President Obama and congressional leaders last night agreed on the framework of a package that gives him the debt ceiling increase that he wants and gives congressional Republicans the spending reductions they were seeking.
The package, which still has to be voted on by the Senate and House, includes $2.4 trillion in spending cuts over the next years. It also creates a House-Senate committee, made up of six Democrats and six Republicans that must recommend additional deficit-reducing measures. These could conceivably include changes in the tax code, such as the elimination of certain tax expenditures, such as the tax exemption for credit unions.
The House-Senate committee has to present its recommendations by mid-November and they must be approved by a majority vote in each chamber and cannot be amended. If the panel can’t agree to on recommendations, Congress would either have to pass to a balanced budget amendment to the Constitution or accept-across-the-board spending cuts, with 50% of the cuts coming from the Pentagon and the rest from other programs, including Medicare.
The measure raises the debt ceiling, which is currently $14.3 trillion, by as much as $2.3 trillion at two different times. Neither Obama nor congressional leaders were entirely pleased with the agreement, though all said it was the best they could achieve under the circumstances given that there is divided government. Obama said the agreement “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, or12 months. House Speaker John Boehner (R-Ohio) said that “if I wrote this myself, it would look different. But I wouldn’t agree to it or put it on the floor if it violated our principles or would hurt the economy,”