OAKLAND, Calif., Aug. 1, 2011 On the heels of negotiations facilitated primarily by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) that extended well into the evening on Sunday, President Obama announced that the parties had come to a preliminary agreement on the debt ceiling debate. He finalized the deal through a series of phone calls to each of the four congressional leaders shortly after 8 p.m. Lawmakers are hoping to pass the compromise through Congress as early as Monday nightbarely 24 hours before the Treasurys forecast of when the government could begin running short of cash to pay the nations bills.
The Congressional Budget Office (CBO) confirmed Monday morning that the debt-reduction deal would cut deficits by at least $2.1 trillion over the next 10 years, if legislators enact the negotiated plan. It calls for establishing caps on discretionary spending through 2021 and requires that the House and Senate vote on a joint resolution proposing a balanced-budget amendment to the Constitution. Additionally, there would be procedures to increase the nations current $14.3 trillion debt limit by $400 billion initially and further measures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion, the CBO said. According to their projections, the legislation would reduce budget deficits by $917 billion between 2012 and 2021.
Although this compromise seems set for approval, there is far from a consensus amongst leading experts that this agreement will make any significant strides towards debt recovery.
The Independent Institutes Research Editor, Anthony Gregory, and Senior Research Fellow, Benjamin Powell, react to these latest developments and comment on what remains as the smoke clears.
The amount the government is now spending above what it is receiving in revenues is something around thirteen times the annual cuts that the two parties are agreeing to. In other words, all this deliberation has amounted to something so closely resembling exactly nothing that we might as well call it exactly nothing.
Hitting the debt ceiling would force the government to only spend as much as it receives in revenue since it would no longer be able to issue more debt. That automatically puts limits on future spending and forces the government to balance its budget. It also implies real spending cuts.
For further analysis from Independent Institute experts on the latest budget developments, please contact Lindsay Boyd, Director of Communications, at 202-725-7722 or firstname.lastname@example.org.
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