Congressional leaders in the United States House of Representatives and Senate are looking to vote on a claimed Bipartisan U.S. Debt Deal . This new U.S. Debt Ceiling bill would raise the United States Debt Ceiling and implement large spending cuts, while addressing the large U.S. deficit and work towards cutting it.
Instantly the new U.S. Debt Deal Bill would raise the United States Debt Ceiling through the end of the year 2012, while also calls for $2.4 trillion in savings over the next ten years. In addition, it establishes a new committee to address budgetary and fiscal concerns that will seek further drastic spending cuts and long term fiscal changes and reforms to aid in the process.
This U.S. Debt Ceiling vote comes on August 1st, just one day away from the Obama administration set deadline of August 2nd. It has been said that if a bill were not to be passed by August 2nd to allow the treasury to increase the deficit further and increase the united states debt, then the united States government would default, as it could not longer pay off its loans or the interest on the loans.
In the event of a default, interest rates were expected to soar up drastically, markets were expected to take a large hit and become unstable and the value of the United States dollar was expected to decrease significantly. Along with the direct fiscal effects on the U.S. economy was the addition of the possible downgrade by Moody’s Investoer Services and other governmental credit rating organizations such as Fitch. The United States of America currently holds a Aaa rating, but faced at minimum a downgrade to an Aa rating, affecting its ability to get more loans and the rate of interest placed on these loans.
The bill may be coming to a vote today, however that does not mean it will necessarily pass. The long term cuts over a decade are meager and it lacks key components that both sides were desiring. Many in the U.S. House or Representatives wanted a bill similar to the Cut, Cap and Balance Proposal that required a Balanced Budget Amendment. Many Democratic lawmakers, which held up a bill passing for months, desired tax increases in order to send a bill to President Obama to sign.
The new bill however includes $917 billion in instant savings, with a large portion, $420 billion coming from the national security budget. In addition to the cuts, the debt ceiling could be raised $900 billion. Due to the deadline being just a day away, President Obama would be able to instantly raise the U.S. Debt ceiling by $400 billion. The other $500 billion would be subject to a congressional vote of approval or disapproval which could be vetoed by President Obama and raised anyways, however lawmakers that oppose it could have a “symbolic” gesture of disapproval.
The new joint committee would consist of six Republican and six Democratic lawmakers. They would have to find at minimum $1.5 trillion additional cuts to the deficit and have them ready to be presented to Congress by November 23rd. By December 23rd there would be an up or down vote with no amendments to the movement to pass or decline the committee recommendations.
If the recommendations are enacted, President Obama would be able to raise the U.S. Debt Ceiling by $1.5 trillion, if they are not he can only raise it by $1.2 trillion. In either case, any increase in the U.S. Debt Ceiling would have to be countered with direct cuts to the U.S. Deficit by equal amounts.