With Senator Tom Coburn coming back to the Senate’s gang of six (or seven if you count President Obama) a deal on the debt ceiling was finally able to come together. It is a bipartisan effort that will reduce the countries deficit in half by 2013, but both Democrats and Republicans can give their constituents something to chew on.
There will be a little over $4 trillion in cuts on overall spending. $500 billion will be immediately cut on items the gang have already agreed to, which includes slicing $100 billion out of Medicare. The rest is a combined effort by Senate committees that have numbers they have to meet according to the deal. The Finance Committee is also in charge of making changes to the tax code, but you can kiss the Alternative Minimum Tax goodbye. All the bills with the cuts that the committees bring to the Senate floor have to garner 60 votes to pass. But if no bill is brought within six months the debate becomes open to the entire body.
Since I know you’re wondering what the talking points for each side will be, they are broken down below;
President Obama: If you thought he won reelection after killing Osama Bin Laden, he just finished building the coffin for whoever the GOP nominee is. He looks like the leader here by getting the debt ceiling raised with the amount of cuts he asked for. For now, he can also say they will be reforming Social Security to make it solvent for future generations, without cutting benefits to those who need it now. But most importantly, he owns the middle. NBC’s poll that came out today showed that the majority of people wanted both sides to compromise. The only ones who didn’t were the diehard liberal and conservatives. But while members of Congress weren’t able to come to a compromise Obama can say he brought both sides together and got them to agree to take responsible actions.
Congressional Democrats: They kept their promise and made sure no changes were made to Social Security. Republicans running against them this year can’t say they voted to reduce their entitlements, and as of today there is only $500 billion in cuts. It keeps government spending strong which is what the economy needs as demand for products is high.
Republicans: Big cuts are being made to government spending to the point where the deficit will be cut in half from 9.3 percent of GDP today, to 4.4 percent of GDP in 2013. Plus, taxes are being reduced by getting rid of the Alternative Minimum Tax. That means there will be an extra $1.7 trillion in people’s pockets to spend which (as some argue) is a stimulus package for the economy.
So, like I said, everyone is getting something, but here’s the problem; this entire plan relies on Congress to actually do something. All the committees have been assigned homework that is due within six months, but we’re talking about a body that hasn’t been able to come together on anything for a year and a half. If moderate Democrats and Tea Party members want to actually be able to say in 2012 they were able to cut $4 trillion out of the budget, they need to meet the numbers agreed to in the deal, on top of agreeing to reforms on Social Security.
And before I forget, this deal has only been agreed to by the Senate. No house members were involved, and members of the Tea Party may not like the fact the deal doesn’t automatically cut the $4 trillion out of the budget.
Both sides have more to gain by making this sound easier then it will actually be. So maybe next week when the Senate votes to raise the debt ceiling, and then go off to start finding those cuts, the gang of six deal will be praised. But if they are not able to agree to some of these changes, those talking points won’t work next year.