The Great Debt Debate: A Deal Nobody Will Like?

The Great Debt Debate:  A Deal Nobody Will Like? Image

Congress has less than 24 hours left to avoid what the Obama administration refers to as “Armageddon.”  Before Sunday a lot of talk and a couple votes took place, but as far as progress is concerned nothing was done to seal an agreement on the Great Debt Debate.

It took a lot of whipping from the Republican House leadership, but finally on Friday Speaker Boehner was able to put his bill up for a vote.  It narrowly passed 218 – 210.  Again, it was up to the Senate to vote on a bill that originated from the House.  And again the Senate voted it down!

After voting down another bill that came from the House only days away from “Armageddon”  Senator Harry Reid decided to do something bold – propose a budget of his own!  I say that was bold of Reid only because it has been over 800 days since the Senate has even proposed a budget, much less pass one.  Any excitement over this Democrat plan did not last long though – it failed.  Even Reid voted against it and it was his bill!  Back to square one…

A lot has been said about the madness that is going on in Washington over such a simple issue.  America is on the road to financial ruin, we have been warned by multiple credit agencies, our debt limit has been maxed out, what should Congress do?  Common sense tells you that if you have to borrow money continually to pay your bills then you should probably slash your spending.  But as we all know common sense is not so common in Washington where long-term solutions are sidelined for short-term political gains.  That mentality is exactly what got Florida Republican Senator Marco Rubio all fired up.  As Rubio explains in the video below (long but worth the time), “If my house was on fire, I can’t compromise about which part of the house I am going to save. You save the whole house, or it will all burn down.”

Now that the Senate has killed every proposal put forth to solve the debt problem (three House bills and two Senate bills) what is left to discuss?  Word has it that there is actually a bipartisan solution being worked on behind closed doors which may be why Reid killed his own bill.  What is in the agreement?  The details are a bit sketchy at this point, but the rumors hint that it will be a bill that nobody will like.  But hey – at least Reid has signed off the framework!  If the Wall Street Journal blog notes are accurate then I believe the notion that it will not be a popular solution is right on the money – at least among conservative House Republicans:

* $900 billion in the first stage of deficit reduction.

* $1.5 trillion in second stage of deficit reduction to be defined by a bipartisan special committee of lawmakers appointed by leaders of the House and Senate.

* If the special committee fails to deliver a deficit-cutting package that would trigger $1.2 trillion in cuts, half would be Defense cuts and the other half would be non-Defense cuts, exempting low-income programs Social Security and Medicaid, and only impacting providers in Medicare.

* The debt ceiling increase would be done in three phases: $400 billion initially; another $500 billion later thise year would be subject to a vote of disapproval; a third increase of $1.5 to get the rest through 2012 and would also be subject to vote of disapproval.

* There is also a provision to have Congress vote on balanced budget amendment.

* The special committee would not necessarily tackle tax reform. But Mr. Obama is threatening to veto any extension of the Bush-era tax cuts for those making $250,000 a year or more unless Congress acts on an overhaul of the tax code.

If those details turn out to be true then Boehner will face another tough sell in the House.  With the balanced budget amendment being attached I am sure he will muster up the votes though.  I suspect that the stubbornness of House Republicans over Boehner’s last bill has been an asset at the negotiation tables.  Without a BBA any bill dealing with the budget and debt ceiling does not stand a chance.  Then again targeting defense spending for cuts so heavily is certain to draw some fire.  Tomorrow should be another interesting day on Capitol Hill.

Update:  “It’s A Deal!”

The agreement would slice at least $2.4 trillion from federal spending over a decade, a steep price for many Democrats, too little for many Republicans…

House Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck, then immediately began pitching the deal to his fractious rank and file.

“It isn’t the greatest deal in the world, but it shows how much we’ve changed the terms of the debate in this town,” he said on a conference call, according to GOP officials. He added the agreement was “all spending cuts. The White House bid to raise taxes has been shut down.”

No votes were scheduled in either house of Congress before Monday, to give rank and file lawmakers time to review the package.

Update:  Reuters has more details on the elements of the deal:

* The deal would allow President Barack Obama to raise the debt ceiling in three steps. Congress would get a chance to register its disapproval on two of these, but would not be able to block them unless it musters a two-thirds vote in both the House and the Senate — an unlikely prospect.

* It envisions spending cuts of roughly $2.4 trillion over 10 years, which Congress would approve in two steps — an initial $917 billion when the deal passes Congress and another $1.5 trillion by the end of the year.

* The first group of spending cuts would apply to the discretionary programs that Congress approves annually, covering everything from the military to food inspection.

* Those programs would be capped each year for 10 years. The caps would be relatively modest at first to avoid stifling the shaky economy — spending for the fiscal year that begins October 1 would be only $6 billion below the current level of $1.049 trillion. The caps would have a greater impact in later years, when it is hoped that the economy will have recovered.

* Some $350 billion of the $917 billion total would come from defense and other security programs which now account for more than half of all discretionary spending. Republicans are resisting this idea and it is one of the few areas of dispute left.

* Automatic across-the-board spending cuts would kick in if Congress does not observe the caps in coming years.

* A 12-member congressional committee, made up equally of Republicans and Democrats from each chamber, would be tasked with finding a further $1.5 trillion in budget savings.

* That committee could find savings from an overhaul of the tax code and restructuring benefit programs like Medicare — the politically risky decisions that lawmakers have not been able to agree on so far.

* The committee would have to complete its work by November 23. Congress would have an up-or-down vote, with no modifications, on the committee’s recommendations by December 23.

* If the committee cannot agree on at least $1.2 trillion in savings, or Congress rejects its findings, automatic spending cuts totaling that amount would kick in starting in 2013.

* Those cuts would fall equally on domestic and military programs. Medicare would face automatic cuts as well, but Social Security, Medicaid, federal employee pay, and benefits for veterans and the poor would be exempt.

* The plan also calls for both the House and the Senate to vote on a balanced budget amendment to the Constitution by the end of the year. It is not likely to receive the two-thirds vote in each chamber needed for passage, but its inclusion will make it easier for conservatives to back the overall deal.