A deal has been done on the US debt ceiling, with agreement on around US$1,000,000,000,000 of spending cuts over the next decade. That is not enough to get back into surplus, but is a promising start. And no tax increases.
The Washington Post looks at the winners and losers:
- Senate minority leader Mitch McConnell
- Tea party
- President Obama
- Congressional Budget Office
- Grover Norquist, President of Americans for Tax reform
- David Wu (as the crisis overshadowed his sex scandal)
- Gang of Six
Americans for Tax Reform played a big role in keeping the Republicans from agreeing to tax increases as many Republican representatives and senators had signed pledges to never vote for a tax increase. If they broke that pledge, they knew they would face a primary challenge.
I quite like how they have made sure of a second round of spending cuts:
The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.
That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.
If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed balanced-budget constitutional amendment.
If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.
So if they can not agree on the next $1.8 of deficit trimming, then they vote on a balanced budget constitutional amendment (a good idea), and if that does not pass then $1.2 trillion of extra spending cuts takes place across the board – including defence spending, but excluding welfare entitlements.