The Pros and Cons of the Debt Deal for States and Localities

UPDATE: June 1, 2023: The U.S. Senate voted 63 to 36 to approve the deal negotiated by President Joe Biden and Republican House Speaker Kevin McCarthy to avoid a first-ever default on the nation's debt. The bill, which President Biden has said he will sign, suspends the debt limit, caps some government spending, accelerates the permitting of some energy projects, and strengthens work requirements for people on food stamps and receiving welfare assistance.

While it remains unclear if the debt ceiling deal reached between President Joe Biden and Republican House Speaker Kevin McCarthy this weekend will pass Congress, cities are breathing a little bit easier.

The deal made public on Sunday, if adopted, means the nation would escape what mayors have said would be a “catastrophic” default on the nation’s debts—delaying street repairs and other essential projects, and potentially leading to massive layoffs in their communities. But the compromise between Democrats and Republicans includes proposals that local officials have opposed in the past.

Top among such proposals are strengthening work requirements for people on food stamps by requiring older, childless adults between 50 and 54 years old to work 20 hours a week or lose their eligibility. 

States will also be able to exempt fewer people from those Supplemental Nutrition Assistance Program work requirements. States can now waive the requirement for 12% of their SNAP recipients, but the proposal would reduce it to 8%, not counting the homeless, veterans and young people who had been in foster care, said Leslie Ford, an adjunct fellow at the conservative American Enterprise Institute.

“SNAP has work requirements in place,” John Giles, mayor of Mesa, Arizona, told Route Fifty in March. “No one should fear going without food. SNAP is intended to ensure families aren’t going to bed hungry.”

In addition to changes to food stamps, the proposal also strengthens work requirements for the Temporary Assistance for Needy Families program, which provides cash assistance to households with children. The proposal puts more pressure on states to get TANF recipients to try to find jobs. Many states say it will likely require them to spend more money on job training than other things intended to help recipients, such as child care or transportation. 

Another part of the deal would keep federal spending largely flat for the next two years, making it less likely that cities and states will get more help from Washington to deal with problems such as the nation’s housing crisis.

A failure to increase spending even enough to reflect inflation would mean less money for housing, said Diane Yentel, president of the National Low Income Housing Coalition, in a statement on Sunday. 

“This debt ceiling deal could lead to tens of thousands of families losing rental assistance during an already worsening housing and homelessness crisis,” she wrote.

In defending the deal, the White House argued that it preserves the Democrats’ climate measure, the Inflation Reduction Act, by getting McCarthy to back off from the $4.8 trillion in spending cuts House Republicans proposed in April.

Left out of the deal is clawing back $3 billion in funding to reconnect disadvantaged communities split apart by highways and a $5 billion cut Republicans sought from the Infrastructure Investment and Jobs Act to help state and local governments reduce greenhouse gas air pollution.

In addition, the proposal does not include taking back American Rescue Plan Act Covid relief funds cities and counties have yet to spend, which had been a major concern for the local governments.

Conservative Texas Republican Rep. Chip Roy was so unhappy the deal would not make deeper cuts he called it ”lunacy” at a press conference on Tuesday that no Republican should support.

But in weighing the pros and cons of the deal, National Association of Counties Executive Director Matthew Chase backed the bill in a statement on Monday, saying that avoiding a default would mean “delivering much-needed certainty on federal commitments to counties.” 

NewDeal, a group of progressive state and local officials, also backed passing the deal to “take the threat of economic harm off the table.” 

The National League of Cities and the U.S. Conference of Mayors, though, were still going through the 99-page bill and had no comment.

The proposal is upsetting some progressives. Rep. Pramila Jayapal of Washington, the chairwoman of the House Progressive Caucus, told CNN that the president should be concerned about whether those on the left will support the bill.

At issue for most progressives is the work requirements on food stamp recipients and a requirement that weakens environmental reviews.

The deal includes changes aimed at speeding up the federal permitting of projects, including requiring environmental impact statements under the National Environmental Policy Act to be done within two years.

Raúl Grijalva of Arizona, the top Democrat on the House Natural Resources Committee, said in a fact sheet that the proposal would weaken NEPA by limiting what projects would have to go under environmental review. The two-year timeframe would also “limit the ability to perform thorough reviews in many cases,” he said.

But the American Association of State Highway and Transportation Officials has previously supported such changes to environmental reviews to make it easier to complete road projects.

On work requirements, progressives say that almost half of older Americans with low incomes have health problems that might make it harder for them to work.

“A large share of low-income adults in this age range are in poor health,” said Sharon Parrott, president of the left-leaning Center on Budget and Policy Priorities. “Many of them will lose basic assistance they need to buy groceries because they aren’t able to meet the work-reporting requirement.”

While they were waived during the pandemic, work requirements are returning with the end of the Covid public health emergency. Able-bodied adults between the ages of 18 and 49, who do not have dependents, can again only receive food stamps for up to three months during any three-year period, unless they work or participated in job training for 20 hours a week.

The debt ceiling deal will raise the requirements, though not as much as Republicans wanted. Still, Republicans argue that toughening the work requirements will help food stamp recipients in the long run by finding jobs to get out of poverty.

“You cannot escape poverty without work,” said Rep. Dusty Johnson, a South Dakota Republican who helped negotiate the deal, on CNN. “You just can’t. It’s got to be a part of the solution. These requirements are not mean.”

Editor’s Note, June 1, 2023: This story was updated to reflect the Senate’s vote to approve the bill.