Late Sunday, Senate Majority Leader Harry Reid announced that congressional leaders had reached a compromise to raise the debt ceiling. The House is expected to put the deal to a vote today, and the Senate will soon follow suit, with members of both parties involved in negotiations working to convince their peers to pass the bill. The deal would raise the debt ceiling by $2.1 trillion and cut spending by $2.4 trillion over the next 10 years. In a news conference last night, President Obama said that, while it was not the deal he would have preferred, it would “allow us to avoid default and end the crisis Washington imposed on the rest of America.”
Here’s your Cheat Sheet to all the details:
- The debt ceiling will be raised in three steps. President Obama will be allowed to raise the debt ceiling, but Congress will have the chance to vote down two of the three if it can muster a two-thirds majority in both the House and Senate.
- Congress will approve spending cuts in two steps. The $2.4 trillion in spending cuts will begin with an initial $917 billion upon passage of the deal, and another $1.5 trillion by the end of the year.
- The first group of cuts would be to discretionary programs. The programs would be capped each year for ten years, beginning with smaller cuts now and gradually increasing over the years as the economy recovers.
- Roughly $350 billion in initial cuts would come from defense and security programs. Defense (NYSE:PPA) and security currently account for about half of all discretionary spending. This issue is one of the few still in dispute, with Republicans opposed to any cuts to defense spending.
- A 12-member committee will be established to find the other $1.5 trillion in cuts. The committee will be made up of Republicans and Democrats from both the House and Senate, and will determine what other programs will be capped after the initial $917 billion in cuts.
- The committee must complete its plan by November 23. Congress will vote on the plan, with no modifications, by December 23. If an agreement cutting at least $1.2 trillion is not reached, automatic spending cuts will be instituted across-the-board starting in 2013, with Social Security, Medicaid, federal employee pay, and benefits for veterans and the poor being the only exemptions.
- The House and Senate must vote on balanced budget amendment to the Constitution by the end of the year. While the amendment would have to receive a two-thirds vote to pass, which is unlikely, its inclusion in the bill currently before Congress makes it more palatable to conservatives.