WASHINGTON — House Republicans are trying to exact a price from Democrats for agreeing to increase the nation’s borrowing authority and prevent the government from defaulting on the obligations it has accrued over decades. They’re arguing for their priorities and going after President Joe Biden’s in a separate bill that passed the chamber on Wednesday.
The legislation in question has virtually no chance of becoming law. But Republicans hope the bill’s passage will force Biden to the negotiating table, where they could seek concessions in return for lifting the nation’s borrowing authority and ensuring that the U.S. Treasury can fully pay its bills.
“He either has to negotiate now or we’re the only ones that have raised the debt limit,” McCarthy said after the vote.
A look at key aspects of the legislation that the House approved by a vote of 217-215.
J. Scott Applewhite
House Budget Committee Chairman Jodey Arrington, R-Texas, speaks as House Majority Leader Steve Scalise, R-La., listens at right, as House Republicans push their sweeping debt ceiling package to win over holdouts in their party, at the Capitol in Washington, Wednesday, April 26, 2023. Speaker of the House Kevin McCarthy, R-Calif., is struggling to round up the votes for the bill, which would couple an increase of the country's debt ceiling with restrictions on federal spending. A final vote on the package is likely Thursday. (AP Photo/J. Scott Applewhite)
LIMIT FEDERAL SPENDING
The bill would set federal discretionary spending at $1.47 trillion during the next fiscal year and allow it to increase only 1% annually from there, far below the rate of inflation in most years.
The cap on spending is the big-ticket item in the bill, accounting for about two-thirds of the $4.8 trillion in deficit reduction that the Congressional Budget Office says would occur over 10 years if the bill is enacted.
Discretionary spending includes things like weapons programs, servicemember pay, grants for schools that serve large shares of low-income students, rental assistance to house millions of poor and disabled, and money to fund research on cancer and other life-threatening diseases. It’s the spending that Congress approves through appropriations bills.
The House GOP bill doesn’t affect spending on Social Security and Medicare. Such spending, referred to as mandatory, accounts for about two-thirds of all federal spending.
CLAW BACK COVID MONEY
The bill would rescind all unobligated COVID relief money from six bills enacted from 2020-2022. The changes would reduce spending by about $30 billion over the next decade, according to the CBO. That’s less than 1% of the total cost of the six bills.
TARGET THE IRS
House Republicans began their tenure in the majority by passing a bill that would rescind nearly $71 billion that Congress is providing the IRS to upgrade its technology and boost hiring. They have included the same proposal in their debt limit bill.
Democrats approved the higher IRS funding on top of what Congress normally provides the agency annually through the appropriations process. The boost immediately became a magnet for GOP campaign ads in the fall claiming it would lead to an army of IRS agents harassing Americans.
The CBO has said that rescinding the IRS money actually would increase deficits by more about $120 billion over the coming decade due to the impact on the agency’s work. But McCarthy said the step is needed to “protect families and businesses from a weaponized IRS.”
J. Scott Applewhite
Speaker of the House Kevin McCarthy, R-Calif., arrives for a closed-door meeting with fellow Republicans as he pushes his sweeping debt ceiling package, at the Capitol in Washington, Wednesday, April 26, 2023. McCarthy is struggling to round up the votes for the bill, which would couple an increase of the country's debt ceiling with restrictions on federal spending. A final vote on the package is likely Thursday. (AP Photo/J. Scott Applewhite)
BLOCK STUDENT LOAN RELIEF
The Republican bill would repeal actions taken by President Biden to waive $10,000 to $20,000 in debt for nearly all borrowers who took out student loans. The bill would also prohibit the administration’s efforts to cut monthly payments in half for undergraduate loans. The CBO projects that the student loan changes House Republicans seek would save about $460 billion over 10 years.
Republicans argue that Biden is unfairly transferring the obligations of people who incurred student loan debts onto millions of American taxpayers who did not go to college or who already paid off their student loans. And the say the policy will do nothing to curb the soaring tuition rates at colleges and universities.
Biden has said the student loan forgiveness would give millions of younger Americans a little breathing room financially. It would improve their ability to plow their resources into a house, car or just basic essentials, which helps power the economy. Nearly 90% of the debt cancellation would go to borrowers who earn less than $75,000.
GOING AFTER RENEWABLES
Republicans are seeking to repeal most of the tax breaks that Democrats passed in party-line votes last year as they sought to boost the production and consumption of clean energy.
McCarthy argues that the tax breaks “distort the market and waste taxpayer money.” The White House says the tax credits are leading to hundreds of billions of dollars in private-sector investments, creating thousands of manufacturing jobs in the U.S.
