President Obama and congressional Republican and Democratic leaders announced Sunday evening that they have reached an agreement on a plan to end the debt-ceiling crisis that calls for more than $2.5 trillion of spending cuts and savings over the coming decade but no increase in tax revenues.
The president and congressional leaders sought to assure the public that despite the months of political wrangling, the Treasury would not default on U.S. debt – a prospect that for weeks has roiled the international financial community and raised the possibility that the government would run out of cash to pay its creditors and contractors.
“My message to the world tonight is that this nation and this Congress are moving forward and we are moving forward together,” Senate Majority Leader Harry Reid of Nevada said from the floor of the Senate.
“At this point I think I can say with a high degree of confidence that there is now a framework that will insure significant cuts in Washington spending, and we can assure the American people tonight that the United States of America will not for the first time in our history default on its obligations,” added Senate Minority Leader Mitch McConnell, R-Ky., a pivotal player in the final round of negotiations, said on the Senate floor.
Obama in remarks from the White House a few minutes later expressed relief that the political impasse over the debt ceiling at last appeared to be drawing to a close, but he voiced irritation with the “messy” and highly combative negotiation process, and complained that the two parties could have achieved considerably more if they had been more cooperative.
The president also indirectly acknowledged that the Republicans may have gotten the better end of the deal in blocking Obama’s efforts to include tax increases as well as spending cuts in the framework for achieving long term deficit reduction, but he vowed to continue to press for changes that would force wealthy Americans to share in the burden of reducing the debt when a special joint committee of Congress pulls together recommendations to Congress for long term savings this fall.
“I’ve said from the beginning that the ultimate solution to our deficit problem must be balance,” Obama said. “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. And despite what some in my own party have argued, I believe that we have to make modest adjustments to programs like Medicare, to assure that they are still around for future generations.”
“Now, is this the deal I would have preferred? No,” he added. “I believe that we could have made the tough choices required on entitlement reform and tax reform right now, rather than through a special congressional committee process, but this compromise does make a serious down payment on the deficit reduction we need and gives each party a strong incentive to get a balanced plan done before the end of the year.”
“Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America,” he said. “It insures also that we won’t face this same kind of crisis again in six months or eight month or twelve months.”
During an 8:30 p.m. conference call with House Republicans, House Speaker John Boehner used a seven-page PowerPoint presentation to stress to his members that Republicans got just about everything they were seeking in the negotiations: deep spending cuts, no tax increases and another vote on a balanced budget amendment to the Constitution.
The plan would authorize the president to raise the debt ceiling immediately by $900 billion, through next February, while imposing $918 billion of spending cuts. A 12-member joint committee would be created and required to report legislation by next November 23 that would produce a proposal to reduce the deficit by at least $1.5 trillion over 10 years. Each chamber would consider a joint committee proposal on an up-or-down basis without any amendments by December 23.
Finally, the framework would create a new sequestration process to cut spending across the board and ensure any debt limit increase is met with equal or greater spending cuts if the joint committee fails to achieve at least $1.2 trillion in deficit reductions. If this happens, the President could request up to a $1.2 trillion debt ceiling increase and across the board spending cuts to discretionary and mandatory programs that would apply to fiscal years 2013 through 2021. Social Security, Medicaid, veterans, civil and military pay would be exempt but cuts to Medicare would apply.
If the House and Senate approve the measure, it would mark the first major initiative by Obama and a politically divided Congress to try to slow the growth of the federal debt and overhaul costly entitlement programs. But even as the White House and congressional leaders announced an agreement, there still appeared to be a number of unresolved differences that could gum up the works.
The negotiations were so disjointed and contentious – and the economic stakes so high―that it will test all of the political skills of Reid, McConnell and Boehner to jam a final agreement through. “I knew the day would come when we would in fact lift the debt limit, but the question is how?” veteran Rep. Jim McDermott, D-Wash., told MSNBC. “This is the messiest, the worst possible process I can imagine for the American people and for the future economy.”
After weeks of bitter partisan wrangling and posturing, the final deal began to come into focus Saturday afternoon, after McConnell, a consummate dealmaker, called President Obama and Vice President Joseph Biden and began a final rounds of talks.There seemed to be broad agreement that any deal reached would include at least $2.5 trillion in spending cuts over the next 10 years, of which $1.2 trillion would be approved now.
The deal also will give conservative lawmakers and Tea Party adherents another crack at passing a balanced budget amendment to the Constitution that was part of a “Cut, Cap and Balance” deficit reduction plan that the House passed a week ago but was defeated in the Senate. The Democrats say they will support another up or down vote on a constitutional amendment but dismiss as preposterous House Republicans demand that the amendment be a condition of raising the debt ceiling.
However, even as negotiators sought to put the final changes on the plan, Republicans and Democrats were still squabbling over the contours of a budget enforcement tool or “trigger” that would automatically impose deep, across the board spending cuts and entitlement reforms if Congress and a new special joint-committee can’t agree to the terms of the reductions. Republicans are bridling at the administration’s call for additional defense cuts of as much as 3 percent, compared to the 2 percent or less the GOP favors. And the White House is pressing to include tax increases in the mix to achieve the automatic reductions in the long-term deficit.
Beyond that, moderate and liberal Democrats in the House and Senate are furious about the depth of the cuts that would be made in Medicare, Medicaid and other social safety-net programs to achieve the overall cuts – especially when tax increases won’t be part of the mix.
The House Progressive Caucus and the Congressional Black Caucus plan to hold an emergency meeting on Monday to map out strategy against the plan.
“We have to insist that minimally Socially Security, Medicare and Medicaid are taken off the table,” liberal Rep. Barbara Lee, D-Calif., told MSNBC on Sunday. Democratic Rep. Kathy Hochul, who won a special election in May in a heavily Republican upstate New York District by blasting Republicans for targeting Medicare for changes, said on the same program that she might not support the compromise debt plan. “My number one priority is protecting Medicare and Social Security,” she said.
House Minority Leader Nancy Pelosi, D-Calif., told reporters after a meeting with Reid that: "We all may not be able to support it. And maybe none of us will be able to support it." But she added, “We’re open to what comes down because the stakes are very high.”