Obama, Boehner Debt Deal To Pound Middle Classes

Middle classes to be hit by tax increase by the back door: Obama and Boehner face furious backlash from their own parties as last minute debt deal is slammed a 'fudge'Democrats fear further spending cuts while Republicans say deal is just a means of raising taxes at a later stage by joint committee

Senior Democrats hint tax hike still to come

Frantic behind the scenes lobbying expected to get lawmakers on the fringes of both parties to support deal

Experts fear credit rating will still be downgraded as U.S. enters double-dip recession and Dow Jones dramatically falls

Deal slammed a 'sugar-coated Satan sandwich'

Tea Party senator says he will filibuster today's vote

Obama: Debt deal will end crisis and remove cloud over the economy

Agreement will cut about $1trillion over 10 years

By Paul Bentley and John Stevens
Last updated at 8:26 PM on 1st August 2011
183 Comments
many photos / videos at the link

President Barack Obama today faced furious reaction to his last-minute debt deal, with experts slamming the agreement as a cruel means of hitting middle classes with tax hikes 'through the back door'.

The President and congressional leaders last night finally announced an agreement on emergency legislation to avert the nation's first-ever financial default.

But while the dramatic resolution briefly lifted a cloud that had threatened the still-fragile economic recovery, critics said in the long run the middle classes would bear the brunt of the country's massive debt, with increased taxes set to cover for the White House's reluctance to cut public spending.

The agreement, slammed as a 'sugar-coated Satan sandwich', is set to slice at least $2.4 trillion from federal spending over a decade, a price which is seen as too steep for many Democrats and too little for many Republicans.
According to President Obama, the deal, which came with scant time remaining before Tuesday's deadline for paying government bills, 'will allow us to avoid default and end the crisis that Washington imposed on the rest of America.'
Experts, however, insist the crisis may still hit middle America the hardest and senior Democrats admitted today that tax hikes were very much on the agenda.
Hours after agreeing to the debt plan, the White House threatened President Obama would use his veto to ensure an end to 'Bush tax cuts' for middle class families.
Two revolutionary laws passed during the presidency of George W. Bush, which lowered tax rates, will expire on January 1 2013 - and President Obama intends to do away with them for good.
The White House said that if a bipartisan committee fails to agree on further cuts in the coming months 'it would enable the President to use his veto pen to ensure nearly $1 trillion in additional deficit reduction by not extending the high-income tax cuts.'

Gene Sperling, the director of the White House National Economic Council, said the veto would be used without a broad overhaul of the tax code.
He told CNN: 'This president also has the veto pen to ensure that the tax cuts for the most well off are not extended if we do not get the type of tax reform that is fair to the middle class.'

Meanwhile House Minority Leader Nancy Pelosi suggested today it was 'disconcerting' that taxes had not been forced on wealthy Americans in the debt deal and that would have to be remedied.

There is also the very real possibility that a 12-person bipartisan committee, which will meet in the aftermath of the agreement, could still opt to impose a hard-hitting tax hike.

GOP lawmakers said the super committee could well recommend a rise in taxes, which would be passed by the House.

TAX HIKE VIA THE BACK DOOR? HOW THE COMMITTEE WILL BE FORMED

In the aftermath of the debt deal, a 12-member congressional committee, made up of six Republicans and six Democrats from each chamber, will be tasked with finding a further $1.5 trillion in budget savings.

There are very legitimate fears the committee will use the opportunity to make the politically risky decisions that lawmakers have not been able to agree on so far in the face of public scrutiny - such as a tax hike or controversial cuts to programmes such as Medicare.

If a majority of the committee, whose members will be chosen by leaders of both parties, agrees on a secondary plan, it will receive a vote in both the House and the Senate as part of an arrangement to raise the debt ceiling yet again.

If, however, the bipartisan panel deadlocks or fails to produce at least $1.2 trillion in additional cuts, which is a very real possibility - or if Congress fails to enact its recommendations - the White House budget office will impose spending cuts totalling that amount across much of the federal budget.