Republicans dropped their efforts to strip out some biofuel tax breaks, however, after the proposed changes threatened to tank the bill. The restoration of those credits was a top priority of Republicans from Iowa and other Midwestern states where the production of alternative fuels such as ethanol play a major role in the rural economy.
Citing estimates from the Joint Committee on Taxation, the CBO projected that repealing the clean energy tax breaks would save about $570 billion over 10 years, though that amount will shrink with the decision to keep some of the biofuel breaks.
J. Scott Applewhite
House Majority Leader Steve Scalise, R-La., speaks to reporters following a closed-door meeting with fellow Republicans as Speaker of the House Kevin McCarthy, R-Calif., struggles to round up the votes for his sweeping debt ceiling package, at the Capitol in Washington, Wednesday, April 26, 2023. (AP Photo/J. Scott Applewhite)
WORK REQUIREMENTS
One of the key elements of the GOP bill is expanded work requirements for recipients of federal cash and food assistance.
Under current law, able-bodied adults under 50 and without dependents risk losing their food stamp, or SNAP benefits, if they don’t spend 20 hours a week in work-related activities. The bill would apply the requirement to those ages 50-55.
In addition, the bill would apply work requirements to able-bodied adults without dependents in Medicaid, the federal-state program that provides health insurance coverage for low-income Americans. Job training and performing community service count toward fulfilling the work requirement.
McCarthy said changes would help those affected learn new job skills and earn a paycheck while helping to fill some of the millions of job openings throughout the country. The White House said millions of people, many already working, would lose their health insurance coverage.
A Congressional Budget Office review last year of work requirements for Medicaid recipients said Arkansas was the only state where a work requirement was imposed for more than a few months. It found many of the targeted adults lost their health insurance and employment did not appear to increase. It said that while evidence was scant, research indicated that many were unaware of the work requirement or found it too onerous to demonstrate compliance.
The CBO estimates that about 15 million people could be subject to the new Medicaid work requirements each year, although many would qualify for an exemption. About 1.5 million, on average, would lose federal funding for their Medicaid coverage, and of that group, about 600,000 would become uninsured.
FOSSIL FUEL BOOST
The debt limit package includes legislation the House passed earlier this year that aims to increase domestic production of oil, natural gas and coal, and to ease permitting restrictions that delay pipelines, refineries and other projects.
Known as HR 1 to signify its importance to House Republicans, the energy bill also seeks to boost production of critical minerals such as lithium, nickel and cobalt that are used in electric vehicles, computers, cellphones and other products. Biden has described the House GOP’s legislation as a “thinly veiled license to pollute.”
INCREASE THE DEBT LIMIT
The Republican would suspend the debt limit through March 31, or by $1.5 trillion, whichever comes first. That would tee up another debt ceiling fight for early next year, just months before the November election when control of the White House and Congress will be decided.
___
-
What’s in the GOP bill to lift debt limit, cut spending
Canva
More than $1 trillion was added to the overall debt carried by consumers in 2022—an extraordinary increase not seen in over a decade. The 7% increase was fueled by elevated levels of inflation, sharp increases in consumer demand and near-full employment levels that kept already cash-flush consumers spending.
In the background, and almost certain to inform consumer borrowing behavior in 2023, is the ratcheting up of interest rates by the Federal Reserve. In its wake is a shakeup of home prices and mortgage affordability; ever-increasing interest rates on variable-rate credit cards, which now average close to 20%; and a marked increase in personal loan activity.
As part of our ongoing review of consumer debt and credit in the U.S., Experian examined representative and anonymized credit data from the third quarter (Q3) of 2019 through Q3 2022 to identify trends within balance and delinquency data for household credit categories.
The total consumer debt balance increased to $16.38 trillion in 2022, up from $15.31 trillion in 2021. The 7% increase from 2021 to 2022 was larger than the 5.4% increase in the same period from 2020 to 2021.
All 50 states and Washington, D.C., experienced increases in average debt balances in 2022. The larger increases were in the Western states, with Idaho and Utah leading the nation. Oklahoma and Connecticut had the two smallest increases in average debt last year.
Total Consumer Debt:
- 2019: $14.14 T
- 2020: $14.53 T
- 2021: $15.31 T
- 2022: $16.38 T
- 2021-2022 Change: +7%
Canva
More than $1 trillion was added to the overall debt carried by consumers in 2022—an extraordinary increase not seen in over a decade. The 7% increase was fueled by elevated levels of inflation, sharp increases in consumer demand and near-full employment levels that kept already cash-flush consumers spending.
