August 01, 2011

We Have A Debt Limit Deal: Now What?

After six months of negotiations and warnings of impending economic doom, the White House and Congress have a deal to raise the debt ceiling. President Obama gets one thing he wanted--the debt limit will be increased by enough to last past the 2012 elections. Republicans get more of what they wanted--no tax increases, spending cuts bigger than the size of the debt limit increase. Now all they have to do is pass it and sign it before midnight tonight.

What's in the deal?

The basic plan, as explained by The New York TimesCarl Hulse and Helene Cooper, Politico's David Rogers, and The Hill's Alexander Bolton, goes something like this:

1. Raise the debt limit by $900 billion and cut spending by the same amount over 10 years. Members of Congress can vote to show they don't like the increase but Obama can veto their disapproval. 
2. Create a bipartisan committee with three members of each party from each chamber of Congress to find spending cuts the size of a second debt limit increase of $1.5 trillion. As a special holiday treat, the plan must be presented to colleagues by Thanksgiving and voted on by Christmas.
3. If the plan passes, Obama can raise the limit by $1.5 trillion.
4. If the cuts committee can't come up with a plan, Obama can get only a $1.2 trillion debt limit increase, and Congress must either:
a. Pass a balanced-budget amendment to the Constitution, or
b. Allow spending cuts the size of the debt limit increase over the next 10 years, with at least half coming from cuts to defense spending. These cuts would be automatic by the end of 2012.
Politico's Mike Allen reports that Republicans expect the cuts committee to come up with a plan similar to the "grand bargain" Obama and House Speaker John Boehner were working on before those talkscollapsed.

What's next?

The Senate is likely to vote first on the plan because winning support for it there will be easier than in the House, the Associated Press' Andrew Taylor reports. (That vote would take place early Monday afternoon at the earliest, First Read says). To get it through the House, Boehner needs 216 votes, which will require winning over reluctant conservatives and some Democrats. And Minority Leader Nancy Pelosi will have to soothe angry liberals. Pelosi's office put out a  lukewarm statement on the deal Sunday night, which, as The Washington Post's Chris Cillizza explains, is Pelosi's way of protecting herself and the liberals crucial to her success. "Pelosi wants to make a point here--that the White House can cut all the deals it want but that she and the Democratic House caucus won't immediately fall in line if it's not in their own political or policy interests to do so." Still, "Pelosi is a team player and won't urge her Democratic colleagues to rob President Obama of the deal he desperately wants/needs heading into 2012." What does that mean for voting on the plan? The Hill's Bob Cusack explains that Pelosi might "argue that the onus is on the House GOP leaders to get more yes votes because they are in the majority. ... Minimizing yes votes from Democrats would force the GOP to lean on its members to vote yes on what could be a politically toxic vote come November 2012."

Interestingly, First Read writes, "It's quite possible that more Senate Democrats will vote for the compromise than Senate Republicans, while more House Republicans will vote for it than House Democrats. In the same way some on the left are questioning the president's ability to lead, Boehner's being questioned, too--him herding cats has not been pretty to watch."
Who's mad about it?
A lot of people. On the right, the possibility of 50 percent of more than $1 trillion in cuts coming from the Pentagon worries many defense hawks. David Frum says he wishes "my defense hawk friends at the American Enterprise Institute and the Weekly Standard had discerned before it was too late that a budget framework that calls for: (1) no additional revenues and (2) big cuts in discretionary spending, is not a hospitable climate for a robust defense budget." He continues:
[T]he pro-defense conservatives who cheered and cheered as Tea Party Republicans were awarded veto power over GOP decision-making have completely outfoxed themselves. They are now parties to a deal that targets the defense budget as the main hostage in future budget negotiations.

Likewise, Andrew Exum at the Center for a New American Security is exasperated that after a decade of ground wars in the Middle East, "Democrats and moderate Republicans have decided they would rather keep expensive entitlements than rebuild our military...  And conservative Republicans claim to value the military and believe in more robust defense spending, but they refuse to raise taxes to pay for the advanced military capabilities they want." Defense analysts will be left to explain to lawmakers that "if they reduce their available resources, they will need to adjust the scale of their ambitions as well." Exum blames self-indulgent boomers for this situation: 

The older generation continues to draw more from entitlement programs than they ever contributed and also refuses to raise taxes, meaning the burden for both perpetually doing more with less and paying for entitlement programs we ourselves will never enjoy falls to my generation and the one below me.
On the left, liberals are appalled that Obama conceded almost everything. The Washington Post's Ezra Klein sums up this deal--no stimulus, no tax hikes--as "heads Democrats lose, tails Republicans win." The New Republic's Jonathan Cohn says Obama should have spent "more time criticizing Republicans for their values and priorities rather than trying to find accommodations with them." Instead, Obama "subordinated" about preserving entitlements and the wealthy having a higher tax burden in favor of "its broader, overarching theme: That Obama is the grown-up in the room."
The New Republic's Jonathan Chait says Obama made several strategic errors that left us with a "horrible piece of legislation." But, given all those errors committed since the end of last year, "the current deal on offer is about as non-bad as it could have gotten. It managed to backload the timing of spending cuts to minimize damage to the recovery and protect programs for the most vulnerable beneficiaries." And, he writes, the deal "rebuilds Obama's image" as fiscally responsible. Plus, further down the road, Obama have "enormous leverage over the GOP" when it comes to the expiring Bush tax cuts, and "going to the mat over the Bush tax cuts would provide Obama with a strong political message for 2012." Klein agrees: "The only way [Republicans] can succeed in keeping taxes from rising is if the Obama administration and the Democrats stand shoulder-to-shoulder with them to extend the Bush tax cuts."