Tag Archives: debt

Debt Deal Timeline

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.


Obama’s Debt Deal

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.”


Chart Geek: What Gets Cut If The Debt Commission Doesn’t Agree

via Matthew Yglesias

Chart Geek: Spending and Revenues

via The Atlantic

Video Geek: Debt Ceiling Deal All Cuts No Taxes

via Real News Network

Chart Geek: Incredible Shrinking Debt Deal

via Ezra Klein

Boehner’s Debt Plan Solves Nothing

Congressional Republicans filed a 57-page bill outlining Speaker of the House John Boehner’s two-step plan to raise the debt ceiling by $2.5 trillion. The first step raises the debt ceiling by $1 trillion and is contingent on 10-year savings of $1.2 trillion from annual appropriations bills, and the second step would raise the debt ceiling by $1.6 trillion after an additional $1.8 trillion in savings in cuts from social safety net programs. It is unclear if it would have the votes to pass the House, and it likely has no chance of passing in the Senate.

The plan does many things. This plan creates another default crisis next year, right in the middle of the Republican presidential primaries. It is far from a balance plan, which is what the majority of Americans want, as it raises no new revenue. It will result in deep cuts in the social safety net, and could dramatically change Social Security and Medicare. The plan would still likely mean a downgrade of the United States’ AAA credit rating, unlike the plan proposed by Senate Majority Leader Harry Reid. It’s a plan that does many things, but solve the problem.

The Center for Budget and Policy Priorities analysis of the Boehner plan characterizes it as “tantamount to a form of class warfare,” and that if enacted it could produce the “greatest increase in poverty and hardship produced by any law in modern U.S. history.”

“The first round of cuts under the Boehner plan would hit discretionary programs hard through austere discretionary caps that Congress will struggle to meet; discretionary cuts thus will largely or entirely be off the table when it comes to achieving the further $1.8 trillion in budget reductions. As Speaker Boehner’s documents make clear, virtually all of the $1.8 trillion would need to come from cuts in entitlement programs. (Cuts in entitlement spending totaling more than $1.5 trillion would produce sufficient interest savings to achieve $1.8 trillion in total savings.)

To secure $1.5 trillion in entitlement savings over the next ten years would require draconian policy changes. Policymakers would essentially have three choices: 1) cut Social Security and Medicare benefits heavily for current retirees, something that all budget plans from both parties (including House Budget Committee Chairman Paul Ryan’s plan) have ruled out; 2) repeal the Affordable Care Act’s coverage expansions while retaining its measures that cut Medicare payments and raise tax revenues, even though Republicans seek to repeal many of those measures as well; or 3) eviscerate the safety net for low-income children, parents, senior citizens, and people with disabilities. There is no other plausible way to get $1.5 trillion in entitlement cuts in the next ten years.”