Debt Ceiling Deal 'A Welcome Sign,' Says FEI CEO-President Marie Hollein
Aug. 2, 2011
After months of debate, President Barack Obama announced Sunday night that a bipartisan compromise with congressional leaders on raising the statutory debt ceiling had been reached. This announcement came just hours after the U.S. Senate failed to invoke cloture, a procedure to move toward consideration of legislation, on an amended debt limit vehicle that the U.S. House of Representatives passed on Saturday. Last night, the House passed the Budget Control Act by a 269-161 vote, and the Senate voted today 74-26 to send the measure to President Barack Obama's desk to be signed into law.
The compromise announced Sunday would reportedly authorize a debt limit increase up to $2.5 trillion in stages. The first stage would mean an immediate debt limit increase of $900 billion tied to more than $900 billion in spending cuts and caps. The second stage could increase the debt limit up to $1.5 trillion upon the enactment of deficit reduction legislation recommended by a newly-created 12-member joint committee. However, if the deficit reduction legislation is not enacted, then automatic across-the-board spending cuts of more than $1 trillion would be triggered, paired with a debt limit increase of the same size.
The joint committee created under the deal, will consist of six Republicans and six Democrats, and would be required to report legislation by Nov. 23 and Congress would be required to hold a vote on the legislation by Dec. 23. While some are praising the creation of a committee to allow more time for further debate without the pressure of the debt ceiling deadline looming, others are skeptical, citing political déjà vu. (This stems from the fact that the president had created a bipartisan body last year, the National Committee on Fiscal Responsibility and Reform – commonly known as the “fiscal commission” – which came up with a plan in December to cut $4 trillion from the deficit, lower corporate tax rates and reform Social Security. Yet, the fiscal commission’s plan, which was unveiled last December, did not gain enough support to be brought to Congress for a vote.)
In addition to the new committee created under the deal, Congress would be required to vote on a balanced budget constitutional amendment by the end of the year. This balanced budget amendment was an idea included in the House Republican “Cut, Cap and Balance” bill, which failed to garner enough support in the Senate after clearing the House.
On announcement of the deal, FEI’s President and CEO, Marie N. Hollein, CTP, stated: “The announcement that a debt limit deal has been reached is a welcome sign that while Washington is divided, compromise can be achieved when it matters most. I have spoken to several FEI members who expressed concern that a failure to raise the debt ceiling before Aug. 2 could have negative impacts on financial markets and thus increase interest rates and raise costs for American businesses.”
Hollein added that “FEI members should be aware that while the current plan does not raise revenue, it is important to monitor the discussions of the new 12-member joint committee created under the proposal. This committee is tasked with developing recommendations to achieve further deficit reduction, which could include tax reform, and other proposals of importance to senior-level financial executives and their organizations.”
To read the White House summary of the deal, click here.
For more information, contact Christina Crooks (email@example.com), manager, Government Affairs-Financial Policy, in Financial Executive International's Washington, D.C., office. This summary does not represent FEI's opinion unless specifically above.