President Biden has signed into law the new debt ceiling agreement that he reached with U.S. House of Representatives Speaker Kevin McCarthy (R-CA). The Fiscal Responsibility Act (FRA) suspends — as opposed to raising — the debt ceiling until 2025, after the next presidential election.
One of the more contentious focuses of the negotiations was non-defense discretionary funding for programs such as scientific research, domestic law enforcement, forest management, environmental protection, air traffic control, and nutritional assistance for mothers. The final result is a virtual freeze on this spending, facilitated in part by the reduced funding for the IRS. The spending will drop by about $1 billion in the 2024 fiscal year, compared to this fiscal year, with a 1% increase slated for the 2025 fiscal year. This amounts to a cut, as inflation is expected to grow at a rate greater than 1%. The final non-defense figures are $704 billion for 2024 and $711 billion for 2025.
More provisions from the Fiscal Responsibility Act will be addressed in the next several days.
Please feel free to reach out to your ELO Tax Advisor for more information or clarity on these changes.