President Obama is authorized to increase the debt limit by at least $2.1 trillion in three steps, allowing Treasury to continue to borrow through 2012 and lawmakers to avoid a retread of this fight in six months.
Nearly $1 trillion of spending cuts over 10 years will be implemented immediately through discretionary spending caps.
Congress will vote on a balanced budget amendment before the end of the year.
A bicameral, bipartisan group of 12 lawmakers will be charged with identifying additional deficit cuts worth about $1.5 trillion. The joint select committee must report precise deficit-reduction proposals by November 23, the day before Thanksgiving, and Congress must vote on the group's package by December 23.
Should the committee fail to come to an agreement on a deficit-reduction package, automatic across-the-board spending cuts worth about $1.2 trillion will kick in starting in 2013 - with 50 percent coming from defense and 50 percent coming from domestic programs - in order to raise the debt ceiling by an equivalent amount. Entitlements largely get a pass: Social Security and Medicaid would be exempted from the cuts, and Medicare would only face cuts to providers and insurers, not beneficiaries.
The White House is assuring supporters that the committee can raise taxes, and several senators have said that, as far as they know, there will be no restrictions on the committee. But House Speaker John Boehner's PowerPoint, sent to his conference, says the group "effectively" cannot raise revenues because any plan it puts forward must be scored by the Congressional Budget Office on current law, which assumes that the Bush tax cuts of 2001 and 2003 will expire at the end of 2012. Either way, it's kind of a moot point: It's hard to believe the six Republicans on the committee will agree to raise tax rates. Still, Obama maintains the ability to veto an extension of the Bush cuts if Congress fails to get the ball rolling on comprehensive tax reform, which means that closing "loopholes" and ending various subsidies will almost surely be a big part of the committee's discussions -- and taxes will continue to fuel the fury of liberals and conservatives alike as the House gears up for a vote on the deal this week.
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