Those cuts would fall equally on domestic and military programs. Medicare would face automatic cuts as well, but Social Security, Medicaid, federal employee pay, and benefits for veterans and the poor would be exempt.

The joint committee would have to present its findings to Congress by November 23, with an up-or-down vote required by both the House and Senate by December 23

In addition, financial experts warned the U.S. credit rating was still likely to be downgraded, as figures revealed the U.S. has entered a double-dip recession and the Dow Jones average today fell to a level barely above the point indicating growth.

As furious reaction from both parties in Washington continued to emerge, Republican Senator Mike Lee threatened to filibuster the Senate vote to try to force the enactment of a constitutional balanced budget amendment to make sure it would be more difficult for the committee to raise taxes.
He told CNN this morning that he fully intends to employ the delay tactic during today's vote.

Rules allow senators to speak for as long as they wish on any topic during a debate to obstruct an outcome.

The only way for a filibuster to be countered is if three fifths of the Senators sworn - usually 60 out of 100 - vote to stop it.

'One of the problems about this that has been frustrating is that there has been very little debate and discussion … we haven't had a single bill to address the debt-limit issue come into the Senate that has been subject to an open debate, discussion and amendment process on the floor,' Mr Lee said.

House Speaker John Boehner insisted the current law baseline is 'effectively making it impossible for [the] Joint Committee to raise taxes,' a statement challenged by conservative analysts.

Democrats are also suspicious of the deal, threatening a rebellion if Medicare cuts are deepened, while GOP insiders are reportedly concerned Medicare will be spared cuts, which will hit the defence programme instead.

Democratic congressman Emanuel Cleaver told MSNBC last night: 'If I were a Republican, this is a night to party.'

He added: 'If you lift the bun, what you see is antithetical to everything the great religions of the world teach. Which is take care of the poor, take of the aged.

'I am concerned about this because we don’t know the details. And until we see the details, we’re going to be extremely non-committed, but on the surface it looks like a Satan sandwich.'

House Minority leader Nancy Pelosi said: 'We all may not be able to support it, or none us may be able to support it.'

Later, she added: 'We're very concerned that a bill that makes these big cuts and has not one red cent from the wealthiest people in our country - no revenue - is very disconcerting.'

Representative Raul Grijalva said: 'This deal trades people's livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it.'

John Conyers said the public should show their anger by marching on the White House.

He said: 'We’ve got to educate the American people at the same time we educate the President of the United States. The Republicans, Speaker Boehner or Majority Leader Cantor did not call for Social Security cuts in the budget deal. The President of the United States called for that. My response to him is to mass thousands of people in front of the White House to protest this.'

'SATAN'S SANDWICH': THE FURIOUS RESPONSE FROM BOTH SIDES

THE LEFT: 'On the surface it looks like a Satan sandwich' (Rep. Emanuel Cleaver)

'We're very concerned that a bill that makes these big cuts and has not one red cent from the wealthiest people in our country - no revenue - is very disconcerting' (House Minority leader Nancy Pelosi)

'This deal trades people's livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it' (Rep. Raul Grijalva)

'My response to him [Obama] is to mass thousands of people in front of the White House to protest this' (Rep. John Conyers)

THE RIGHT:

'I do anticipate requesting one [a filibuster]' (Senator Mike Lee)

'[The deal] spends too much and doesn't cut enough. ... Someone has to say no. I will' (Presidential candidate Michele Bachmann)

'While I appreciate the extraordinarily difficult situation President Obama’s lack of leadership has placed Republican Members of Congress in, I personally cannot support this deal' (Presidential candidate Mitt Romney)

'I deeply oppose the efforts of the Majority Leader. His plan does not tackle the task at hand' (Senator Orrin Hatch)

Tea party presidential candidate Michele Bachmann added that the deal 'spends too much and doesn't cut enough. ... Someone has to say no. I will.'

In the aftermath of the announcement last night, world markets initially showed signs of relief - but the boost was short-lived.