In the background, and almost certain to inform consumer borrowing behavior in 2023, is the ratcheting up of interest rates by the Federal Reserve. In its wake is a shakeup of home prices and mortgage affordability; ever-increasing interest rates on variable-rate credit cards, which now average close to 20%; and a marked increase in personal loan activity.
As part of our ongoing review of consumer debt and credit in the U.S., Experian examined representative and anonymized credit data from the third quarter (Q3) of 2019 through Q3 2022 to identify trends within balance and delinquency data for household credit categories.
The total consumer debt balance increased to $16.38 trillion in 2022, up from $15.31 trillion in 2021. The 7% increase from 2021 to 2022 was larger than the 5.4% increase in the same period from 2020 to 2021.
All 50 states and Washington, D.C., experienced increases in average debt balances in 2022. The larger increases were in the Western states, with Idaho and Utah leading the nation. Oklahoma and Connecticut had the two smallest increases in average debt last year.
Total Consumer Debt:
- 2019: $14.14 T
- 2020: $14.53 T
- 2021: $15.31 T
- 2022: $16.38 T
- 2021-2022 Change: +7%
-
What’s in the GOP bill to lift debt limit, cut spending
Experian
- The largest percentage increases were for personal loans, where total balances grew by 18.3%, and credit card balances, which grew by 16%.
 - Balances of home-based loan types—mortgages, home equity loans and home equity lines of credit—all grew as mortgage interest rates increased.
 - Retail credit card balances declined, as consumer financing for department stores became increasingly supplemented, if not supplanted, with buy now, pay later financing.
 - In the auto financing space, consumer demand for new auto loans was abundant, as dealers sold cars as soon as they arrived on dealers' lots for much of 2022. Most cars sold for more than their manufacturer's sticker price, and auto loan balances grew by 6%. Conversely, the relatively smaller auto lease market actually fell by 23%, as inventory was diverted from the lease market to the auto loan market.
 - Finally, student loan balances declined in 2022, as eligible borrowers await the Supreme Court's decision on the Biden Administration's student debt forgiveness plan, which would cancel more than $400 billion in outstanding loans. Meanwhile, student loan payments—and the accrual of interest—have been on hold since March 2020. Additionally, loan balances were canceled for thousands of borrowers through the Public Service Loan Forgiveness program. Overall, student loan balances fell by 9.3% in 2022.
Each of these types of debt illustrates a similar picture: Inflation, which grew at a pace not seen in 40 years, played a role in increasing nominal average balances of all types of debt, more than it had in the previously low-inflation environment of the 21st century. Average credit card balances increased the most, driven by increased demand for goods and services as economic activity resumed as pandemic restrictions and supply chain disruptions eased.
Experian
- The largest percentage increases were for personal loans, where total balances grew by 18.3%, and credit card balances, which grew by 16%.
 - Balances of home-based loan types—mortgages, home equity loans and home equity lines of credit—all grew as mortgage interest rates increased.
 - Retail credit card balances declined, as consumer financing for department stores became increasingly supplemented, if not supplanted, with buy now, pay later financing.
 - In the auto financing space, consumer demand for new auto loans was abundant, as dealers sold cars as soon as they arrived on dealers' lots for much of 2022. Most cars sold for more than their manufacturer's sticker price, and auto loan balances grew by 6%. Conversely, the relatively smaller auto lease market actually fell by 23%, as inventory was diverted from the lease market to the auto loan market.
 - Finally, student loan balances declined in 2022, as eligible borrowers await the Supreme Court's decision on the Biden Administration's student debt forgiveness plan, which would cancel more than $400 billion in outstanding loans. Meanwhile, student loan payments—and the accrual of interest—have been on hold since March 2020. Additionally, loan balances were canceled for thousands of borrowers through the Public Service Loan Forgiveness program. Overall, student loan balances fell by 9.3% in 2022.
Each of these types of debt illustrates a similar picture: Inflation, which grew at a pace not seen in 40 years, played a role in increasing nominal average balances of all types of debt, more than it had in the previously low-inflation environment of the 21st century. Average credit card balances increased the most, driven by increased demand for goods and services as economic activity resumed as pandemic restrictions and supply chain disruptions eased.
-
-
What’s in the GOP bill to lift debt limit, cut spending
Experian
Balances grew for all borrowers, no matter their risk to lenders. Typically, those with very good or exceptional FICO Scores are able to finance more than those with lower scores. Nonetheless, average balances grew the most in percentage terms among those with the highest credit scores and lowest credit scores. Even those with good scores—comprising more than 35% of all U.S. consumers—saw overall average debt increase by 3.9% to $95,067 last year.
