rather than a debt ceiling standoff. In a purely practical sense, this was all just a lot of bluster for very few changes, all in an extremely high-risk environment.

Politically, of course, the story is a little different. For Speaker McCarthy, I think this is a big win. Criticism from fellow conservatives aside, he is proving wrong those who said he wouldn't be able to manage a raucously divided caucus. So far, he's doing pretty well. He managed to keep Republicans together on a tough vote to spark these negotiations, and has managed to squeeze just enough out of Biden that he can hammer home some talking points to the public. More than anything, though, he’s won by projecting the image of a leader who can govern, directly take on the president, and keep House Republicans in line. In Washington, D.C., that reputation is valuable currency.

Of course, this deal is far from done. It's unlikely, but a few House or Senate Republicans who want to make a point could derail this legislation, which would make things really dicey. Treasury Secretary Janet Yellen extended the date of a potential default to June 5, but that deadline is still far too close for comfort if this bill runs into any hiccups at all.

Meanwhile, what actually got done? Pretty much the only novel idea here is the less-talked-about "administrative pay-go," which is a new requirement that federal agencies offset new costs in regulation with cost reductions elsewhere. It's an interesting concept that the Government Accountability Office (GAO) will run point on, flagging Congress for potential violations and allowing it to vote down certain regulations on a majority vote. But even this idea has a critical hook: Biden can simply veto any vote of disapproval, meaning it could serve only to elevate the debate publicly and end up being entirely toothless.

Otherwise, Manchin got a pet project approved in West Virginia, there was a small change in work requirements for SNAP, permitting reforms might speed up (which I am very happy about), and nonmilitary spending will stay flat for a year after growing astronomically over the last four. In a vacuum, the net of these changes might be a positive for the country, but at what cost? And how big a risk?

Again: Nothing in the deal will rein in our unsustainable debt, which would have required substantial changes to Social Security, Medicare or Medicaid. Gargantuan and wasteful defense spending is still going up and faces little new scrutiny. Pathways to increasing revenue were walked backwards if considered at all, with increased IRS enforcement taking a hit and tax increases (of course) entirely left out. I'm not pushing my support for any of those policy changes individually, but we all know they are the biggest and most meaningful areas where we can address our debt situation, and none were touched.

So, was it worth it? To me, the answer is a definitive no. On the one hand, maybe it’s a good thing this brinkmanship didn’t get rewarded with major concessions. On the other hand, it still seems hard to justify all the risk and hot air of the last few weeks for what we got. I suppose in this political moment I should just be happy that (for now) we appear to be on track to avoid economic calamity.

What do you think? Leave a comment or reply to this email and let us know.

Your questions, answered.

Q: I just wanted to mention something I thought was missing from the pieces you pulled to create [the edition on Tim Scott’s candidacy] as well as your own take: whether Tim Scott (or, for that matter, Nikki Haley) seriously thinks he can win the nomination (even on a long shot) or if he is really aiming to elevate his profile in order to be the actual nominee's running mate?

— Richard from St. Louis, Missouri

Tangle: This is a good callout, and probably an oversight on my part. For what it's worth: Yes, I think both Nikki Haley and Sen. Tim Scott (R-SC) are probably auditioning for VP just as much as they are running. I could see a world where Trump plucks either one as a running mate if he secures the nomination, and I think they'd both be willing to take the job. Perhaps that's why they are — so far — playing nice with each other.

At the same time, I don't think that's true of everyone in the Republican primary field. Vivek Ramaswamy will probably stay in the private sector (with a big boost in name recognition) when this is done. If former Vice President Mike Pence runs, it definitely will not be to go through another four years as Trump's sidekick. DeSantis is clearly making a bet on beating Trump, not joining him. And the other people whose hats are in the ring — like Chris Christie and Asa Hutchinson — are running explicitly as anti-Trump Republicans.

It's possible as the race develops that Haley or Scott turn a page and go on the attack, risking any potential vice presidential pathways by trying to beat Trump. But for now, yes, I think it is true they’re both exploring two paths to the White House.

Want to have a question answered in the newsletter? You can reply to this email (it goes straight to my inbox) or fill out this form.

Under the radar.

Consumer spending, the primary driver of economic growth, rose 0.8% in April, hitting another record. Americans spent more on vehicles and services such as insurance and healthcare, The Wall Street Journal reported. The increased spending came as inflation also accelerated, staving off concerns about a recession but complicating the Federal Reserve's plan to pare back interest rate hikes. Now, a potential pause in rate hikes appears less than likely. Axios's Kate Marino has the story.

Numbers.

$886 billion. The proposed military spending budget next year, under the latest debt ceiling deal.
$895 billion. The proposed military spending budget in two years, under the latest debt ceiling deal.
$860 billion. The estimated total savings in federal spending over the next 10 years if the terms of the debt ceiling agreement stay in place, according to The New York Times.
$6.6 billion. The estimated cost of the Mountain Valley Pipeline that just got approval in West Virginia.
4.5 years. The average time an environmental review takes under the National Environmental Policy Act of 1970.
1 or 2. The new cap, in years, that would be imposed on environmental reviews.

The extras.

One year ago today, we didn't have a newsletter, but I had just written a personal essay titled "We are broken" after the school shooting in Uvalde, Texas.
The most clicked link in Thursday's newsletter was our video about porn.
No thanks: 54% of Tangle said they strongly disapprove of DeSantis and are unlikely to vote for him, 22% said they somewhat approve of DeSantis and would consider voting for him, 11% said they strongly approve and were likely to vote for him and 8% said they somewhat disapprove, and would probably not vote for him.
Nothing to do with politics: Tangle is welcoming its first full-time employee today, as our long-standing newsletter editor Ari Weitzman starts his new role as Managing Editor! It's another step in the right direction as we grow in both content and quality.
Take the poll: What do you think of the debt ceiling deal? Let us know.

Have a nice day.

Researchers at Hadassah-University Medical Center in Jerusalem announced an "unprecedented achievement" in the treatment of multiple myeloma cancer, the second-most common hematological disease. The innovative treatment for the once incurable disease uses genetic engineering technology to boost a patient's immune system against the cancer. More than 90% of the 74 patients treated at Hadassah went into complete remission, oncologists said. “We have evidence of a very positive overall response rate with minimal side effects, and they are mild,” Polina Stepensky, who heads the department conducting the research, said. “These are dramatic results. This is a huge hope for patients with a disease that has not yet had a cure.” Jerusalem Post has the story.

Before you go...

Remember: We have no investors, a small team, and are up against all the divisive, partisan, sensational news outlets in the world. There are so many ways to support us — please consider taking one action to help!

📣 Share Tangle on Twitter here, Facebook here, or LinkedIn here.