SARASOTA -- The Senate and House of Representatives are expected to vote today on a deal to raise the debt ceiling and cut the deficit, a compromise that President Barack Obama and leaders in Congress reached on Sunday night. The proposed deal includes $2.4 trillion in deficit reduction over 10 years while authorizing an increase in the federal debt ceiling by a slightly smaller amount to allow the government to pay its debts through 2012. Although the deal does not include tax increases, that discussion is not over. The agreement proposes a two-stage process. In the first stage, it includes $917 billion in spending cuts and other deficit reduction now, as well as a $900 billion increase in the debt ceiling. Because of the pending Tuesday deadline, Obama would have immediate authority to raise the debt ceiling by $400 billion, which will last through September, according to the White House document.
For the other $500 billion of debt ceiling extension in the first stage, Congress can vote on resolutions of disapproval that, if passed, the president can then veto, the White House said. In the second stage, a special joint committee of Congress will recommend further deficit reduction steps totaling $1.5 trillion or more by the end of November, with Congress obligated to vote on the panel's proposals by the end of the year. If the recommendations are enacted, Obama would be authorized to increase the debt ceiling by up to $1.5 trillion -- as long as the additional deficit reduction steps exceed that amount. The president also can get the additional debt ceiling increase if both chambers of Congress pass a balanced budget amendment to the U.S. Constitution in votes to be held by the end of the year. However, Obama would be able to request only up to $1.2 trillion in additional debt ceiling if the special congressional committee fails to agree to at least $1.2 trillion in cuts. Despite this deal, however, market pundits believe a downgrade of US debt is still possible.
Article provided by Robert W. Baird & Co. with the authorization of its author for Evan Guido, Vice President, Financial Advisor at the Sarasota office of Robert W. Baird & Co., member SIPC. The opinions expressed are subject to change, are not a complete analysis of every material fact and the information is not guaranteed to be accurate.
Evan R. Guido
Vice President of
Private Wealth Management
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