The deal is similar to the McConnell Plan, which we discussed here at the time. There are some new wrinkles though. The deal will raise the ceiling immediately by $400 billion, and then the President can request another $500 billion, subject to a Congressional "vote of disapproval" which does nothing. These increases are accompanied by around $900 billion in cuts.
Then, there will be a bipartisan committee of both houses of Congress, which will be tasked with finding another one and a half trillion dollars in savings, more or less. Essentially, we get to go through the Catfood Commission madness again, though it's possible that some revenue increases could come out of it. If the commission fails, or Congress rejects its recommendations, or the President does not sign an eventual bill on those lines, $1.5 trillion will automatically be cut, except half of it will be from defense and half mostly from entitlements. This step will in either case include a raise of $1.5 million to the debt ceiling.
So, for starters: we avoid blowing up the economy, and without anything insane like a Balanced Budget Amendment or anything else. And there are other nice things. The cuts are almost entirely backloaded, which means we will mostly avoid massive cuts right now, while the recession lingers. And as Nate Silver points out in the previous link, the farther out the cuts are, the easier it is to counter them with new policy changes. So it's entirely likely that many cuts will never really take effect, assuming that 2012 is kind to Democrats.
Also, many of the cuts - especially in the trigger - are to defense. This is a big victory in some ways, although redistributing defense cuts to domestic spending would be preferable to just reducing it as part of overall cuts. However, if we have to accept a deal with significant amounts of cuts, it's easier to swallow one where a large percentage is from defense. I agree pretty strongly with Silver here:
If you’re a Democrat and you must accede to $1.5 trillion in cuts — and that’s literally the situation that Democrats will find themselves in if the deal passes through Congress — it’s going to be hard to do better than this $1.5 trillion in cuts. They are very heavily loaded with defense cuts, while containing few changes to entitlement programs or to programs which benefit the poor.There are other benefits too. Medicaid, Social Security, and many low-income and veterans' programs are untouchable in this deal. Also, the Bush-era tax cuts will still expire as planned in the current deal unless the commission replaced them with other revenue increases. So either way, we will eventually see some actual revenue solutions instead of just spending cuts.
Now, this is far from a good deal overall. Cutting spending in a recession is like asking a person with anorexia to stop eating so much. It completely ignores any rational understanding of economics. Given the current political realities though, and combining those with the failure of President Obama and the White House to resolve the crisis sooner or negotiate in a normal way, this seems like the least painful deal we were likely to get.
The sun will come up tomorrow, and we will still have a functioning economy and a functioning country. We may have a broken political system in the exchange, but there's still hope for fixing it. In the meantime we at least avoid a worse crisis for now. No one on the left should be happy with this deal. I'm certainly not. But any anger should be directed where it really belongs: the Tea Party - and their brinkmanship - that brought us here.
So this is it: the last time The Liberal Mob has to discuss the debt ceiling. Ever. Unless this happens again, in which case I will probably cry.