Late last night we got word that an agreement had been reached. We are still learning the details it appears that in exchange for raising the debt ceiling, there will be spending cuts of $2.1 trillion. Of the total proposed cuts, $917 billion would be immediate cuts and the remaining $1.2 trillion in cuts would come from a legislative committee charged with finding the savings by the end of the year. In other words 57% of the cuts in the compromise package are at the mercy of a legislative commission, and we all know how effective legislative commissions have been in the past.
Meanwhile, the public has little appetite for raising the debt ceiling without significant and real debt reduction. In a CNN poll released late last week, only 17% of Americans favored ceiling without an agreement on the debt. Nearly half (45%) said they would favor action on the debt ceiling “only if Congress takes action to reduce by trillions of dollars the amount the government owes,” and 36% said they oppose raising the debt ceiling under all circumstances.
Time will tell, but the devil is in the details of the legislative commission’s work. For the time being, it looks like Washington is going to do what it always does and use accounting gimmicks and blue ribbon commissions to avoid having to make meaningful spending cuts. Like an alcoholic saying they are going to stop drinking tomorrow, Congress is making promises of future fiscal restraint that are simply not believable.
