Assuming that Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif., can work together and find enough votes to get it through the House, the debt limit will be raised by the $2.4 trillion needed to allow the federal government to pay it’s bills through the 2012 election. But this does not mean that President Obama will be able to avoid the debt, or any of the other surrounding issues, in the election.
The deal supposedly cuts $2.4 trillion over ten years, but a quick reading shows that only $2.1 trillion of them are guaranteed to go into law, and less than 1 percent of them will actually occur before Obama’s current term is up. The plan calls for $900 billion in spending cuts from statutory caps on discretionary spending over ten years, but only $10 billion of those cuts are scheduled to occur over the next two years. The remaining $1.5 trillion in cuts is supposed to come from a “Super Congress” made up of House and Senate members pulled equally from each party.
This Super Congress will fail to come to an agreement. No Republican appointed to the committee will be able to agree to any entitlement reform that does not fundamentally repeal Obamacare. And no Democrat appointed to the committee will sign off on any reform that does. When the Super Congress fails to reach agreement, another $1.2 trillion in cuts will be triggered, at least half of which will come from defense spending. But these cuts are spread out over nine years and none of them occur before 2013. The triggered defense spending cuts are a completely empty threat.
By January 2012, the issues for the 2012 campaign will be clearly set. Obama will be running on the expiration of the Bush Tax Cuts, which will raise taxes by $3.5 trillion over the next decade, more than enough to pay for Obamacare. The Republican candidate will be running on the opposite; low taxes and the repeal of Obamacare. The debt ceiling fight was never going to settle the tax or Obamacare issues. But at least the Tea Party won some spending cuts in the meantime.
Around the Bigs
Associated Press, Obama, Congress will avert default: President Obama, Speaker John Boehner, R-Ohio, and Majority Leader Harry Reid, D-Nev. Have struck a deal to raise the debt limit by $2.4 trillion. Neither House of Congress will vote on the deal till at least late Monday. The plan includes $900 billion in spending cuts from statutory caps on discretionary spending over ten years. A “Super Congress” would then be charges with finding $1.5 trillion in additional deficit cuts, which could come from tax and entitlement reform. When the Super Congress fails to reach a deal by Thanksgiving, an additional $1.2 trillion in cuts will go into law, half of which will come from domestic programs, including Medicare but not Medicaid or Social Security, and the other half will come from defense. Both Houses of Congress must also vote on, but need not pass, a Balanced Budget Amendment.
The Wall Street Journal, Markets Show Relief, for Now: Stock markets and the dollar rose sharply as news of the debt limit deal spread to Asia last night. Japanese banks were the biggest winners since they have significant U.S. Treasury holdings.
The Hill, White House: Lot for Dems to love in deal: Obama administration officials are desperately defending the debt deal to other Democrats. “This is a framework for a long-term solution,” one administration official told The Holl. “A long-term solution will have to include revenues in it.” The White House is also stressing that they protected Medicaid funding and Pell Grants.
The Hill, Debt-limit deal puts Pelosi in driver’s seat: The deal struck by Obama, Boehner, and Reid will need Democratic votes to pass the House, but Minority Leader Nancy Pelosi, D-Calif., is not promising anything: “I have to meet with my caucus [Monday] to see how they wish to proceed. We may not be able to support it, or none of us may be able to support it.”
The New York Times, Opposing the Health Law, Florida Refuses Millions: Florida Gov. Rick Scott has refused millions of dollars in federal grants to help implement Obamacare. “There are a lot of programs that the federal government would like to give you that don’t fit your state, don’t fit your needs and ultimately create obligations that our taxpayers can’t afford,” Scott tells The New York Times.
Perry: Jobs for Iowa, a new super PAC hoping Texas Gov. Rick Perry will run for president, is spending $40,000 for two week’s worth of air time on Fox News Channel in the Hawkeye State.
RedState‘s Erick Erickson makes the case the the debt deal paves the way for the Super Congress to raise taxes: “The Deficit Commission will have at least one weak kneed Republican and the commission will only be as strong as its weakest link.”
The Wall Street Journal calls the deal A Tea Party Triumph: “The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996.”
The Washington Examiner‘s Phil Klein previews the upcoming battle between battle between defense hawks and anti-tax crusaders: “For decades, the central difference between conservatives and liberals when it comes to fiscal policy is that liberals want to reduce the deficit through tax hikes and cuts to defense spending while conservatives want to focus on entitlements and other non-defense spending without raising taxes. Given that any deal between the two parties would have to involve Republicans giving something up, there’s always been the potential for tension between these two strands of conservatism. That underlying tension is going to rise to the surface in the coming months.”
Under the header, The President Surrenders, Paul Krugman says the deal “is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.”
Daily Kos’ Hunter says that debt ceiling ‘compromise’ appears to include everything far-right demanded.
Sen. Dick Durbin, D-Ill., tells The Huffington Post that the debt deal will be the death of Keynesian economics.