The FTSE 100 jumped 60 points in the ten minutes after opening, while Japan's benchmark Nikkei index, opening this morning, was up 1.7 per cent in early trading. On Wall Street, U.S. stock futures surged.

The proposed $3 trillion deal, which still requires congressional approval, immediately led to a rise in the value of the dollar and a rally on the stock markets in Asia.

By late morning, however, the Dow Jones industrial average sharply reversed course, shedding all of those gains after a key manufacturing index tumbled in July.

The Dow was down than 50 points after the Institute of Supply Management said its manufacturing index fell to 50.9 - an amount barely above the 50 point figure that indicates growth. Economists had been expecting a much higher reading of 55.

The manufacturing report comes just one trading day after the government said that the economy grew at an annual rate of just 1.3 percent from April to June.

GDP figures show the U.S. has entered a double dip recession, with consumer spending up a remarkably low 0.1 per cent in the second quarter.

This year, the economy has grown at its slowest pace since the recession ended in June 2009 and sharp reductions in short-term government spending could further weaken the economy, according to analysts.
Experts also today warned that the debt plan, which still needs to win enough support to pass both chambers of Congress, does not at all remove the threat to America's AAA credit rating.

Julian Jessop, chief international economist at Capital Economics, said: 'It looks like none of the numbers are going to reassure the debt rating agencies. I'm pretty sure America will lose its triple-A rating.'

Peter Morici, an economics professor at the University of Maryland, added: 'This will have minimal impact on the economy. The cuts are not there for the first couple of years, which really makes you wonder if they're really going to happen at all.'

Although leaders now hope passing the bill will be a formality, there are expected to be frantic discussions behind the scenes as lawmakers on the fringes are lobbied by their parties.

Mr Obama said at the White House that defaulting 'would have had a devastating effect on our economy.'

House Speaker John Boehner telephoned Obama at mid-evening last night to say the agreement had been struck, then immediately began pitching the deal to his fractious rank and file.

'It isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town,' he said on a conference call, according to GOP officials. He added the agreement was 'all spending cuts. The White House bid to raise taxes has been shut down.'

'The leaders of both parties have reached an agreement,' Mr Obama said announcing the deal at a press conference from the White House.

Mr Obama said the agreement will cut about $1 trillion in spending over 10 years. Another $1.2 trillion in spending would be cut automatically if a joint committee fails to find at least that much in budget savings.

The deal 'begins to lift the cloud of debt and uncertainty that hangs over our economy,' said the President.

'I want to thank Americans who compelled Washington [to reach a deal],' he said.

'It allows us to avoid default, pay bills and reduced the deficit.'
'Is this the deal I would have preferred? No,' Mr Obama said. 'But this compromise does make a serious down payment on the deficit reduction we need.'

Furious supporters of both major parties took to Twitter today to express their frustration at the last minute deal.

Democrat Manish Thakur wrote: 'Tea Party wins big. Hopefully they'll now get ahead of themselves and (in a McGovern moment) make Bachmann the GOP nominee :)'
Conservative Elisha Bjorne sent a public message to tea party champion Allen West, stating: 'My brief assessment is you have slowed the sinking of the Titanic & hope 2/3 life boats will arrive in 2012. No guarantee.'
Another conservative writer, RB, wrote: 'Wow. Obama has hippie-punched the #p2 [liberal] loons so many times I've lost count. How many times has it been, moonbats? Still in love?'

A progressive, who goes by the username @MBtheZEE, added: 'Could it be any more clear representative gov't is dead? We're a plutocracy.The vast majority wanted tax increases on top 2% & NOTHING.'

The U.S. debt deal cuts spending by $917 billion over 10 years and tasks a panel with finding at least $1.5 trillion more to trim, House of Representatives Speaker John Boehner said.

In a presentation prepared for a call with his fellow Republicans, Mr Boehner said the joint committee would have to present its findings to Congress by November 23, with an up-or-down vote required by both the House and Senate by December 23.

