On Sunday night, Obama announced that a deal on the debt ceiling had been reached. While House minority leader Nancy Pelosi was saying that some or none of her Democrats might vote for the proposal, House Speaker Boehner held a conference with the leaders on the right side of the aisle.
Later Sunday night, he released the details of the framework on his website.
The framework is a two-step increase with a trigger:
Phase one is an immediate $900 Billion increase to the debt ceiling that will hold the government over until roughly February. In exchange for that increase, discretionary spending will be cut and capped immediately which will save $917 Billion over ten years. In an effort to prevent the increase from happening without the savings (remember Reagan anyone?), the ceiling increase will not occur until Congress and the President implement the spending cuts. This would signal that a short term measure will need to be passed to allow a small debt limit increase (perhaps a week’s worth) while Congress irons out the spending cuts.
Phase two: The President can ask for a second debt limit increase of $1.5 Trillion if either a balanced budget amendment to the Constitution is sent to the states for ratification or a the recommendation of a 12-member special committee are implemented that would save more than $1.5 Trillion.
The trigger: Specific spending caps would be put in-place to limit spending. If the government fails to remain below these limits, it will trigger across-the-board cuts to government spending. The trigger is specifically hit if the Joint Committee fails to achieve at least a drop of $1.2 Trillion in the deficit. Once the trigger fires-off, the President can request another $1.2 trillion increase in the debt-limit. If the increase is passed, across-the-board cuts in all government spending equal to the difference between $1.2 trillion and the amount of the deficit reduction enacted by Congress. These cuts would be equally applied to mandatory and discretionary spending, both defense and non-defense. While Medicare would be included in the cuts, Social Security, Medicaid, veterans benefits and government pay (civilian and military) would not be affected.
One way to read the summary presentation from Boehner is that the triggers could cause the spending cuts to be split 50-50 between Defense and Medicare spending. Some reports have said that the Medicare spending would only affect providers (hospitals, doctors, suppliers) not beneficiaries.
As a final note, the framework includes no tax hikes, but the committee will be free to recommend them as a method for reducing the deficit.
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