President Obama announced a deal had been reached to raise the debt limit, but many of the details were still unclear and there were indications the proposal would meet opposition from both parties.
A compromise based on proposals that have been under discussion for weeks, the multi-step plan with a special committee and deadlines and “triggers” would raise the debt ceiling by more than $2 trillion — high enough so lawmakers likely won’t have to go through this exercise again until 2013.
The plan also calls for $1 trillion in savings over 10 years as a first step. Then, a bipartisan committee of House and Senate members would be formed to make recommendations later this year for up to $2 trillion more in savings, including from Medicare.
If the special committee’s work didn’t lead to congressional approval of the additional savings, deep cuts would automatically be triggered, including ones to Medicare and the Pentagon. The trigger was designed to give ample incentive to both parties to make the committee process work, lest their most treasured programs be slashed.
The plan would not require that a balanced-budget amendment to the U.S. Constitution be passed, a provision passed by the House last week. That would ensure many Tea Party Republicans wouldn’t go for it; some conservatives were also reportedly unhappy about the defense-cut trigger.
Until the details of the deal are presented and threshed out, it will be unclear who won. Greg Sargent of the Washington Post says “it apppears the GOP is on the verge of pulling off a political victory that may be unprecedented in American history. Republicans may succeed in using the threat of a potential outcome that they themselves acknowledged would lead to national catastrophe as leverage to extract enormous concessions from Democrats, without giving up anything of any significance in return.” Sargent argued the GOP could hold out longer because the Democrats needed the money more.
Under the emerging deal, President Obama can hike the debt limit in two stages — the first in exchange for equivalent cuts; the second after a Congressional committee comes up with second round of yet more cuts, including to entitlements. The talks appear close to resolving the spending cut “trigger” that would force the committee to act — without giving the GOP an incentive to deliberately sabotage its work. The remaining question is how to get it through the House. But a deal seems immiment.
Again and again, Dems drew lines in the sand that they promptly erased as the threat of default grew. A clean debt ceiling hike? Dropped. Cuts to Medicare benefits? They’ll likely be in that committee’s crosshairs. The insistence on revenue hikes? Withdrawn.
What make this all the more remarkable is that throughout this process, Republicans themselves conceded not just that a debt ceiling hike would be disastrous for America, but also that it was inevitable. Yet they were still able to use the threat of default as leverage. How?
The simple answer: Dems weren’t prepared to allow default — no matter what. Republicans, by contrast, treated the debt ceiling hike as a necessity, but one that had to happen on their terms.
But just because something is touted as a victory doesn’t mean that it is. If the Republicans are determined to give away the store, the leadership would present it as a good deal. But Scribd has the text of John Boehner’s summary of the deal, the bullet points of which are reproduced below. The readers can judge for themselves, from the documentation available, who “won” the negotiations.
TWO-STEP APPROACH TOHOLD PRESIDENT OBAMA ACCOUNTABLE
Emerging framework has three main features:
- (1)cuts government spending more than it increases the debt limit;
- (2)implements spending caps to restrain future spending;
- (3) advances the cause of a Balanced Budget Amendment Framework accomplishes this without tax hikes, which would destroy jobs, while preventing a job-killing national default.
A. NO TAX HIKES
- Same as House-passed bill, the framework includes no tax hikes.
- Requires baseline to be current law, effectively making it impossible for Joint Committee to increase taxes.
B. CUTS THAT EXCEED THE DEBT HIKE
- Same as House-passed bill, framework includes spending cuts that exceed the amount of the increased debt authority granted to POTUS.
- Would cut & cap discretionary spending immediately, saving $917B over10 years (certiﬁed by CBO) & raise the debt ceiling by less – $900B – to approximately February.
- Before debt ceiling can be raised, Congress and the president must enact spending cuts of a larger amount ﬁrst.
C. CAPS TO CONTROL FUTURE SPENDING
- As in House-passed bill, framework imposes spending caps that would set clear limits on future spending & serve as barrier against gov’t expansion while economy grows.
- Failure to remain below these caps triggers automatic across-the-board cuts (“sequestration”).
- Same mechanism used in 1997 Balanced Budget Agreement.
D. BALANCED BUDGET AMENDMENT
- Same as House-passed bill, framework requires both House & Senate to vote on a BBAafter Oct. 1, 2011 but before the end of year.
- Similar to House-passed bill, framework authorizes POTUS to request second tranche of debt limit increase of $1.5T if:
- Joint Committee cuts spending by greater amount than the requested debt limit hike,OR
- A Balanced Budget Amendment is sent to the states.
- Creates incentive for previous opponents of a BBA to now support it.
E. ENTITLEMENT REFORMS & SAVINGS
- Same as House-passed bill, framework creates a 12-member Joint Committee required to report legislation by November 23, 2011 that would produce aproposal to reduce the deﬁcit by at least $1.5T over 10 years.
Each chamber would consider Joint Committee proposal on an up-or-down basis without any amendments by December 23, 2011.
- If Joint Committee’s proposal is enacted OR if a Balanced Budget Amendment issent to the states, POTUS would be authorized to request a debt limit increase of$1.5T.
F. ENTITLEMENT REFORMS & SAVINGS
- Sets up a new sequestration process to cut spending across-the-board – and ensure that any debt limitincrease is met with greater spending cuts – IF Joint Committee fails to achieve at least $1.2T in deﬁcit reduction.
- If this happens, POTUS may request up to $1.2T for a debt limit increase, and if granted, then across-the-board spending cuts would result that would equal the difference between $1.2T and the deﬁcit reduction enacted as a result of Joint Committee.
- Across-the-board spending cuts would apply to FYs 2013-2021, and apply to both mandatory & discretionary programs.
- Total reductions would be equally split between defense and non-defense programs.
- Across-the-boardcuts would also apply to Medicare.
- Other programs, including Social Security, Medicaid, veterans, andcivil & military pay, would be exempt.
- Sequestration process is designed to guarantee that Congress acts on the Joint Committee’s legislation to cut spending.
Several items deserve closer inspection. The first and most important is whether Boehner’s claims of “no taxes” and “real savings” are true. The second and arguably more important is how the debt deal affects the relative power relationship between the movement which seeks to reduce the size of government to a manageable and affordable level or whether it simply provides a speedbump on the way to an even larger socialistic state.
Assuming the cuts and the lack of tax hikes are real, the question is why, as Sargent says, Obama lost when he had the Senate, the White House and the media at his back. One possibility is that he ceded the initiative early on to the GOP. He never had a plan, simply the belief that he could force the GOP to surrender on his terms by threatening a government shutdown. If, as Sargent says, the president eventually realized that his political opponents had a greater will to run the risk than it would knock the floor out from under him.
But the devil is in the details and it will be interesting to see which side fared better in the standoff.