President Obama and congressional leaders are "very close" to reaching a compromise to raise the nation's debt limit before the August 2 deadline.
"We're very close" to a debt limit deal, said Senate Minority Leader Mitch McConnell (R-Ky.) on CNN's "State of the Union" on Sunday.
The sticking points in negotiations were over tax increases. Republicans would not support a bill that had tax increases, or revenue increases eliminating tax deductions. Democrats would not support a bill that did not include revenue increases. Democrats also said they would not support a bill that made cuts to entitlements (Medicare, Medicaid and Social Security). President Obama wanted a debt limit increase large enough that it would not have to be increased again until after the 2012 elections. Tea Party Republicans said they wanted Congress to pass a balanced budget amendment before the debt ceiling was increased.
The compromise that is reportedly being worked on would give Republicans what they want (no tax increases), Democrats what they want (no cuts to entitlements), and Obama what he wants (a limit that will last past 2012).
The group that gets left out of the agreement is the Tea Party Republicans – there may be a vote on a balanced budget amendment, but passage will not be required. This is not surprising, since many of them have already expressed that they would not vote for a debt limit increase under any circumstance, they took themselves out of the negotiations.
The compromise, according to Jennifer Rubin at The Washington Post, would cut $1 trillion right away. Then, a bipartisan committee will be assigned with the task of cutting another $1.8 trillion. There will also be a “trigger” in place such that, if the committee does not come up with a bill, or if Congress does not pass the committees bill, automatic deficit reduction will go into place.
There is no word yet on what the trigger will be. It could be letting the Bush tax cuts expire, automatic across the board spending cuts, or some combination of the two, for example.
The most difficult part of deficit reduction will certainly come from the committee. To get that amount in spending cuts will likely require some combination of entitlement reform and tax reform. Getting both parties to agree on the committee's bill would likely, therefore, require a severe trigger.
Negotiations on the final deal are expected to continue. Leaders will then begin the difficult process of convincing their colleagues to vote for it. The Senate is scheduled to vote on a bill at 1 p.m. on Sunday.