Sunday night, lawmakers from both parties finally signed an agreement to raise the debt ceiling and prevent an unprecedented default on the country’s financial obligations. The bipartisan battle was long and hard, and much remains yet to be sorted out after the dust settles. Both parties have reportedly expressed dissatisfaction with the compromise.
Forming a Super Congress
Lawmakers came to an agreement late Sunday after months of bitter debate and partisan fighting. The debt deal reached includes $2.4 trillion in spending cuts over the next decade, without tax hikes or closure of tax loopholes. It also calls for the formation of a “Super Congress” to address further spending cuts by November. In return, the $14.3 trillion debt ceiling will be raised by $900 billion through 2013.
The new Super Congress is a committee of 12 lawmakers evenly divided between the two parties and chambers. The committee is charged with finding $1.5 trillion more in cuts to present by Thanksgiving 2011. Congress will not have the option of amending or filibustering the committee’s decisions.
Vote scheduled for Monday
While most analysts expect the debt deal reached to pass, there is no guarantee. A vote is scheduled for Monday. If the debt ceiling is not raised by Tuesday, the U.S. could default on payments to investors in Treasury bonds, social security pensions and veterans’ benefits.
Stocks, which have been nervous of late, rose in the U.S. by more than 1 percent Monday in response to the news. The dollar also made a slight-but-encouraging rise against the Swiss franc and the yen.
A House divided
The Democratic-led Senate is expected to pass the debt ceiling deal. But tougher opposition may come from the House. Liberals opposed it out of fear that social programs would be cut. Conservatives waned even more cuts in the debt deal reached.
Credit rating may still face downgrade
While the chance of a default looks far less likely, the future of the nation’s impeccable credit rating is not nearly as certain. Ratings service Standard & Poor’s has threatened to downgrade the rating, and may do so even if a default is averted.
Taxation seems to be shaping up as the next great partisan battle. At best, most analysts see the deal as a compromise for all concerned. House Speaker John Boehner was the only one to claim victory Sunday night.
“The White House bid to raise taxes has been shut down,” he told House Republicans.
However, even though the new deficit reduction plan does not specifically call for new taxes, many Democrats see the Super Congress as a potential vehicle to reform the tax code and provide additional revenue. If tax reform does not succeed in the committee, the White House promises to allow the tax cuts made by former President George W. Bush to expire in 2013.
Huffington Post: http://www.huffingtonpost.com/2011/07/31/debt-ceiling-deal_n_914538.html
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