Tuesday, August 02, 2011

The Infamous Bipartisan Debt Deal Is Finalized

Aug 2: Following weeks of debate on the highly controversial issue of raising the United States debt ceiling, a deal was finally reached on Sunday (July 31), and the U.S. House voted in bipartisan fashion, 269-161, to approve the measure last evening (August 1). The bill, the Budget Control Act of 2011 (S.365), was voted on in the U.S. Senate today (August 2) and also passed with a bipartisan vote of 74-26. The President signed the bill shortly following the Senate approval. Below, we have included excerpts from summaries released by the White House and House Republicans, because there is different emphasis and interpretations by both.
    A White House fact sheet indicates that the "Bipartisan Debt Deal: A Win for the Economy and Budget Discipline" as follows:
  • Removes the cloud of uncertainty over our economy at this critical time, by ensuring that no one will be able to use the threat of the nation's first default now, or in only a few months, for political gain;
  • Locks in a down payment on significant deficit reduction, with savings from both domestic and Pentagon spending, and is designed to protect crucial investments like aid for college students;
  • Establishes a bipartisan process to seek a balanced approach to larger deficit reduction through entitlement and tax reform;
  • Deploys an enforcement mechanism that gives all sides an incentive to reach bipartisan compromise on historic deficit reduction, while protecting Social Security, Medicare beneficiaries and low-income programs;
  • Stays true to the President's commitment to shared sacrifice by preventing the middle class, seniors and those who are most vulnerable from shouldering the burden of deficit reduction. The President did not agree to any entitlement reforms outside of the context of a bipartisan committee process where tax reform will be on the table and the President will insist on shared sacrifice from the most well-off and those with the most indefensible tax breaks. 
    According to the White House summary the bill will:
  • Immediately enacted 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction; balanced between defense and non-defense spending.
  • President authorized to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013.
  • Bipartisan committee process tasked with identifying an additional $1.5 trillion in deficit reduction, including from entitlement and tax reform. Committee is required to report legislation by November 23, 2011 [the day before Thanksgiving Day], which receives fast-track protections. Congress is required to vote on Committee recommendations by December 23, 2011.
  • Enforcement mechanism established to force all parties -- Republican and Democrat -- to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 -- split 50/50 between domestic and defense spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.  
    The White House summary also emphasizes that: "The deal puts us on track to cut $350 billion from the defense budget over 10 years; The enforcement mechanism would not be made effective until 2013, avoiding any immediate contraction that could harm the recovery; The deal provides specific protection in the discretionary budget to ensure that the there will be sufficient funding for the President's historic investment in Pell Grants without undermining other critical investments; Any recommendation of the Committee would be given fast-track privilege in the House and Senate, assuring it of an up or down vote and preventing some from using procedural gimmicks to block action; To Meet This Target, the Committee Will Consider Responsible Entitlement and Tax Reform. This means putting all the priorities of both parties on the table – including both entitlement reform and revenue-raising tax reform."
    The White House said, "The deal is designed to achieve balanced deficit reduction, consistent with the values the President articulated in his April Fiscal Framework. The discretionary savings are spread between both domestic and defense spending. And the President will demand that the Committee pursue a balanced deficit reduction package, where any entitlement reforms are coupled with revenue-raising tax reform that asks for the most fortunate Americans to sacrifice. . . The enforcement mechanism in the deal exempts Social Security, Medicaid, Medicare benefits, unemployment insurance, programs for low-income families, and civilian and military retirement."
    House Republican Speaker John Boehner (R-OH) issued a summary saying, "The final agreement to cut spending and avoid default meets Republicans' criteria to (1) cut government spending more than it increases the debt limit; (2) implement spending caps to restrain future spending; and (3) advance the cause of a Balanced Budget Amendment -- all without tax hikes on families and job creators.  It is largely consistent with the bill House Republicans passed last Friday [July 29], and reflects the principles of Cut, Cap, & Balance."
    The Republican summary emphasizes that, "As further protection against any tax hikes, the Joint Committee of Congress (described below) will be scored on a current-law baseline.  The committee would have to raise taxes by more than $3.5 trillion above today's rates before it would begin to count as 'deficit reduction.'  Since that is unlikely, there is little chance the Joint Committee will produce a bill that increases taxes."
    The Republican summary indicates, "The bill would cut and cap discretionary spending immediately, saving $917 billion over 10 years – as certified by the nonpartisan Congressional Budget Office CBO) – and raise the debt ceiling by less – $900 billion – to approximately February. Congress must vote to cut spending FIRST.  Then, the President may ask for debt authority of up to $900 billion, which will be subject to a vote of disapproval by the House and Senate that can be vetoed by the President."
    Regarding the "Balanced Budget" issue, the Republican summary indicates, "The bill advances the cause of a Balanced Budget Amendment by requiring the House and Senate to vote on the measure after October 1, 2011 but before the end of the year, allowing the American people time to build sufficient support for this popular reform. This is the same as the House-passed bill.  Also, similar to the House-passed bill, the measure authorizes the President to request a second tranche of debt limit increase of $1.5 trillion if the Joint Committee's proposal is enacted OR if a Balanced Budget Amendment is sent to the states."
    One of the key elements of the deal is the 12-member Joint Committee of Congress [a.k.a. the Super Committee] that is required to report legislation by November 23, 2011, that would produce a proposal to reduce the deficit by another $1.5 trillion over 10 years. House and Senate Republicans would each appoint 3 members to the Committee. Each chamber would consider the proposal of the Joint Committee on an up-or-down basis without any amendments by December 23, 2011. Many observers predict the Super Committee will result in another deadlock because their is no tie-breaking mechanism and the mandatory across-the-board cuts will be enacted.
    If the Joint Committee fails to achieve at least $1.2 trillion, then the President may request up to $1.2 trillion for a debt limit increase. The deal includes an automatic sequester on certain spending programs to ensure that -- between the Committee and the trigger -- that at least an additional $1.2 trillion in deficit reduction by 2013. If the Joint Committee recommendations are not implemented then across-the-board spending cuts would apply to FYs 2013-2021, and apply to both mandatory and discretionary programs. The final agreement specifies that total reductions would be equally split between defense and non-defense programs. The across-the-board cuts would exempt Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side.
    Access the White House fact sheet (click here). Access a video and the President's remarks (click here). Access the complete House Republican summary (click here). Access the 74-page final version of S.365 (click here). Access legislative details for S.365 including the roll call votes (click here). [#All]

No comments: