After days and weeks of roller-coaster negotiations, a disgruntled-looking President Obama emerged tonight to announce that Democrat and Republican leaders have finally agreed to the framework of a deal that will cut $2.4 trillion in spending over the next decade in exchange for raising the debt ceiling in order to head off a national default.
The deal will establish a bi-partisan congressional committee to sort out the nitty-gritty details of deficit reduction by November, something Obama explained he had hoped to avoid because it prolongs decisions that should have already been made. "This process has been messy," he said brusquely. "It's taken far too long." Now the burden falls on John Boehner to round up enough votes — let's hope he's been working extra hard on those PowerPoints. Time will be extremely tight: A vote is likely on Monday evening, and on Tuesday the U.S. could start to default on some of its obligations. [WSJ]
Update: The White House released a fact sheet this evening outlining many of the mechanisms that will come into play should the deal pass the House. The deal will authorize Obama to raise the debt ceiling by at least $2.1 trillion. The cuts will be divided in two phases: $900 billion in specific cuts over ten years, and another $1.5 trillion that must be identified by a bi-partisan committee by late November. That should be enough borrowing authority to get the country's coffers all the way to 2013. For now, Social Security and Medicare are exempt. Defense cuts seem to have been substituted for tax hikes to win over Republicans. If the committee can't agree on a second round of cuts in November, defense spending and domestic programs (not including Social Security and Medicare) will be automatically cut still further.
Even though Obama was against the idea of the bi-partisan committee, it appears he's achieved some victories in terms of the balance of the deficit reduction (the word "balance" appears twelve times throughout the fact sheet). Deficit reduction will be split evenly between defense and non-defense spending, and if Obama feels the deficit reduction is unbalanced, he reserves the right to veto extension of the Bush tax cuts. (Here's a handy breakdown on which party got what out of the deal; the Republican column is longer and meatier.)
Update: Everyone's had a few hours (in addition to the weeks of prior back-and-forth) to let this deal sink in, and people aren't being shy about voicing their opinions. As Clara Jeffrey tweeted, "Obama gets shellacked by Krugman AND Douthat. That takes some doing." Some choice reactions to the deal:
Paul Krugman: "Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels." [NYT]
Chris Cillizza: Winners of the deal include Kentucky Republican Mitch McConnell, the tea party, President Obama, the Congressional Budget Office, Grover Norquist (the head of Americans for Tax Reform), and David Wu. Losers include Congress, the Gang of Six, Commissions, and liberals. [WP]
Nate Silver: "In short, as a philosophical matter, tax increases are probably even more anathema to Republican voters than defense cuts. But as a practical matter the reverse may be true." [FiveThirtyEight/NYT]
Matt Miller: "The numbers sound big and can be sold as 'historic,' but they're not even close to what's needed ... Politically, however, it's a sufficient escape hatch." [WP]
James Fallows: "I agree with Matt Miller ... disaster averted, decline embraced ... [but] America will no doubt muddle through, as it has done so often before." [Atlantic]
Phillip Klein: "Given that any deal between the two parties would have to involve Republicans giving something up, there’s always been the potential for tension between these two strands of conservatism. That underlying tension is going to rise to the surface in the coming months." [Washington Examiner]
Ezra Klein: "It’s all about lowest-common denominator lawmaking. There are no taxes. No entitlement cuts. No stimulus. No infrastructure. Less in actual, specific deficit reduction than there was in the Simpson-Bowles, Ryan, or Obama plans, and even than there was in the Biden/Cantor or Obama/Boehner talks. The two sides didn’t concede more in order to get more. They conceded almost nothing in order to get a trigger and a process, not to mention avoid a financial catastrophe." [WP]
Ross Douthat: " Instead of drawing clear lines and putting forward detailed proposals, the president has played Mr. Compromise — ceding ground to Republicans here, sermonizing about Tea Party intransigence and Washington gridlock there, and fleshing out his preferred approach reluctantly, if at all." [NYT]
Kristin Roberts: "Obama says there’s a deal but we’re not done yet. Leaders must do careful math to ensure they have enough support to pass legislation through both chambers of Congress. The Senate’s top Democrat and Republican said they’ve agreed and can pass it, but we haven’t heard the same from the leaders in the House. It’s tricky business, vote counting in the House." [Reuters]
Mark Knoller: "Deficit drinking game: anytime you hear or read the phrase 'in an 11th hour deal..." [Mark Knoller/Twitter]
Ari Melber: "A huge short-term loss: The deal does not extend unemployment insurance or payroll benefits that juice spending every 2 weeks." [Ari Melber/Twitter]
Asian markets, the first indicator, reacted positively to the deal. Gold fell and the dollar rose. But Wall Street doesn't appear terribly sanguine about what the deal means for the country's longer-term economic prospects:
“The debt ceiling is out of the way, but the current picture is far from rosy,” said Ajay Rajadhyaksha, head of United States fixed-income and securitized strategy at Barclays Capital. “Economic growth is so much weaker than many people thought just six months ago, and we are heading into a period of austerity.”
Analysts and investors warned that the markets could remain turbulent in the weeks ahead. Besides sluggish economic growth, the threat of a ratings downgrade on United States debt and Europe’s continuing financial troubles loom.
Still, far-from-rosy beats "financial doomsday and panic," which is what many were predicting if a deal wasn't struck.