Success! Well, kind of.

It looks like House leaders, Senate leaders, and the White House have struck a deal on raising the debt limit. According to a presentation created by Speaker of the House John Boehner, it will initially cut $917 billion from the budget over 10 years in return for raising the debt ceiling by $900 billion, and requires Congress to find more cuts before it can be raised by another $1.5 trillion.  It also requires a vote on a Balanced Budget Amendment to the Constitution by the end of the year.  And it doesn’t include any tax increases.

Overall, I’m pretty happy with this.  I’m especially happy that the deal doesn’t require passage of a BBA before the ceiling can be raised, as that was never going to happen.  I like the idea of an amendment, but it needs to be passed on it’s own merits.  There is some anger from certain conservatives that the deal draws too much from the defense budget, and I’m going to have to side with them on their protest that a spending cut trigger – should the budget committee fail to find $1.2 trillion in cuts – would be to unfair to that budget (though a defense budget liberal I am not).  That’ll need to be modified before this can successfully be passed.

I guess the question is, can it be passed?  That remains to be seen.  On the whole, I believe this deal favors the Republicans more than it does the Democrats, but the mention of a BBA amendment might be a vote killer for them, as will the absence of tax increases for some.  On the other side, no BBA prior to a debt ceiling rise could be a problem for some tea partiers, but I think many of them will ultimately accept the commitment to a vote before more ceiling raises as acceptable.  They’ve made their preference clear, but they’ll vote for the bill now and save their energy for the later fight.

Will it pass? Probably, with some modifications.  It it a start?  Yes.  Is it great?  Not really.

It’s not great because it does nothing to actually cut spending.  It caps future spending, but that’s not really cutting it. The government is spending about $3.7 trillion now, with roughly $1.6 trillion of that money from borrowing. Politicians know spending will probably be above $5 trillion by 2020.  So they pass this plan to cut up to roughly $2.5 trillion going forward.  The problem is that the government is still spending $3.7 trillion every year on only $2.1 in taxes.  And that number will still go up.  So we end up at $5 trillion in spending by 2022, instead of 2020, but we’re still going to get there, and on only $2.1 trillion in taxes if they’re not raised.  We’ll have to borrow more and more to make up the difference.

So real substantive spending cuts are needed to bring us down to the same level we’re paying in taxes.  And growth is needed in the economy to increase revenues. However, I’m still not sure they’ll be enough to solve our long-term debt problems quickly enough (unless we can expand enough for a $1.6 trillion increase in revenue in the next couple years), so I remain firmly of the opinion that taxes may need to be raised, temporarily.  But the real long-term solution to the problem, and not just a band-aid of temporary tax increases, will be spending cuts. Real spending cuts that actually make government smaller, not just delay its growth.