The two parties went eyeball to eyeball over the threat of a national default, and the Democrats blinked. That's the conventional wisdom in Washington as Congress passes a law which will raise the debt ceiling until 2013, and cut at least $2.1 trillion from the national debt over 10 years. Although both sides tried to claim victory, by signing onto a debt limit hike which does not explicitly include new tax revenues — even though it leaves that possibility open — President Obama was the one who gave up more. As Democrats grudgingly approved the bill in the Senate on Tuesday, they also vowed to make sure that they'll have the upper hand when the conflict over the to-be-determined deficit cuts in the deal arises again in December.
It was hard not to draw a conclusion about who won or lost based on the body language of the Senate leaders before the deal's final 74-26 vote. As Senate Minority Leader Mitch McConnell spoke gleefully of a victory by newly elected Republicans, Senate Majority Leader Harry Reid slumped in his seat and rested his forehead on his fingertips. While he praised the bill, Reid also blasted the Tea Party movement for pushing Congress rightward, calling it "very disconcerting." And, perhaps more critically, Reid vowed that the joint committee established by the law would include new tax revenue as part of its recommendations. "We've had too much talk the last few days of Republican leaders in the Senate saying there will be no revenue," Reid said. "That's not going to happen." Reid's comments, along with promises from House Speaker Nancy Pelosi to ensure that Democratic committee members are against cuts to Social Security and Medicare benefits, show that Democrats are already getting ready for yet another showdown over revenue and entitlements.The outline of the bill is what Obama and Democrats had generally agreed to over the past few months. It would immediately enact about $900 billion worth of cuts over the next decade, including some cuts to defense, that had been worked out during negotiations with Vice President Joe Biden. It also establishes a process to cut $1.5 trillion later this year. But Obama ultimately gave in to Republican demands in two significant ways. The joint committee, which will have 12 members split evenly from each party, is given the freedom to consider tax changes, but there aren't any requirements to do so. And the so-called trigger to compel the committee to action comprises only broad spending cuts, not anything which would raise taxes. Those two factors give the GOP considerable leverage to continue to pursue a cuts-only approach. President Obama claimed that the expiration of the Bush tax cuts at the end of 2012 gives the White House some power to make sure that repealing high-income tax breaks is part of the solution. But his logic is a bit puzzling, since that was the administration's position anyways, and Obama failed to follow through on his promise to roll back the income tax breaks on the richest Americans at the end of 2010.
As the administration made a furious push Monday to convince members of Congress to approve the bill, there were plenty of questions about what type of legislation the joint committee would approve. "Unfortunately, there are no guarantees," Michigan Democratic Sen. Debbie Stabenow said after meeting with Biden on Monday. But Reid's Tuesday statement, just short of an ultimatum, seems to indicate that Democrats will take a proactive approach to make sure that the committee either approves a debt reduction package with a mix of spending cuts and tax hikes, or it does nothing at all. Republicans continued to claim that tax hikes are a non-starter, whether through corporate tax reform, eliminating tax incentives, or allowing the Bush tax cuts to expire. "I don't think that type of posturing is helpful," said Arizona Republican Sen. Jon Kyl, of Reid's comments.
The next fight has all of Washington chattering about who will be appointed to the committees, and whether the parties will use any litmus tests to pick their members. The joint committee would include six House members and six senators, appointed by party leaders. It would have until November 23 to present a package of measures to reduce the deficit by $1.5 trillion, which must be approved by at least seven of its members. Congress would then have to vote on those recommendations — up or down, without filibusters or amendments — before December 23. If they are passed, then President Obama would get his full debt limit increase, up to $2.4 trillion. If they aren't passed, or if the committee is deadlocked and doesn't present any findings, then the law would trigger $1.2 trillion worth of budget cuts in 2013, spread across defense, Homeland Security, Veterans Affairs, the State Department, Medicare payments to providers, and several other government departments. (In that case, the debt ceiling increase would only increase to $2.1 trillion.) That, aside from some procedural and symbolic votes on a balanced budget amendment and votes to disapprove of the the debt ceiling hike, would guarantee that the debt limit issue will be dealt with until at least 2013.