President Obama, Congress Reach Tentative Deal on Raising the Debt Ceiling

After 48 hours of gut-wrenching negotiations, President Obama and Congressional leaders in both parties shook sweaty palms late last night on a tentative, bi-partisan agreement that would cut trillions of dollars in federal spending over the next decade, avoiding a national debt default.

Democratic and Republican leaders in the House and Senate moved with swift cautiousness over the weekend to hammer out the skeleton of a deal, as the American public watched with bated breath.

Colvin Grannum, president and CEO of The Bedford-Stuyvesant Restoration Corporation (BSRC), points to slow economic growth beginning during the Bush presidency, coupled with the Bush tax cuts, for the long term national debt. He says the logical federal government response would have been to invest in growing the economy by creating jobs and generate more tax revenue by taking away tax benefit from big business such as subsidies for oil companies and corporate jets and to reduce military spending. 

The new, bi-partisan compromise calls for $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling. Medicare would also sustain cuts, though the reductions would be capped; Social Security and other programs would be exempt.

"The Republican argument that we should cut domestic investing and spending carried the day at least for now," said Grannum. "Over the next ten years, $2.4 trillion dollars will be cut from the federal budget. This will hurt communities across the nation but especially communities like Bedford Stuyvesant which have high unemployment and poverty rates and depend on government investment to jumpstart business, create jobs, improve education, and support the social safety net for poor and low income families."

However, even though an agreement has been reached, the worst is not over. Both leaders will need to present and sell the compromise to their caucuses today for the crucial votes that will give final life to the agreement before the Tuesday deadline.

At an impromptu press conference, President Obama made his own bid at selling the agreement to the American public, pointing out first that the deal will effectively avoid a default and downgrade of the nation’s credit and finally end the crisis “that Washington imposed on the rest of America.”

“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” said President Obama. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”

The stakes were high for leaders in both parties, as the decisions they make and the sides they choose will not only will be central to their reelection, but also impact their financial coffers and the special interest groups that fill them.

In Bed-Stuy, residents reacted with skepticism and contempt toward the tentative agreement, blaming the debt ceiling stall on government greed and a need to prey on the poor.

“What’s ironic is, I saw a quote from President Obama in 2006 that said all the things the Republicans have been saying against raising the debt ceiling now,” said Bed-Stuy resident Harry Lopez, 56. “The bottom line is, they’re addicted to money. It’s all about cash. I don’t think it’s a matter of partisan politics; it’s just about the rich staying rich and the poor staying poor, and working people working for the rich. That’s all it’s about.”

Natasha Pegues, 40, of Bed-Stuy said she believes the fighting is an indication that the country is in its last days of power: “It’s sad. We’re already in a bad situation as it is, and I don’t see it getting any better honestly. I see it as going downhill. I believe the country is going to kill itself.”

And still, both liberals and conservatives have contentions with the current compromise—The liberals think it doesn’t go far enough in saving crucial entitlement programs and ending tax breaks for the wealthiest Americans, while hard-line Republicans like Tea Party members feel the cuts do not go deep enough.

But the new compromise adds plenty of caveat provisions that will help circumvent and help protect against future bi-partisan stalemates like the one just experienced.

For example, if the plan is approved in both houses of Congress, it will call for an increase in the debt limit by $900 billion in the first installment—an agreement that will be subject to a Congressional vote of approval that President Obama would either sign or veto. But to prevent a default, $400 billion would be added immediately.

A second increase of $1.2 trillion to $1.5 trillion would be available, also subject to approval by Congress. At the same time, a new joint Congressional committee would be created to find cuts roughly matching the increase in the debt limit.

If the committee failed to agree on a plan, Congress would either have to approve a balanced budget agreement to the Constitution or accept an across-the-board cut in spending in line with the committee’s goal, with 50 percent of the savings coming from the Pentagon beginning in 2013.

"I’m glad they reached an agreement in principal," said Lopez. "I’m glad that the government is not a bunch of deadbeats."

"We can only hope that the [new] Congressional committee will realize the importance of raising the revenue needed to create jobs and address the needs of our most vulnerable populations," Grannum said.

Both houses will vote on the plan today.