Debt limit compromise reached; Congress to vote on bill today

WTF debt limit compromise reached hp 8.1.11

The White House, Congressional Republicans and Democrats have reached an 11th hour compromise to raise the debt limit, potentially averting an embarrassing and unprecedented default of U.S. debt obligations. The House and Senate are expected to vote on the Budget Control Act of 2011 today.

President Obama answers questions on the debt limit compromise on Sunday. PHOTO SOURCE: WhiteHouse.gov

“I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days,” said President Barack Obama on Sunday. “It will allow us to avoid default.  It will allow us to pay our bills.  It will allow us to start reducing our deficit in a responsible way.  And it will allow us to turn to the very important business of doing everything we can to create jobs, boost wages, and grow this economy faster than it’s currently growing.”

Overview of the Debt Limit Compromise

  • The compromise will raise the debt limit by at least $2.1 trillion and eliminate the need for another debt limit increase before 2013. This would ensure that Republicans cannot exploit the debt limit vote for political gain during an election year.
  • In exchange for the debt limit increase, more than $1 trillion in cuts to domestic and military spendings will go into effect over the course of 10 years. This would reduce non-defense spending to its lowest level since the Eisenhower era.
  • A bipartisan congressional committee will have until Nov. 23, 2011 to submit a plan to cut an additional $1.5 trillion from the federal budget, including tax and entitlement reforms. (Pell Grants, Social Security, Medicare, and low-income programs like Medicaid benefits are protected from such cuts. However, Medicare reimbursements to providers could be reduced.) Congress will have until Dec. 23, 2011 to approve the bipartisan committee’s spending reduction plan.
  • If Congress fails to pass the bipartisan committee’s proposal, then $1.5 trillion in cuts will be automatically triggered and split 50/50 between domestic and defense budgets.
  • Furthermore, the President would have the option to allow the Bush tax breaks to expire on Jan. 1, 2013 to recover more than $1 trillion in deficit reduction should Congress fail to act.

 

Transcript of President Obama’s remarks on the debt limit compromise (7/31/11):

“Good evening. There are still some very important votes to be taken by members of Congress, but I want to announce that the leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default — a default that would have had a devastating effect on our economy.

“The first part of this agreement will cut about $1 trillion in spending over the next 10 years — cuts that both parties had agreed to early on in this process. The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President — but at a level that still allows us to make job-creating investments in things like education and research. We also made sure that these cuts wouldn’t happen so abruptly that they’d be a drag on a fragile economy.

“Now, I’ve said from the beginning that the ultimate solution to our deficit problem must be balanced. Despite what some Republicans have argued, I believe that we have to ask the wealthiest Americans and biggest corporations to pay their fair share by giving up tax breaks and special deductions. Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations.

“That’s why the second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. In this stage, everything will be on the table. To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don’t act. And over the next few months, I’ll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job.

“Now, is this the deal I would have preferred? No. I believe that we could have made the tough choices required — on entitlement reform and tax reform — right now, rather than through a special congressional committee process. But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year.

“Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months. And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.

“Now, this process has been messy; it’s taken far too long. I’ve been concerned about the impact that it has had on business confidence and consumer confidence and the economy as a whole over the last month. Nevertheless, ultimately, the leaders of both parties have found their way toward compromise. And I want to thank them for that.

“Most of all, I want to thank the American people. It’s been your voices — your letters, your emails, your tweets, your phone calls — that have compelled Washington to act in the final days. And the American people’s voice is a very, very powerful thing.

“We’re not done yet. I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days. It will allow us to avoid default. It will allow us to pay our bills. It will allow us to start reducing our deficit in a responsible way. And it will allow us to turn to the very important business of doing everything we can to create jobs, boost wages, and grow this economy faster than it’s currently growing.

“That’s what the American people sent us here to do, and that’s what we should be devoting all of our time to accomplishing in the months ahead.

“Thank you very much, everybody.”

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