A (Sort of) Debt Ceiling Deal

Last night the players agreed to a budget deal that includes raising the debt ceiling. The President's 'Fact Sheet' is here. Ezra Klein:

The deficit-reduction side includes $1 trillion in cuts now, $1.5 trillion (or more) in deficit reduction later, and a vote on a balanced budget amendment. Meanwhile, it raises the debt ceiling by $900 billion immediately, and either $1.5 trillion (if the second deficit reduction package or a balanced budget amendment passes) or $1.2 trillion (if neither pass) later. Either way, the Treasury should have plenty of borrowing authority to get us to 2013.

Most of the effort went into crafting the "trigger", which is supposed to make automatic cuts of $1.2 trillion (0ver ten years) if Congress doesn't enact the $1.5 trillion in cuts. There are no new taxes in this deal. But for liberals there is a silver lining: cuts in defense spending, initially $350 billion and half of whatever amount the "trigger" cuts.

Also, and this is probably the key thing about the deal, it does not extend the Bush tax cuts, which are scheduled to expire in 2012. If they do expire, that's $3.6 trillion in revenue. Obama has been trying to make the "middle class" portion of the tax cut permanent, in return for raising taxes on the wealthy, but Republicans would not take the deal. They must be thinking either that they will control the whole government in 2012, or that Obama will blink and not let taxes rise. Obama thinks that deadline will force a deal eventually. From the Fact Sheet:

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.

Ezra Klein thinks that since making this deal was so difficult -- the House took up less than half the number of bills this year than it does in a typical session -- we may be on autopilot from here on out:

Perhaps this deal signals the end of the need to actually reach an agreement, however. If the Joint Committee fails, the trigger begins cutting spending. If negotiations over taxes fail, the Bush tax cuts expire and revenues rise by $3.6 trillion. Neither scenario is anyone’s first choice on policy grounds. But you can get to both scenarios without Republicans explicitly conceding to higher taxes or Democrats explicitly conceding to entitlement cuts in the absence of higher taxes. Politically, that’s the lowest-common denominator, and that might mean it’s also the only deal the two parties can actually make. But that’s because it’s the only deal that doesn’t require, well, making a deal.

Assuming, of course, that this passes the House.