The House of Representatives endorsed a debt-reduction agreement on Monday, hours before the debt ceiling limit was set to expire on Tuesday, Aug. 1. The Budget Control Act Amendment of 2011 passed on a vote of 269 to 161.
The last-ditch deal, which the Senate is expected to approve today, prevents the nation from defaulting, but does little else, according to the Los Angeles Times. Politically, each faction gets a partial victory in the face of $2.1 trillion in cuts phased in over time: the GOP protects high-income Americans from paying more in taxes; Democrats are assured Social Security won’t be cut; and President Barack Obama won’t face another debt-ceiling debacle before the next election (though the budget battle is next). The loser is the nation’s economy, according to the LA Times.
Under the plan, the federal government will cut $21 billion from its $3.7 trillion budget in 2012. Most of the $2.1 trillion in cuts, to be meted out over the course of a decade, wouldn’t go into effect until after the next election. Analysts say the federal budget reductions could weaken what is anticipated to be a slow recovery in 2013 and 2014.
Read a “fine print” summary of the bill from Nate Silver, fivethirtyeight.com/New York Times.
Vermont’s delegation is split on the so-called Reid-McConnell deal. Sen. Patrick Leahy reluctantly supports the bill. He emphasizes the importance of averting a default that would have sent “shock waves” through the economy.
“We have to understand the choice is not between this bill and something better,” Leahy said in a video message to Vermont constituents on his website (footage is included at the bottom of this post). “I would look for something better if I could.”
Sen. Bernie Sanders, I-Vt., adamantly opposes the Budget Control Act Amendment of 2011, and plans to vote against it on Tuesday. He described the deal in a speech (on video) as “immoral” and “grotesquely unfair.”
Rep. Peter Welch, D-Vt., cast his vote with the nays. He told Vermont Public Radio that it was one of the “most difficult decisions” he’d faced in Congress, and he described the vote as a “pick your poison situation.”
A default would have led to immediate fiscal fall out on Wall Street, bank credit would have been tightened further and the nation’s credit rating would have taken a hit. Economist Paul Krugman is predicting, however, that the debt ceiling deal itself will slow the nation’s growth in 2013 and 2014 when the caps on spending kick in.
Welch decried the extreme partisanship that has gripped Congress since Tea Party activists began taking the GOP and Capitol Hill in a far rightward direction in January.
“I also voted against this bill because it validates the tactic of putting a gun to the head of the American economy to advance a party’s agenda,” Welch said in a statement. “Never before has a willful majority in Congress held hostage the full faith and credit of the United States of America in order to get its way on the budget.”
As deputy minority whip, Welch led an effort to pass a “clean extension” of the debt ceiling without conditions. The effort failed in May.
Welch said he couldn’t support the new measure because “it is not a balanced plan with shared sacrifice.”
The congressman would have preferred a broad plan that would have restored fiscal stability and made important investments in the economy.
“It ignores glaring inequities in the federal tax code while cutting programs important to the middle class, seniors, and low-income Americans,” Welch said in a statement. “There is simply no excuse for condoning continued tax breaks for Wall Street hedge fund managers, the ethanol industry and big oil companies while the middle class struggles to hang on to their jobs, pay their bills and send their children to college.
Among the congressman’s chief concerns is the way the bill sets caps on spending. The language of the legislation is not specific, he said in a telephone interview Monday night, and he has “no idea what the cuts are.” The bill, Welch said, authorizes the “Ryan budget team to make those decisions.”
Congressman Paul Ryan’s proposed budget, “A Roadmap for America’s Future,” lowers taxes for high-income individuals by a third and eliminates taxes on interest, capital gains, dividends and estates. It requires workers to invest a third of their Social Security taxes in private investments. Under the Wisconsin representative’s plan, Medicare coverage would become a private insurance program, facilitating $389 billion worth of cuts over 10 years, according to the Huffington Post. Medicaid would become a state block grant program giving states maximum flexibility to tailor Medicaid programs to the specific needs of their populations, leading to $735 billion in budget reductions. Ryan’s budget assumes that the Affordable Care Act is repealed, and if that becomes a reality, federal spending would be slashed by $1.4 trillion over the next decade.[youtube raW2T28Ua7Y]