Debt ceiling bill heads to Senate: How the debt fight impacted both parties

The bill to raise the debt ceiling has passed through the House and now heads to the Senate for a vote. It effectively takes the threat of default off the table for the foreseeable future. Joseph Zeballos-Roig, Domestic Policy & Politics Reporter at Semafor, joins Yahoo Finance Live to discuss who won and lost in the debt ceiling fight.

Video Transcript

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- The House has passed legislation to raise the government's debt ceiling just days ahead of the June 5th ex-date. It now heads to the Senate. The bill would defer the debt limit for two years past the 2024 presidential election and cut deficits by an estimated $1.5 trillion over the next 10 years. That's according to the Congressional Budget Office.

The high stakes negotiations were a critical test for Speaker Kevin McCarthy to keep both sides of the aisle happy. Ultimately, Democrats played a larger role in its passage. 165 Democrats joined 149 Republicans to approve the bill. In a statement, President Biden acknowledged, quote, "Neither side got everything it wanted," but praised bipartisan compromise for pushing it through.

Joining us now, Joseph Zeballos-Roig, Semafor Domestic Policy & Politics reporter. They took us right to the edge-- almost to the edge. I mean, we've been here before. So how do we interpret this now, Joseph?

JOSEPH ZEBALLOS-ROIG: So as you laid out earlier, this does take the threat of default off the table for the foreseeable future through January 2025. The next step now is for the legislation to go through the Senate. The Senate leaders are looking to wrap this up as fast as possible, possibly by the end of today. So I think we're going to see some other votes there.

But I think for now, the fight is going to start moving into some of the messaging. Republicans, Democrats are eager to claim wins for both sides, for both of their respective parties. And then actually implementing the law. There's a lot of provisions here that would basically revert spending to last year's levels. And there's going to be-- the appropriators now are going to have to fill in the blanks as to how they're actually going to go about apportioning the spending and the deal.

BRAD SMITH: So who did get the better part of the deal, from your perspective, Joseph?

JOSEPH ZEBALLOS-ROIG: It does seem to me that Democrats were able to keep more of the bad stuff that they wanted out of the deal. I think Republicans are looking for a lot of brutal cuts in the original debt limit bill. It would have cut-- given the parameters they laid out themselves, it would have drastically cut domestic spending by roughly 20%. I think those cuts are going to be really alleviated now because the Democrats are able to reapportion some of the IRS money from last year's Inflation Reduction Act to spare some of those agencies from brutal cuts. Work requirements and the legislation aren't as stringent as Republicans wanted.

So it does seem to me that Republicans were able to get some modest concessions from the administration. But in the end, Democrats did get the better end of the-- better end the bargain here.

- So who does this set up for? Because obviously, this kicked the can down the road past the 2024 election. Does this set up the Democratic or Republican party stronger heading into the election?

JOSEPH ZEBALLOS-ROIG: That's an interesting question. And as of now, I think we're going to have to wait to see some of the political impacts of this fight. I think Republicans are eager to move past this fiscal fight into some of the more cultural wars. They're more eager to wage, going into the election.

Democrats, on their part, for example, they're able to say at the end of this debt fiscal agreement that they kept Social Security and Medicare cuts off the table, which is something that Biden isn't very clear about. He's not going to cut Social Security and Medicare going into a presidential election year.

So I think the political benefits, going into the presidential election, are going to be, at least for the foreseeable future, muted. But we'll see how Republicans, particularly former President Trump, DeSantis use this deal to position themselves, going into the Republican primary.

BRAD SMITH: And so even as we continue to monitor what the market reaction had been to all of the talk-- and for days, for weeks, we were discussing and monitoring, this is moving forward. Now, this is moving forward and they're finally going to have a meeting. Great. Awesome. The markets were largely looking past this and saying, yeah, they're going to get a deal done. So why is it that this continues to come up as a topic that is amazingly important to cover, especially considering the fact that we all expected them to get a deal done somehow?

JOSEPH ZEBALLOS-ROIG: I was actually thinking about that this morning, how Wall Street had always basically was banking on a deal to happen, which is why I didn't see none of the market chaos that was a feature of the 2011 debt ceiling fight. I think that the debt ceiling issue is going to continue to be an issue here in Washington simply because I think Republicans see a benefit of leveraging it, particularly under Democratic presidency, to extract policy concessions from a Democratic administration.

And on the Democratic side, I still picked up a lot of unease over actually scrapping the debt limit. They could have done it themselves when they had control of Congress and the White House. But as Senate Majority Leader Chuck Schumer said yesterday, they did not have the votes to do that through a process called reconciliation. So that basically guarantees that the debt ceiling will be a feature of Washington political and economic life for many years to come.

And even the White House, before the negotiations really kicked into high gear, they were entertaining the 14th Amendment to declare the debt ceiling unconstitutional. But there was still unease within the administration to go that route. So again, Republicans see a benefit to leveraging this for concessions. Democrats are uneasy with getting rid of it. So there is-- those lines basically are set-- are going to ensure that this stays with us for the foreseeable future of the debt limit.

BRAD SMITH: Joseph Zeballos-Roig, Semafor Domestic Policy & Politics reporter. Thanks so much for taking the time here with us today. Appreciate it.

JOSEPH ZEBALLOS-ROIG: Thanks for having me on.

BRAD SMITH: Absolutely. So with the debt ceiling bill moving forward, Friday's jobs report is now in full--