Bipartisan Debt Deal: A Win for the Economy and
Budget Discipline
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Removes the cloud of
uncertainty over our economy at this critical time, by
ensuring that no one will be able to use the threat of
the nation's first default now, or in only a few
months, for political gain;
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Locks in a down payment
on significant deficit reduction, with savings from
both domestic and Pentagon spending, and is designed
to protect crucial investments like aid for college
students;
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Establishes a bipartisan
process to seek a balanced approach to larger deficit
reduction through entitlement and tax reform;
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Deploys an enforcement
mechanism that gives all sides an incentive to reach
bipartisan compromise on historic deficit reduction,
while protecting Social Security, Medicare
beneficiaries and low-income programs;
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Stays true to the President's commitment to shared
sacrifice by preventing the middle class, seniors and
those who are most vulnerable from shouldering the
burden of deficit reduction. The President did not
agree to any entitlement reforms outside of the
context of a bipartisan committee process where tax
reform will be on the table and the President will
insist on shared sacrifice from the most well-off and
those with the most indefensible tax breaks.
Mechanics of the Debt Deal
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Immediately enacted
10-year discretionary spending caps generating nearly
$1 trillion in deficit reduction; balanced between
defense and non-defense spending.
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President authorized to
increase the debt limit by at least $2.1 trillion,
eliminating the need for further increases until 2013.
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Bipartisan committee
process tasked with identifying an additional $1.5
trillion in deficit reduction, including from
entitlement and tax reform. Committee is required to
report legislation by November 23, 2011, which
receives fast-track protections. Congress is required
to vote on Committee recommendations by December 23,
2011.
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Enforcement mechanism established to force all
parties – Republican and Democrat – to agree to
balanced deficit reduction. If Committee fails,
enforcement mechanism will trigger spending reductions
beginning in 2013 – split 50/50 between domestic and
defense spending. Enforcement protects Social
Security, Medicare beneficiaries, and low-income
programs from any cuts.
1. REMOVING UNCERTAINTY TO SUPPORT THE AMERICAN
ECONOMY
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Deal Removes Cloud of
Uncertainty Until 2013, Eliminating Key Headwind on
the Economy: Independent analysts, economists, and
ratings agencies have all made clear that a short-term
debt limit increase would create unacceptable economic
uncertainty by risking default again within only a
matter of months and as S&P stated, increase the
chance of a downgrade. By ensuring a debt limit
increase of at least $2.1 trillion, this deal removes
the specter of default, providing important certainty
to our economy at a fragile moment.
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Mechanism to Ensure Further Deficit Reduction is
Designed to Phase-In Beginning in 2013 to Avoid
Harming the Recovery: The deal includes a mechanism to
ensure additional deficit reduction, consistent with
the economic recovery. The enforcement mechanism would
not be made effective until 2013, avoiding any
immediate contraction that could harm the recovery.
And savings from the down payment will be enacted over
10 years, consistent with supporting the economic
recovery.
2. A DOWNPAYMENT ON DEFICIT REDUCTION BY LOCKING
IN HISTORIC SPENDING DISCIPLINE – BALANCED BETWEEN
DOMESTIC AND PENTAGON SPENDING
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More than $900 Billion in
Savings over 10 Years By Capping Discretionary
Spending: The deal includes caps on discretionary
spending that will produce more than $900 billion in
savings over the next 10 years compared to the CBO
March baseline, even as it protects core investments
from deep and economically damaging cuts.
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Includes Savings of $350
Billion from the Base Defense Budget – the First
Defense Cut Since the 1990s: The deal puts us on track
to cut $350 billion from the defense budget over 10
years. These reductions will be implemented based on
the outcome of a review of our missions, roles, and
capabilities that will reflect the President's
commitment to protecting our national security.
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Reduces Domestic
Discretionary Spending to the Lowest Level Since
Eisenhower: These discretionary caps will put us on
track to reduce non-defense discretionary spending to
its lowest level since Dwight Eisenhower was
President.
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Includes Funding to Protect the President's Historic
Investment in Pell Grants: Since taking office, the
President has increased the maximum Pell award by $819
to a maximum award $5,550, helping over 9 million
students pay for college tuition bills. The deal
provides specific protection in the discretionary
budget to ensure that the there will be sufficient
funding for the President's historic investment in
Pell Grants without undermining other critical
investments.
