Where the debt ceiling debate hits you at home and in the bank

The debate over raising the debt ceiling can seem like another fracas in hyper-partisan Washington D.C., but it affects many Chicagoans.

President Joe Biden and House Speaker Kevin McCarthy negotiated a deal Sunday to raise the nation’s debt ceiling and work to gain support in Congress to pass the measure in the coming week.

The House Rules Committee endorsed the 99-page bill Tuesday on a 7-6 vote. It is expected to be sent Wednesday to the Republican-led House for a full vote. The matter would then go to the Senate, where Democrats have the majority.

Treasury Secretary Janet Yellen has said inaction would force the government into a first-ever default by June 5, potentially throwing U.S. financial markets and the world economy into turmoil.

Here are important ways the bill, if enacted, could affect you:

Welfare restrictions

Those on the government’s two main welfare programs could face expanded work requirements, but the changes have been watered down from prior Republican proposals.

Able-bodied people in the Supplemental Nutrition Assistance Program, formerly known as food stamps, who are aged 50 to 54 would be required to work to get the benefit. The government currently imposes a work requirement for able-bodied recipients aged 18 to 49. The age increase would be phased in by 2025, but the SNAP changes would expire in 2030.

Other changes would make it harder for states like Illinois to waive the work requirements at their discretion.

For the Temporary Assistance to Needy Families program, which gives cash aid to families, the bill changes rules that allow states to require fewer recipients to work.

Student loans

Biden’s pause on student loan repayments, a pandemic-era relief measure, would end in the final days of August. A Republican push to cancel the White house’s plan to waive $10,000 to $20,000 in debt for nearly all borrowers didn’t make it into the bill.

Whether Biden’s loan relief measure is constitutional is before the Supreme Court, dominated 6-3 by a conservative bloc. The court is expected to rule by the end of June.

IRS funding

Last year, the IRS received $80 billion in new funding to hire more agents and improve its notoriously poor customer service as well as increase audits on wealthy taxpayers.

But the debt ceiling bill would eliminate $1.4 billion in funding.

As part of the compromise, the White House also said it agreed to shift $20 billion from the IRS and spend it on other nondefense programs.

Medical care for veterans

The agreement would fully fund medical care for veterans at the levels included in Biden’s proposed 2024 budget blueprint, including a fund dedicated to veterans who have been exposed to toxic substances or environmental hazards. Biden sought $20.3 billion for the toxic exposure fund in his budget.

Environmental oversight

The deal puts in place a significant change in the nation’s environmental policies.

A “lead agency,” according to the bill, would be delegated to develop and schedule environmental reviews in hopes of streamlining the process.

Agencies would have one year to complete reviews. Complex projects would need to be reviewed within two years.

Social Security and Medicare

Quite simply, the measure would preserve these benefits simply by being passed.

Yet a federal debt default would call into question whether those far-reaching government programs could be funded at all. Yellen has said Treasury officials would have to make “hard choices” over whether it would send monthly payments to seniors or pay debt holders in the event of default.

Savers and investors

Passage of the bill is expected to calm financial markets and stabilize interest rates, potentially lowering the borrowing costs for companies.

A default would lead to a sharp rise in interest rates, increasing borrowing costs for consumers. Buyers of Treasury debt would demand a higher return on what previously was viewed worldwide as a no-risk investment.

Accounting and consulting firm RSM developed what it called a “shock model” that said a government default on all payments would cause the unemployment rate to surge to around 12% within six months. It also said the economy could contract by more than 10%.

Contributing: The Associated Press