White House, Congressional leaders reach debt limit deal (Washington Post):
President Obama and congressional leaders sealed a deal to raise the federal debt limit late Sunday that includes sharp spending cuts but no new taxes, breaking a partisan impasse that has driven the nation to the brink of a potentially disastrous government default...
The agreement would raise the $14.3 trillion debt limit in two stages by as much as $2.4 trillion. It represents a victory for Obama, in that it would allow him to avoid another politically grueling and economically damaging debt-limit fight in the heat of the 2012 presidential campaign.
However, Obama failed to secure other top priorities, including fresh measures to revive the flagging recovery and an end to tax breaks for corporations and the wealthy. Obama said he would pursue those priorities later this year, when a new congressional committee would begin the search for a broader debt-reduction plan, under the terms of the deal.
“The ultimate solution to our deficit problem must be balanced,” Obama said Sunday. “That’s why the second part of this agreement is so important.”
Republicans, by contrast, won severe cuts to agency budgets over the next decade and the prospect of deeper cuts to come, delivering on the campaign promises that helped them gain control of the House in last fall’s congressional elections. Democrats also agreed to stage a vote on a balanced-budget amendment, which has become a rallying point for tea-party-aligned conservatives.
For days, the chief obstacle to a deal was the design of a mechanism to force the committee to act — or to make sure spending cuts were adopted if the committee failed. In the end, negotiators settled on a trigger that would force automatic across-the-board cuts of $1.2 trillion to agency budgets, split half and half between domestic programs and defense.
Hmm. As far as I can tell, entitlements have not been touched. That's very bad. And the potential defense cuts sound dangerously deep, too. And $2.4 trillion is a huge debt ceiling hike, enough to raise debt well over 100% of GDP if I'm not mistaken. Oh, but this sounds better:
By all accounts, it looks like a deal is about to be announced in which the debt ceiling is hiked in exchange for the promise of major spending cuts, including to entitlements, totalling at least $2.4 trillion.
Anything can happen, but 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.
Not only that, but Republicans — in perhaps the most remarkable example of political up-is-downism in recent memory — cast their willingness to dangle the threat of national crisis as a brave and heroic effort they’d undertaken on behalf of the national interest. Only the threat of national crisis could force the immediate spending cuts supposedly necessary to prevent a far more epic crisis later.
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.
So maybe there are entitlement cuts in the pipeline as part of the negotiation for the second part of the debt ceiling hike. Very good then. Still, it's sobering to think that the debt can rise to nearly $17 trillion now. A reminder of the urgency of changing fiscal course.