Print this page

The Debt Deal to Avoid Default

We are still discovering the details of “the DEAL” to raise the debt ceiling. It is emerging that it is a mix of good news/bad news. There is something for everyone to hate. Progressives and Conservatives are likely to be unified in their dislike of the compromise. (Some say that evidences a good compromise)


According to what we know now, the deal includes several pieces that we were advocating for including:

  • Raising the debt ceiling in one step for the period from now until the end of 2012.
  • Excluding entitlement programs (Medicaid, Medicare, Social Security, SSI) that serve low income people from the initial cuts.  We know that in addition SNAP, TANF, SCHIP, EITC and Child Tax Credit are specifically exempted from the automatic cuts if the Commission does not act, but we do not know what other programs (including international programs) are included in this protection.
  • Immediate cuts include the Defense Department with $350 billion over 10 years. It also includes $400 billion in cuts to non-defense spending over 10 years.

The key point that is not included is raising revenues (taxes) now. It was agreed that the 12 person Commission could include revenues in their consideration for further reducing the budget deficit by $1.5 trillion. IF the Commission is to be successful, it will have to include revenue increases in order to accomplish their goals without further scuttling the economy. The implementation time line for the Commission’s report is January 1, 2013, the same as the expiration of the Bush tax cuts.

The incentive for Republicans to buy into this commission was that it could include restructuring of Social Security and Medicare in order to accomplish the Commission’s goals. So taxes and entitlement restructuring were the tradeoffs in the commission.

To encourage the success of the 12 person commission, the agreement contains a “trigger” that would be “pulled” if the Commission is unsuccessful in reaching an agreement. To be effective a trigger has to have something awful for each side. For the Republicans, the trigger is the reduction of Defense Department Spending by 8% (an additional $500 billion in cuts). The awful consequence for the Democrats is a 6.7% cut to domestic programs (other than programs for people who are poor) AND a 2% reduction in payments to Medicare providers.


So what do we at NETWORK think about this “deal?” We are glad that they got a deal, but we are distressed that revenue is not included in the initial step. When you look at our campaign to educate about the wealth gap in our nation, it is critical that we address the need for revenues from those who have benefitted most in our society. We also know that this is a better deal than the Boehner or McConnell plans or many of the other rumored compromises. We achieved some success, but it is not over. This deal puts tremendous pressure on us to keep up our advocacy about how it gets implemented AND what the commission does. The work continues in the 2012 and 2013 appropriations. AND WE ARE NEEDED NOW MORE THAN EVER!

Thank you for your advocacy, engagement, faith and passion for justice. Together we can make a difference!