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It Is Almost Over: The Tentative Agreement To Avoid Default Has Been Reached
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It is Almost Over: The Tentative Agreement to Avoid Default Has Been Reached

President Obama was cautiously optimistic but noticeably tired when he spoke to the media. Finally the news that everyone has been waiting to hear, a tenative deal to avoid financial default has been struck just days away from the deadline. The news was met with renewed confidence in the foreign financial markets as trading slowly eased upward.

The deal cuts just over two trillion dollars from the federal spending in the next ten years but does extend the Treasury’s authority to borrow beyond 2012, one of Obama’s key objectives. But, the President had to give up his bid to raise taxes for the wealthiest Americans, a sticking point that the Republicans would not give up on.

Experts agree that the spending cuts might threaten the economic recovery that is fragile at best. The first half of 2011 has been the worst in terms of the economy since the official end of the Great Recession.

Congress still has to approve the measure before it is officially passed with that vote scheduled for Tuesday morning. There will be not voting at all on Monday to allow party leaders the time to sell the plan to their members. The plan is almost a sure bet in the Senate but there is potential problem getting it to pass the House. If the plan does not pass as planned, a default could occur. If it is approved as the White House hopes, the United States will keep its credit rating and the stock market may recover the losses it has had so far.

The plan also requires a committee to be formed. That committee will need to come up with more cuts, nearly two trillion dollars more, from benefits programs and from tax reforms by Thanksgiving of this year. Congress will vote on the cuts just before the Christmas recess. If the committee cannot get the cuts or Congress refuses to sign off on them, there will be other cuts that are automatically triggered, taking money from Pentagon and domestic programs.

Thee will be no extension of the current unemployment benefits as Obama had asked for, but Social Security, Medicaid and Veteran’s benefits will not be changed at all. Payments to medical professionals under the Medicare program, including doctors, nurses and therapists as well as others could have their payments cut or eliminated with the new deal.

Tax increases are also off of the table unless the bipartisan committee recommends them as absolutely necessary. That new committee will have equal numbers of Democrats and Republicans. How the committee will be selected has not been discussed.

While everyone has been cautiously optimistic or prudently silent, Michelle Bachmann has said that she will vote no on the plan as it is currently written. While Democrats and Republicans have tweeted about compromise and the greater good, Bachmann, who is considered a serious contender for the Republican party’s presidential nomination remains negative. During a speech, Bachmann also placed the blame for the entire situation on President Obama and not political wrangling by the GOP.

Street Talk

Ryan you are confused. Our Monthly federal tax revenue is $200 billion. That means every month the government is receiving $200 billion dollars in tax money. The interest on our debt payment is $20 billion a month. The recent deal made, did nothing to stop default on are debt payment, since we were never going into default in the first place. With the final deal in place Obama can now spend (and add) 2.6 trillion dollars to our debt. So Ryan are you going to improve your debt situation by spending more? Your article has a number of misconceptions. "Tax increases are also off of the table unless the bipartisan committee recommends them as absolutely necessary." Obama's extension on The Bush tax cuts are due to run out again this year. Obama's decision not to extend them will be a tax increase. This decision has nothing to do with congress deciding.

  about 1 decade ago
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