The debt ceiling deal has been signed into law, after requiring tough concessions from Democrats and Democrats alike (Does 2% count as a concession?). We know what is in the deal – $917 billion in deficit reduction over the next decade, $1.5 trillion of deficit cuts from the Super Congress, and an increase of the debt ceiling through 2012. But, when is this all going to happen? The Sunlight Foundation has broken down the when:
Tuesday, August 2, 2011. Date of Enactment of Budget Control Act
Tuesday, August 16, 2011. Co-Chairs and Committee Members Appointed
Friday, September 9, 2011. Latest possible date of announcement of the first Joint Committee hearing.
Wednesday, September 14, 2011. Latest possible date to release agenda for first meeting to Committee members.
Wednesday, September 14, 2011. Latest possible date for filing of witness statements for first hearing.
Friday, September 16, 2011. Latest possible date for first Joint Committee Meeting.
Saturday, October 1, 2011. Start of FY 2012.
Friday, October 14, 2011. House and Senate Committees transmit recommendations to Joint Committee.
Wednesday, November 23, 2011. Joint Committee vote on report and proposed legislative language.
Saturday, November 26, 2011. Filing of additional views.
Friday, December 2, 2011. Joint Committee submit report and legislative language.
Friday, December 9, 2011. House and Senate Committees must report the bills to the full chamber.
Likely December 13 or 14, 2011. Senate debate may start.
Friday, December 23, 2011. Date by which vote in passage in House or Senate must occur.
If the President vetoes the joint committee bill, debate on a veto message in the Senate shall be 1 hour.
Saturday, December 31, 2011. Latest possible date for vote by House or Senate on Balanced Budget Amendment.
Saturday, December 31, 2011. Latest possible date for President to submit first certification to raise debt limit — automatic raise of $400 billion.
January 31, 2012. Joint Committee terminates.
Sunday, February 19, 2012. Latest possible date for Congress to disapprove of first debt limit increase.
It’s difficult to have a well reasoned public debate when the public is largely uniformed about public policy. The Pew Research Center conducts regular polls on the public’s knowledge of the political process and public policy issues. In general the public is often uninformed about specifics of public policy (which part of the budget is the largest), but generally well informed about public policy that is common talking points (which country hold the largest percentage of American debt).
In the latest update, the Pew Research Center found that only 29% of Americans knew that the government spends the most on Medicare. Last year only 34% knew that the Troubled Asset Relief Program, otherwise known as the bailout, was enacted during the Bush Administration. That same year only 26% knew that it takes 60 votes in the Senate to break a filibuster. How do you have a more informed public? By participating in the conversation. Each week PolitiGeek will breakdown a different piece of public policy.
Center for Budget and Policy Priorities breaks down the differences between deficits, debt, and interest:
For any given year, the federal budget deficit is the amount of money the federal government spends (also known as outlays) minus the amount of money it takes in (also known as revenues). If the government takes in more money than it spends in a given year, the result is a surplus rather than a deficit.
When the economy is weak, people’s incomes decline, so the government collects less in tax revenues. This is one reason why the deficit often grows during recessions. Conversely, when the economy is strong and tax revenues increase, the budget deficit shrinks.
Unlike the deficit, which drives the amount of money the government has to borrow in any single year, the national debt is the cumulative amount of money the government has had to borrow throughout our nation’s history. Each time the government runs a deficit, it increases the national debt; each time the government runs a surplus, it shrinks the debt.
Interest, the fee a lender charges a borrower for the use of the lender’s money, is the true cost of government borrowing. This cost is considerable. In 2008 the federal government paid roughly $250 billion in interest payments, or roughly the amount that it spent on education, transportation, and veterans’ programs combined.
Interest costs reflect both the amount of money borrowed (also known as the principal) and the interest rate. When interest rates go up or down, interest costs do too, making the national debt a bigger or smaller drain on the budget.
Every dollar the government spends on interest payments is a dollar that is unavailable for programs that currently benefit taxpayers. Rather, interest is what we pay now for benefits received in the past. Adding to the national debt by running up deficits essentially shifts the costs of current programs on to future generations, who will have to pay the interest costs.
Michael Linden, Director for Tax and Budget Policy at the Center for American Progress, explains why the United States is running such high deficits:
The deal to raise the debt ceiling has been signed, sealed, and delivered – but what is being delivered? The political debate about the winners and the losers, whether or not the Republicans or the Democrats will gain or lose the most politically, will be analyzed and debated for weeks.
In many ways this reminds me of the health care reform debate in 2009. I think we saw a preview then of how President Obama made political deals in order to get a rather moderate and centrist piece of legislation through Democratic majorities in both houses of Congress. What did we think would happen when Obama was face with a divided Congress?
But what about the policy implications? Unlike the political ramifications, the policy ramifications are much more serious. The Economist breaks down the nuts and bolts of the deal:
The result is a mishmash of expedient stop gaps and promises that tilts heavily to Republican priorities while guaranteeing more wrangling and uncertainty in the months ahead. It does nothing to support the near-term economic outlook, and makes less progress on long-term fiscal consolidation than hoped.
Its key provisions are $917 billion in deficit reduction over the next decade (the precise timing is unclear), drawn mostly from domestic discretionary outlays. (Discretionary items must be approved annually by Congress. Entitlements, also called mandatory spending, proceed on autopilot unless the law changes.) In return, the debt ceiling rises immediately by $400 billion, about enough borrowing room for the Treasury to fund current spending until September. Then, it would rise another $500 billion unless both the House and Senate were to vote by super-majorities against doing so, which is highly unlikely.
Then comes the tricky part. The debt ceiling will rise by another $1.2 trillion to $1.5 trillion by December 23rd, enough to tide Treasury over until after next autumn’s presidential election, a priority for Mr Obama. However, that requires one of two things to happen. A committee of 12 legislators composed equally from both parties and both chambers is to agree on $1.5 trillion of deficit cuts. Congress could then accept or reject but not amend the proposals by December 23rd. Approval would result in the debt ceiling rising by $1.5 trillion.
If the committee fails to come up with at least $1.2 trillion in cuts or their proposal is rejected, spending would be automatically cut by enough to bring total cuts to $1.2 trillion, coming equally from defence and domestic outlays. The triggers would take effect in 2013, and result in a debt ceiling increase of $1.2 trillion. Payments to Medicare providers could be trimmed but Medicare, Social Security and Medicaid benefits would all be shielded. The thinking is that these cuts would inflict such pain on both Republican and Democratic pet priorities that they will labour mightily to come up with an alternative.
What do policy experts think? Mohamed El-Erian, CEO of global investment firm PIMCO, said that the deal does nothing to restore household and corporate confidence “so unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise.” Analysis by the Economic Policy Institute (EPI) found that the deal could lead to roughly 1.8 million fewer jobs in 2012. The EPI analysis says that “not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs.” The Center for American Progress notes that the deal “does nothing to help with the biggest problem facing our nation: anemic job growth and a faltering economy. In fact, by putting a noose on public investments and tightening the squeeze on the middle class, the deal goes straight in the wrong direction.”