Leaders Agree on Debt Deal, House and Senate Could Vote Soon

Late yesterday evening the White House announced that the President and
Congressional leaders had signed off on an agreement to resolve the debt
ceiling issue.  With time running out before tomorrow’s deadline, both
the House and Senate will be rushing to pass the agreement.  Guiding the
agreement through each chamber will not be easy, with reservations
strong on both the left and the right.

The mechanics of the agreement are fairly complicated.  Immediately upon
enactment, the debt ceiling would be increased by $900 billion.  This
would be offset by approximately $1 trillion in cuts and caps to
discretionary spending over the next decade, with $350 billion
coming from cuts to the Pentagon budget and the rest coming from
non-defense accounts.

A second increase in the debt ceiling would be authorized after a
special committee established by the bill has a chance to propose
further deficit reductions.  The bipartisan committee, which would
include six members from each party, would be tasked with finding $1.5
trillion in savings and reporting their recommendations to Congress by
November 23rd of this year.  Congress would then be required to hold an
up or down vote on the recommendations within a month.  If the
recommendations passed, the debt ceiling would be raised by a
corresponding $1.5 trillion.  If they failed, it would be raised by $1.2
trillion and would be offset by automatic cuts triggered by the failure
of the committee plan that would go into effect in 2013.  These
automatic cuts would be split evenly between defense and non-defense
accounts and more importantly would shield Medicaid and other programs
serving vulnerable populations from cuts.

The deal includes no new revenue.  At the same time, it does not
specifically forbid the special committee from including revenue in its
$1.5 trillion in recommendations.  Essentially the revenue issue, which
was the source of so many breakdowns in negotiations between the two
parties, has been deferred for the time being.  Likewise while Medicaid
and other entitlements and mandatory programs serving vulnerable
populations are protected under this agreement, they could also be
targeted by the special committee.

The House could take up the deal as soon as today with the Senate
presumably following suit soon thereafter.  It is expected to have a
tougher time passing the House where opposition from Tea Party-aligned
members as well as liberals will make it difficult to round up 216
supporters.

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