3. ESTABLISHING A BIPARTISAN PROCESS TO ACHIEVE
$1.5 TRILLION IN ADDITIONAL BALANCED DEFICIT REDUCTION
BY THE END OF 2011
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The Deal Locks in a
Process to Enact $1.5 Trillion in Additional Deficit
Reduction Through a Bipartisan, Bicameral
Congressional Committee: The deal creates a
bipartisan, bicameral Congressional Committee that is
charged with enacting $1.5 trillion in additional
deficit reduction by the end of the year. This
Committee will work without the looming specter of
default, ensuring time to carefully consider essential
reforms without the disruption and brinksmanship of
the past few months.
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This Committee is
Empowered Beyond Previous Bipartisan Attempts at
Deficit Reduction: Any recommendation of the Committee
would be given fast-track privilege in the House and
Senate, assuring it of an up or down vote and
preventing some from using procedural gimmicks to
block action.
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To Meet This Target, the Committee Will Consider
Responsible Entitlement and Tax Reform. This means
putting all the priorities of both parties on the
table – including both entitlement reform and
revenue-raising tax reform.
4. A STRONG ENFORCEMENT MECHANISM TO MAKE ALL
SIDES COME TOGETHER
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The Deal Includes An
Automatic Sequester to Ensure That At Least $1.2
Trillion in Deficit Reduction Is Achieved By 2013
Beyond the Discretionary Caps: The deal includes an
automatic sequester on certain spending programs to
ensure that—between the Committee and the trigger—we
at least put in place an additional $1.2 trillion in
deficit reduction by 2013.
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Consistent With Past
Practice, Sequester Would Be Divided Equally Between
Defense and Non-Defense Programs and Exempt Social
Security, Medicaid, and Low-Income Programs:
Consistent with the bipartisan precedents established
in the 1980s and 1990s, the sequester would be divided
equally between defense and non-defense program, and
it would exempt Social Security, Medicaid,
unemployment insurance, programs for low-income
families, and civilian and military retirement.
Likewise, any cuts to Medicare would be capped and
limited to the provider side.
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Sequester Would Provide a Strong Incentive for Both
Sides to Come to the Table: If the fiscal
committee took no action, the deal would automatically
add nearly $500 billion in defense cuts on top of cuts
already made, and, at the same time, it would cut
critical programs like infrastructure or education.
That outcome would be unacceptable to many
Republicans and Democrats alike – creating pressure
for a bipartisan agreement without requiring the
threat of a default with unthinkable consequences for
our economy.
5. A BALANCED DEAL CONSISTENT WITH THE
PRESIDENT'S COMMITMENT TO SHARED SACRIFICE
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The Deal Sets the Stage
for Balanced Deficit Reduction, Consistent with the
President's Values: The deal is designed to achieve
balanced deficit reduction, consistent with the values
the President articulated in his April Fiscal
Framework. The discretionary savings are spread
between both domestic and defense spending. And the
President will demand that the Committee pursue a
balanced deficit reduction package, where any
entitlement reforms are coupled with revenue-raising
tax reform that asks for the most fortunate Americans
to sacrifice.
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The Enforcement Mechanism
Complements the Forcing Event Already In Law – the
Expiration of the Bush Tax Cuts – To Create Pressure
for a Balanced Deal: The Bush tax cuts expire as of
1/1/2013, the same date that the spending sequester
would go into effect. These two events together will
force balanced deficit reduction. Absent a balanced
deal, it would enable the President to use his veto
pen to ensure nearly $1 trillion in additional deficit
reduction by not extending the high-income tax cuts.
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In Securing this Bipartisan Deal, the President
Rejected Proposals that Would Have Placed the Sole
Burden of Deficit Reduction on Low-Income or
Middle-Class Families: The President stood firmly
against proposals that would have placed the sole
burden of deficit reduction on lower-income and
middle-class families. This includes not only
proposals in the House Republican Budget that would
have undermined the core commitments of Medicare to
our seniors and forced tens of millions of low-income
Americans to go without health insurance, but also
enforcement mechanisms that would have forced
automatic cuts to low-income programs. The enforcement
mechanism in the deal exempts Social Security,
Medicaid, Medicare benefits, unemployment insurance,
programs for low-income families, and civilian and
military retirement.
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