They worked throughout the night. They worked all weekend long. They didn’t golf. They didn’t socialize. Instead, our legislators in Washington raced against the August 2 deadline in order to come up with a deal that would allow America to borrow more money to pay its bills. So what are we left with? If the devil is in the details, this is a hell of a mess.

As Fox News reports, Obama, along with Democrats and Republicans from both chambers of Congress have come up with a tentative deal. Monday will be the day that the deal is pitched to the rank and file members… and the “sell job” will begin.

According to the president, the deal means an immediate cut of $1 trillion in government spending over a 10-year period accompanied by a $900 billion increase in the debt ceiling. That will be followed by the creation of the committee to come up with additional cuts worth at least $1.5 trillion. The debt ceiling will be raised by $1.5 trillion if the committee recommendations are approved by the end of the year.

“Despite what some Republicans have argued, I believe that we have to ask the wealthiest Americans and biggest corporations to pay their fair share by giving up tax breaks and special deductions. Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations. That’s why the second part of this agreement is so important,” Obama said from the White House briefing room.

Here we go again. The old “fair share” line. Nobody can define what that means, but that doesn’t ever stop Obama and the Democrats from using it. In addition, it’s crazy to describe a series of cuts over a 10-year period as immediate. How in the world can it be immediate if it takes 10 years?

Sidenote: Any time you see something like that, you should think “political cowardness.” The cuts may seem large in total, but look at the details and see what is actually being cut NOW. Much will be left to later years when politicians hope that someone else will have to make the tough calls. Our budget deficit problem is occurring NOW. Our debt problem is occurring NOW. Yet our “immediate” solution kicks in over 10 years? Crazy.

House Speaker John Boehner put together a PowerPoint presentation to describe the deal. Here are some of the details:

— The “framework” of the deal has three main features:

  • cuts government spending more than it increases the debt limit
  • implements spending caps to restrain future spending
  • advances the cause of a Balanced Budget Amendment

— No Tax Hikes

— Cuts Exceed the Debt Hike

  • Same as House-passed bill, framework includes spending cuts that exceed the amount of the increased debt authority granted to POTUS.
  • Would cut & cap discretionary spending immediately, saving $917B over 10 years (certified by CBO) & raise the debt ceiling by less – $900B – to approximately February
  • Before debt ceiling can be raised, Congress and the president must enact spending cuts of a larger amount first.

— Caps to Control Future spending

    • As in House-passed bill, framework imposes spending caps that would set clear limits on future spending & serve as barrier against gov’t expansion while economy grows.
    • Failure to remain below these caps triggers automatic across-the-board cuts (“sequestration”). Same mechanism used in 1997 Balanced Budget Agreement.

— Balanced Budget Amendment

    • Same as House-passed bill, framework requires both House & Senate to vote on a BBA after Oct. 1, 2011 but before the end of year
    • Similar to House-passed bill, framework authorizes POTUS to request second tranche of debt limit increase of $1.5T if:
      • Joint Committee cuts spending by greater amount than the requested debt limit hike, OR
      • A Balanced Budget Amendment is sent to the states
    • Creates incentive for previous opponents of a BBA to now support it

— Entitlement Reforms and Savings

  • Same as House-passed bill, framework creates a 12-member Joint Committee required to report legislation by November 23, 2011 that would produce a proposal to reduce the deficit by at least $1.5T over 10 years.
  • Each chamber would consider Joint Committee proposal on an up-or-down basis without any amendments by December 23, 2011.
  • If Joint Committee’s proposal is enacted OR if a Balanced Budget Amendment is sent to the states, POTUS would be authorized to request a debt limit increase of $1.5T.
  • Sets up a new sequestration process to cut spending across-the-board – and ensure that any debt limit increase is met with greater spending cuts – IF Joint Committee fails to achieve at least $1.2T in deficit reduction.
  • If this happens, POTUS may request up to $1.2T for a debt limit increase, and if granted, then across-the-board spending cuts would result that would equal the difference between $1.2T and the deficit reduction enacted as a result of Joint Committee.
  • Across-the-board spending cuts would apply to FYs 2013-2021, and apply to both mandatory & discretionary programs.
  • Total reductions would be equally split between defense and non-defense programs. Across-the-board cuts would also apply to Medicare. Other programs, including Social Security, Medicaid, veterans, and civil & military pay, would be exempt.
  • Sequestration process is designed to guarantee that Congress acts on the Joint Committee’s legislation to cut spending.

So what do you think?

There was no doubt in my mind that some kind of deal would be reached. After all, what was the goal? The goal was to raise the debt ceiling in order to avoid America defaulting on loan payments. Now… in order to achieve that goal, legislators needed to talk about things like cuts and caps and balanced budgets. However, because those items were just negotiating tools and not actual goals, you can count on Washington having to go through all this again when we hit the next debt limit.

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