Late last night ABC News first reported that the White House and Republicans agreed on a framework which would cut almost $3 trillion from the deficit while increasing the debt ceiling by approximately the same amount. Both sides say a final deal has not yet been agreed upon, but have confirmed reports of the talks. Senate Minority Leader Mitch McConnell (R-KY) claimed that “a lot of progress” has been made and that the two sides are “very close” to a final agreement. A White House official familiar with the negotiations was more cautious saying “major details” of the deal still needed to be agreed upon. The deal being discussed reportedly contains the following provisions:
- A debt ceiling increase of $2.1 or 2.4 trillion, whichever amount would take the country through the 2012 election.
- Immediate spending cuts of about $1.2 trillion.
- The formation of a special committee, or “super Congress,” which would make a recommendation for another $1.6 trillion in spending cuts. Those recommendations would be due by the Thanksgiving recess.
- If Congress does not adopt the recommendations of the special committee by December 23 then $1.6 trillion of automatic across-the-board cuts would go into effect. That $1.6 trillion would include spending cuts to Medicare and defense.
- A vote on the Balanced Budget Amendment in the House and Senate.
[See also: What the debt deal means for the average American]
The key aspect of the deal is the “trigger” agreed upon to enforce the recommendations of the special committee. There have been many deficit committees in the history of the United States, but there recommendations typically get ignored if there is not some incentive to adopt their proposals. The Democrats would presumably be motivated to adopt the special committee cuts in order to avoid automatic Medicare cuts. The Republicans would presumably be motivated to avoid the automatic defense cuts.
In the past Democrats in Congress have said that any trigger must include not only spending cuts but also tax increases on the very wealthy. This trigger does not include any tax increases, which may make it very hard to get Democratic votes for the deal.
If a deal is agreed upon by both sides it would have to be quickly written in order to be voted on and signed ahead of the August 2 deadline for a default on the debt. President Obama has said that he would be willing to a sign a short-term increase of the debt ceiling if there was an agreement already in place to extend the debt ceiling for the long term.
A number of key questions remain unanswered as well. For instance, would the special committee be empowered to recommend tax increases? If so, would the Republicans still be willing to vote for the debt deal? How deep are the defense cuts in the deal, and would they really serve as an incentive for Republicans to accept some other kind of compromise?
The positive news is that both sides are at least talking, though Democrats seem concerned that the President is essentially caving to all the Republican demands in the final hours.