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Debt-limit legislation passes House and Senate

Debt-limit legislation passes House and Senate

As the House and Senate pass the debt-limit bill and the President signs it, discussions continue as to who showed the most leadership and which party had concern for the most vulnerable in US society.

From the BBC:

The deal, hammered out over the weekend after weeks of feverish speculation, raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years. In a key point for President Obama, the bill would raise the debt ceiling into 2013 – meaning he would not face another congressional showdown on spending in the middle of his re-election campaign next year.

The compromise deal deeply angered both right-wing Republicans and left-wing Democrats. Liberals have been unhappy that the plan relies on spending cuts only and does not include tax rises, although Mr Obama could still let Bush-era tax cuts for the top brackets expire in January 2013. House Republicans were displeased that the bill did not include more savings.

Announcing the deal on Sunday evening, President Obama said that, though it was not the one he would have preferred, it was a “serious down-payment” on the US deficit. The deal would enact more than $900bn in cuts over the next 10 years.

It would also establish a 12-member House-Senate committee charged with producing up to $1.5tn of additional deficit cuts over a decade. If the panel failed to produce at least $1.2tn in deficit savings, spending cuts would take effect across much of the federal budget.

The Pentagon would be among those areas affected, but in a concession to Democrats, individual benefits under Social Security, Medicaid and Medicare would be exempt.

The legislation also requires the House and Senate to vote on an amendment to the Constitution, forcing the US to balance its budget. The political stalemate has unsettled financial markets, endangered Washington’s coveted triple-A credit status, and exasperated Americans still grappling with unemployment of 9.2%.

New York Times

Senate passage at BBC

See also Episcopal Café video blog.

What do you think about the deal?

See more below from Episcopal Public Policy Network:

From The Episcopal Public Policy Network

Policy Alert

Congress has reached an agreement to raise the debt ceiling as well as make deep cuts in the federal debt. The agreement requires up $2.4 trillion in deficit reduction and a maximum $2.4 trillion increase in the debt limit in two stages. It immediately produces $917 billion in savings through FY 2021 by capping discretionary spending each year, and provides for a $900 billion increase in the debt ceiling. The agreement also creates a 12-member joint congressional committee to develop a plan for an additional $1.5 trillion in deficit reduction that Congress would vote on in December.

While the debt ceiling agreement reached this week has averted an economic default that would have had catastrophic consequences for the global economy, it comes at a steep price. Unfortunately, the process for reaching an agreement has resulted in a deficit reduction plan that asks those who are least able to afford it to bear a disproportionate share of the burden in reducing the debt. Essential services to children, seniors, people with disabilities, the unemployed and uninsured will be drastically cut to help reduce the debt.

To learn more about the impact of the debt ceiling agreement on low-income communities, please find out how to be a part of a special webinar sponsored by the Interreligious Working Group on Domestic Human Needs:

To get connected to the webinar, sign in as a guest and let them know that you are an Episcopalian (e.g., John Doe, St. Mark’s Episcopal Church):


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John B. Chilton

I feel better, now. Larry Summers:

“Remarkably for a matter so consequential, the agreement the super committee will seek to reduce the deficit by $1,500bn comes without any agreement on what the baseline is from which that figure is to be subtracted. Does the baseline include the Bush tax cuts? Does it exclude tax extenders, or the annual fix on the alternative minimum tax? These and other questions are unresolved.

Such baselines arguments are mind numbing, but highly consequential. If a baseline following current policy is adopted, for instance, probably in an effort to make deficit reduction easier, it would treat the non-extension of the Bush-era high income tax cuts as a $1,000bn tax increase – hardly a likely outcome given the composition of the proposed super committee.”

John B. Chilton

And this, from the White House:

“The argument against this second claim is based on a misrepresentation of what is called “the baseline.” The “baseline” is what deficit reduction is measured against. Reports have suggested that the Committee would have to use a “current law” baseline—a baseline that assumes that all of the 2001 and 2003 tax cuts expire along with relief from the Alternative Minimum tax. That would mean that any tax reform effort that raised less revenue than allowing all those tax cuts to expire would be scored as increasing the deficit. Even conservative Republican proposals for “revenue neutral” tax reform would be scored under this approach as increasing the deficit by more than $3 trillion.”

They lost me at “that would mean”. Current law has expiring tax cuts. Consider a tax reform that did not touch those scheduled expirations, but eliminated some tax loopholes resulting in greater tax revenue. Why wouldn’t that count as a deficit reduction?

Ann Fontaine

More on why Obama won this round.

Michael Russell

I doubt the POTUS will reap much political gain from playing the reasonable man. He sold his political inheritance for a bowl of pottage, and very sour pottage at that.

As cuts are made and benefits for children, seniors and the infirm dry up. A jobs vanish (yes this is about jobs from military to congressional aides), he will have no moral place ro stand having repudiated his values, the values that got him elected.

Already T-Bond interest rates are up, adding more debt to trigger more cuts. Good job Mr. President.

John B. Chilton

The expiration of the Bush/Obama tax cuts at the end of 2012 is not touched by The Deal.

Whether Obama will allow them to expire (Congress would have to pass legislation extending them and Obama has the veto) is another question. And there is Obama’s promise not to raise taxes on those earning less than $250,000. That’s an unrealistically high cutoff if you’re serious about raising substantially more revenue. What the promise leaves room for, I hope, is tax reform that reduces tax deductions and exemptions while leaving tax rates untouched. We do need more revenue.

As far as social programs, let’s not pretend that a substantial portion of them are not anti-poverty programs. Social security, Medicare and the health care plan benefits all should be means-tested. Let’s get real: we’re talking about the government making financial commitments that exceed the revenues it collects from the beneficiaries of those commitments that do have the means to pay for them.

As long as Social Security, tax rates and Medicare remain untouchable we’re living in dreamland. Ok, The Tea Party voters played tough and unrealistically, but Seniors have been doing so for far longer.

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