Experian
Balances grew for all borrowers, no matter their risk to lenders. Typically, those with very good or exceptional FICO Scores are able to finance more than those with lower scores. Nonetheless, average balances grew the most in percentage terms among those with the highest credit scores and lowest credit scores. Even those with good scores—comprising more than 35% of all U.S. consumers—saw overall average debt increase by 3.9% to $95,067 last year.
-
What’s in the GOP bill to lift debt limit, cut spending
Experian
Average overall debt increased among all except the oldest of U.S. consumers in 2022. Through a generational lens, 2022 echoed 2021: Debt balances held by older generations have largely leveled off, while younger generations continued to amass debt at double-digit annual rates.
Generation Z experienced a nearly 25% jump in average debt balance, which is in line with the additions of new debt the generation is broadly taking on. While this increase may seem striking, it's largely a result of milestone responsibilities such as first-ever car payments, student loans or, in some cases, mortgages. And while Gen Z takes on new debts, older generations are going through the inverse pattern of shedding debt as they pay off financial obligations they took on when they were younger.
Experian
Average overall debt increased among all except the oldest of U.S. consumers in 2022. Through a generational lens, 2022 echoed 2021: Debt balances held by older generations have largely leveled off, while younger generations continued to amass debt at double-digit annual rates.
Generation Z experienced a nearly 25% jump in average debt balance, which is in line with the additions of new debt the generation is broadly taking on. While this increase may seem striking, it's largely a result of milestone responsibilities such as first-ever car payments, student loans or, in some cases, mortgages. And while Gen Z takes on new debts, older generations are going through the inverse pattern of shedding debt as they pay off financial obligations they took on when they were younger.
-
-
What’s in the GOP bill to lift debt limit, cut spending
Canva
The U.S. continues to face a housing shortage, and rising interest rates designed to tamp down inflation are also dumping cold water on new home purchases. That's especially the case for those financed by conventional 30-year mortgages, which saw rates increase from about 3% at the beginning of 2022 to more than 6% by autumn.Â
One standout is the 13% jump in mortgage balances held by Generation Z, which may appear startling. But keep in mind that currently this generation represents less than 1% of all mortgage borrowers. As they get older and increase their incomes, their share is certain to increase.
Auto loan debt begins to stabilize
The big seller's market in 2021 was the automotive sector, and prices for both new used vehicles continued to increase in 2022. However, a combination of increasing car lot inventory and consumer sticker shock meant that loan balances didn't increase as sharply in 2022 as in 2021.
Younger generations, often purchasing their first car, have higher average auto loan balances. Older consumers, perhaps waiting a bit until their next auto purchase, saw less of an increase compared with 2021, and balances for Generation X borrowers actually fell slightly last year.
Canva
The U.S. continues to face a housing shortage, and rising interest rates designed to tamp down inflation are also dumping cold water on new home purchases. That's especially the case for those financed by conventional 30-year mortgages, which saw rates increase from about 3% at the beginning of 2022 to more than 6% by autumn.Â
One standout is the 13% jump in mortgage balances held by Generation Z, which may appear startling. But keep in mind that currently this generation represents less than 1% of all mortgage borrowers. As they get older and increase their incomes, their share is certain to increase.
Auto loan debt begins to stabilize
The big seller's market in 2021 was the automotive sector, and prices for both new used vehicles continued to increase in 2022. However, a combination of increasing car lot inventory and consumer sticker shock meant that loan balances didn't increase as sharply in 2022 as in 2021.
Younger generations, often purchasing their first car, have higher average auto loan balances. Older consumers, perhaps waiting a bit until their next auto purchase, saw less of an increase compared with 2021, and balances for Generation X borrowers actually fell slightly last year.
-
What’s in the GOP bill to lift debt limit, cut spending
Canva
Federal student loan repayments and interest remained paused throughout 2022 and are still suspended, so most federally backed student loan debts aren't growing. (The pause is still in effect, as borrowers await a court decision challenging the legality of a student loan forgiveness plan announced in August 2022.)
Credit card debt increases more sharply among younger consumers
Generation Z—the oldest of whom turned 25 in 2022—saw their credit card balances increase by 25.1% last year, although they still have the lowest average balances. Millennial card debt grew nearly as much at 23.4%, but the average balance of $5,649 among millennials is nearly twice that of Generation Z. All other generations have higher balances than they did a year ago, as well, though their growth wasn't as sharp.
