Update: President Obama has signed the deal into law.
Washington took the debt limit to the edge as the Senate voted today, 74-26, to enact the agreement reached late Sunday to increase the statutory debt ceiling while also reducing the federal budget deficit. The House approved the measure Monday on a 269-161 vote. President Obama will sign the legislation later today, the day the Treasury Department said the current debt limit will be reached.
The deal will increase the debt limit by up to $2.4 trillion in three increments through 2012. It will also reduce the deficit by a similar amount over the next decade through discretionary spending caps and a joint committee tasked with finding at least $1.2 trillion in deficit reduction that Congress must vote on in a fast-track process. A trigger of automatic spending cuts will kick in if deficit reduction does not materialize from the joint committee. Read the summary here.
Throughout the process CRFB called for an agreement that coupled a debt limit increase with substantial deficit reduction and recently reiterated the recommendation. Unfortunately, this deficit reduction package does not go far enough to improve the fiscal outlook for the U.S.
Attention will now turn to the joint committee, which must report by the end of the year. We hope the committee will go beyond expectations and produce a comprehensive plan that will stabilize the national debt in the medium term and put us on the path to lower it further in the longer term. The committee will have solid examples to follow in the form of plans from the Gang of Six, the White House Fiscal Commission and many others (compare all the plans here).
This is not the end, only the latest step. The fiscal challenge facing the country is illustrated in a recent CRFB PowerPoint presentation. Try your own hand at meeting the challenge with our Stabilize the Debt online budget simulator.