Midday Update
by digby
Sources from both parties tell ABC News that the major potential roadblock in deficit negotiations– the triggers — are now essentially agreed upon. The plan is for the House to vote on this tomorrow, assuming all goes according to plan.
The agreement looks like this: if the super-committee tasked with entitlement and tax reform fails to come up with $1.5 trillion in deficit reduction that passes Congress, the “neutron bomb” goes off, — as one Democrat put it — spending cuts that will hit the Pentagon budget most deeply, as well as Medicare providers (not beneficiaries) and other programs.
If the super-committee comes up with some deficit reduction but not $1.5 trillion, the triggers would make up the difference.
So it’s a minimum $2.7 trillion deficit reduction deal.
And the debt ceiling will be raised by $2.4 trillion in two tranches: $900 billion immediately, and the debt ceiling will be raised by an additional $1.5 trillion next year – either through passage of a Balanced Budget Amendment, which is unlikely, or with Congress voting its disapproval..
Two items still being negotiated:
1) The exact ratio of Pentagon to non-Pentagon cuts in the trigger – Democrats want 50% from the Pentagon, Republicans want less;
2) Democrats want to exempt programs for the poor from the cuts.
Also Democrats say –- if tax reform doesn’t happen through the super-committee, President Obama will veto any extension of Bush tax cuts when they come up at the end of 2012, further creating an incentive for the super-committee to act.
All sides hope this will be enough to convince the markets and ratings agencies that the federal government is serious about deficit reduction -– in order to avoid default.
Well yes. And then “the market” will smoke a cigarette and roll over and go to sleep.
And I thought the president had promised to extend the Bush tax cuts for the wealthy no matter what?
‘Whatever we agree on, we are still going to have plenty to argue about in 2012,'” a senior administration official said, paraphrasing the president. “‘I’ve said I’m not going to renew the tax cuts for the top two percent. We might agree on tax reform or simplification, but on the upper-income tax cuts we are just going to have to agree to disagree.'”
There have been varying reports that the Bush tax cuts were part of discussions, but I haven’t seen them thrown in in exchange for “tax reform”, that fabulous abstraction in which everyone gets lower rates and the government collects more money (and nobody feels a thing.) I had been hearing that the Bush tax cuts expiring would be the big liberal achievement that would make all this worthwhile. Looks like there’s a possibility even that was too optimistic.
Just keep in mind that progressives should want to do all this.
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