President Obama has announced that bipartisan leaders have come to an agreement that will cut the deficit and avert default.

·         President Obama has announced that bipartisan leaders have come to an agreement that will cut the deficit and avert default – a default that would have had catastrophic consequences for the American economy.

·         That agreement is a victory for American families because:

o   It extends the debt limit to the year 2013, getting rid of the cloud of uncertainty looming over the American economy and guaranteeing that no one can use the possibility of default right now or in the coming months for political gain.

o   It will boost global confidence in the American economy by establishing a framework for balanced fiscal discipline in the long term.

o   It guarantees that America can meet all its obligations – including Americans’ monthly Social Security payments, veterans’ benefits, and the contracts our government has signed with thousands of businesses across the country.

·         Details of the Debt Agreement. President Obama said from the start that any solution to avert default and achieve significant deficit reduction had to have the support of Democrats and Republicans.  After working toward an agreement for months, bipartisan members of the House and Senate have come to an agreement that includes:

o   A down payment on deficit reduction that includes historic long-term spending reductions, including almost $1 trillion in spending cuts.  Those cuts are set out in a way that avoids damaging our economic recovery.  They are balanced between domestic and defense spending, and they protect essential initiatives like aid for college students.

o   An expedited process to achieve balanced deficit reduction.  The agreement establishes a longer term process to achieve another $1.5 trillion in deficit reduction with a committee structure that is going to put everything on the table, including reforms to taxes and entitlements.  To stop either side from utilizing procedural tricks that would stop Congress from acting, the recommendations of the committee will get fast track authority, meaning they can’t be filibustered or amended.

o   Setting the stage for a balanced agreement that includes revenues.  American families and an increasing number of Republicans are united in agreement that any deficit reduction deal has to be balanced and must include revenue.

§  Even the Speaker of the House was willing to consider an agreement with $800 billion in revenues, and almost 20 Republican Senators lent their support to the Gang of Six framework, which included more than $2 trillion worth of revenue.

§  If the Committee is not able to achieve meaningful balanced deficit reduction that includes revenue-increasing tax reform for the wealthiest Americans by the end of 2012, President Obama can put his veto pen to work to raise nearly $1 trillion from the wealthiest Americans by vetoing any extension of the Bush tax cuts for the most well-off individuals.

o   A demonstrated enforcement method.  The enforcement mechanism in the agreement will force cuts that are painful enough to both sides that Congress will have to act.  By their nature, enforcement mechanisms should include aspects that neither side supports in order to guarantee action is taken.

§  The enforcement mechanism in this agreement does just that.  If Congress doesn’t act, then beginning in 2013 there are going to be $1.2 trillion in spending cuts through 2021 – 50 percent from domestic spending and 50 percent from defense spending.

§  Low income programs such as Medicaid and Social Security and Medicare benefits would be exempt.  Cuts to Medicare would be capped and limited to the provider side.

§  The last time such an enforcement method was put to use – with 50 percent domestic and 50 percent defense reductions – the threat of defense reductions helped spur the bipartisan budget agreement of 1990 under President George H. W. Bush, an agreement that included revenues as well as spending cuts.

o   An agreement in keeping with President Obama’s commitment to shared sacrifice.  This agreement does not accept entitlement reform without giving equal consideration to revenue-increasing tax reform, and it guarantees that low-income and middle class families won’t be forced to carry the burden of deficit reduction alone. 

·         We haven’t put this challenge behind us yet.  Leaders of both parties are now taking the framework agreement to their caucuses, and bipartisan members of Congress have to vote on this agreement in the next two days.

·         If Congress doesn’t act, America could default on its obligations for the first time in our history, not because we aren’t able to pay our nation’s bills, but because we don’t have a Triple A political system to match our bond rating.

·         Those who say the tough choices included in the framework agreement aren’t good enough should know that a default on America’s debt would have catastrophic economic consequences and would lead to real hardship for Americans across the country – with a tax increase in the form of higher interest rates on Americans’ mortgages, car loans, and credit cards as well as delays in payments to America’s seniors, the disabled, veterans, and small companies that do business with our federal government.

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