In a very unsurprising turn of events, congressional leaders and Barack Obama reached an agreement tonight on a debt limit deal that will allow the country to avert its first-ever default.
The debate over the debt ceiling/deficit reduction deal has dominated the news, especially over the past couple of weeks. The storm clouds have been brewing for a while, as politicians from both parties started warning earlier in the year that the debate over the debt ceiling would very likely be a contentious one. Treasury Secretary Timothy Geithner said that the nation would default by August 2nd if a debt ceiling deal hadn't been agreed to by then - most people expected that the negotiations would come down to the last minute, and those people were right.
The Republicans promised that they would not agree to increasing the debt ceiling unless it was accompanied by a deficit reduction plan. The Democrats were insistent that a deficit reduction plan consist of a mixture of cuts and revenue increases ("elimination of loopholes" as they called it), while the Republicans said that taxes could not be raised in any way, especially in this fragile economic environment, as increased taxes would kill job creation.
The two sides dug in their heels, which led to many tense meetings and a number of high-profile walkouts.
The deal calls for a "first round" of $917 billion in cuts over the next ten years. In exchange for this first round of cuts, the debt ceiling will be raised by $900 billion.
The "next round" of "cuts", which is reportedly going to be $1.5 trillion, is going to be decided by a committee of 12 lawmakers. These 12 lawmakers will come from both parties and both chambers. The "cuts" could be in the form of spending cuts and/or tax increases.
The second round of cuts will have to be agreed upon by Thanksgiving and voted on by Congress by Christmas. If the two sides can not come to an agreement on the cuts, then "across the board cuts" to the tune of $1.2 trillion will be instituted that will "hit the Pentagon and domestic programs." Social Security and Medicaid would both be exempt from the automatic cuts.
After the second round of cuts have been agreed to, a second increase in the debt ceiling would occur. This increase would reportedly cover the country through the 2012 elections, which was requested by President Barack Obama.
Members of Congress still need to vote on the measure. The Senate is expected to vote first on Monday afternoon, with the House expected to follow on Monday night.
Filed under: General Knowledge