Personal loan debt increases sharply as consumers consolidate revolving credit card debt
Loan balances grew among all consumers, but grew the most for the younger generations. Even the Silent Generation, the oldest of U.S. consumers, saw their usually static average personal loan balances increase by 5.1% in 2022, though their overall debt is lower than it was in 2021. Most often, personal loans are used for debt consolidation, and new loan activity has increased following interest rate hikes that have increased the cost to carry a balance on variable-rate credit cards.
Canva
Federal student loan repayments and interest remained paused throughout 2022 and are still suspended, so most federally backed student loan debts aren't growing. (The pause is still in effect, as borrowers await a court decision challenging the legality of a student loan forgiveness plan announced in August 2022.)
Credit card debt increases more sharply among younger consumers
Generation Z—the oldest of whom turned 25 in 2022—saw their credit card balances increase by 25.1% last year, although they still have the lowest average balances. Millennial card debt grew nearly as much at 23.4%, but the average balance of $5,649 among millennials is nearly twice that of Generation Z. All other generations have higher balances than they did a year ago, as well, though their growth wasn't as sharp.
Personal loan debt increases sharply as consumers consolidate revolving credit card debt
Loan balances grew among all consumers, but grew the most for the younger generations. Even the Silent Generation, the oldest of U.S. consumers, saw their usually static average personal loan balances increase by 5.1% in 2022, though their overall debt is lower than it was in 2021. Most often, personal loans are used for debt consolidation, and new loan activity has increased following interest rate hikes that have increased the cost to carry a balance on variable-rate credit cards.
-
-
What’s in the GOP bill to lift debt limit, cut spending
Experian
Debt levels have increased more than in previous years, and although the reasons are many, most fall into one of three broad categories.
- Inflation: Perhaps the most obvious explanation, the 8% increase in consumer prices from September 2021 through September 2022 broadly fed all types of debt balances, from simple grocery store credit card swipes to new mortgages for homes with much higher price tags.
- Interest rates: The Federal Reserve, in its efforts to calm inflation, embarked on an interest rate increase campaign throughout 2022, raising the key fed funds rate from a rock-bottom 0.25% to more than 4% by September. While not all types of borrowing are impacted by Fed rate hikes the same way, credit cards tend to bear the most immediate and drastic impact.
- Consumer demand: The U.S. and the world largely reopened in 2022 after more than a year in economic "hibernation" due to the global pandemic. Broadly, more consumers started buying up goods and services they were deprived of in 2020 and 2021. Moreover, bank account balances remained relatively flush, thanks to government stimulus payments many consumers socked away, and unemployment remained low, which kept household incomes stable if not rising for much of the year.
Each of these factors is expected to cool in 2023. Inflation appears to be slowing into the new year, and consumers are beginning to show they're in fact sensitive to price increases and are purchasing less than in 2022. And Fed watchers are expecting rate increases to end by spring 2023. Assuming a mitigation of each of these three factors, debt levels aren't likely to increase as much in 2023.
Methodology: The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database that may include use of the FICO Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.
This story originally appeared on Experian and has been independently reviewed to meet journalistic standards.
Experian
Debt levels have increased more than in previous years, and although the reasons are many, most fall into one of three broad categories.
- Inflation: Perhaps the most obvious explanation, the 8% increase in consumer prices from September 2021 through September 2022 broadly fed all types of debt balances, from simple grocery store credit card swipes to new mortgages for homes with much higher price tags.
- Interest rates: The Federal Reserve, in its efforts to calm inflation, embarked on an interest rate increase campaign throughout 2022, raising the key fed funds rate from a rock-bottom 0.25% to more than 4% by September. While not all types of borrowing are impacted by Fed rate hikes the same way, credit cards tend to bear the most immediate and drastic impact.
- Consumer demand: The U.S. and the world largely reopened in 2022 after more than a year in economic "hibernation" due to the global pandemic. Broadly, more consumers started buying up goods and services they were deprived of in 2020 and 2021. Moreover, bank account balances remained relatively flush, thanks to government stimulus payments many consumers socked away, and unemployment remained low, which kept household incomes stable if not rising for much of the year.
Each of these factors is expected to cool in 2023. Inflation appears to be slowing into the new year, and consumers are beginning to show they're in fact sensitive to price increases and are purchasing less than in 2022. And Fed watchers are expecting rate increases to end by spring 2023. Assuming a mitigation of each of these three factors, debt levels aren't likely to increase as much in 2023.
Methodology: The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database that may include use of the FICO Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.
This story originally appeared on Experian and has been independently reviewed to meet journalistic standards.