No votes were expected in either house of Congress until Monday at the earliest, to give rank and file lawmakers to review the package.
Mr Obama said that, if enacted, the agreement would mean 'the lowest level of domestic spending since Dwight Eisenhower was president' more than a half century ago.

Senate Democratic leader Harry Reid provided the first word of the agreement.

Outspoken: Pelosi is clearly unhappy with the deal and has warned wealthy Americans should be hit with a tax hike

'Sometimes it seems our two sides disagree on almost everything,' he said. 'But in the end, reasonable people were able to agree on this: The United States could not take the chance of defaulting on our debt, risking a United States financial collapse and a world-wide depression.'

In his remarks, Mr Obama said there will be no initial cuts to entitlement programs like Social Security and Medicare. But he said both could be on the table along with changes in tax law as part of future cuts.

That was a reference to a special joint committee of lawmakers that will be established to recommend a second round of deficit reductions, to be voted on by Congress before year's end as part of an arrangement to raise the debt ceiling yet again. That is expected to be necessary early next year.

Pending final passage, the agreement marked a dramatic reach across party lines that played out over six months and several rounds of negotiating, interspersed by periods of intense partisanship.

A final stick point had concerned possible cuts in the nation's defense budget in the next two years. Republicans wanted less. Democrats pressed for more in an attempt to shield domestic accounts from greater reductions.

Details apparently included in the agreement provide that the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. Thousands of programs - the Park Service, Labor Department and housing among them - could be trimmed to levels last seen years ago.
No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy.

Officials familiar with the negotiations said that Mr McConnell had been in frequent contact with Vice President Joe Biden, who has played an influential role across months of negotiations.

In the first stage under the agreement, the nation's debt limit would rise immediately by nearly $1 trillion and spending would be cut by a slightly larger amount over a decade.

That would be followed by creation of the new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit.

Wary: Republican Senator Mike Lee said measures should be put in place to prevent the committee raising taxes

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.

If that failed to pass, automatic spending cuts totalling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

Officials describing those steps spoke on condition of anonymity, citing both the sensitivity of the talks and the potential that details could change.
The deal marked a classic compromise, a triumph of divided government that would let both Mr Obama and Republicans claim they had achieved their objectives.

As the President demanded, the deal would allow the debt limit to rise by enough to tide the Treasury over until after the 2012 elections.
But it appeared Mr Obama's proposal to extend the current payroll tax holiday beyond the end of 2011 would not be included, nor his call for extended unemployment benefits for victims of the recession.

Republicans would win spending cuts of slightly more than the increase in the debt limit, as they have demanded.

Congressional Democrats have long insisted that Medicare and Social Security benefits not be cut, a victory for them in the proposal under discussion. Yet they would have to absorb even deeper cuts in hundreds of federal programs than were included in Reid's bill, which many Democrats supported in a symbolic vote on the House floor on Saturday.
Optimism: Senator Chuck Schumer told CBS: 'If there's a word right here that would sum up the mood, it would be relief'

As details began to emerge, one liberal organization, Progressive Change Campaign Committee, issued a statement that was harshly critical.

'Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare and Medicaid benefit cuts is like entering a bizarre parallel universe - one with horrific consequences for middle-class families,' it said.

While politically powerful business groups like the Chamber of Commerce are expected to support the deal, tea party organizations and others have looked disapprovingly on legislation that doesn't require approval of a balanced-budget amendment.

If they keep to that position, it could present Mr Boehner a challenge in lining up enough votes to support a compromise, just as Obama may have to stand down rebels within his own party.

Though a compromise thrashed out over the weekend looks set to avoid the prospect of a crisis, the unprecedented political row appears to have badly damaged the reputation of the world's largest economy and raised questions over whether it can pay its way in the future.

China, which is likely to overtake the U.S. as the biggest economy in 2015, and is the largest holder of U.S. government debt, appears furious.

The official People's Daily newspaper castigated the handling of the debt crisis as 'irresponsible'.

And a senior economic policymaker in the Eurozone said he expected Washington to solve the problem, but expressed surprise and anger that U.S. politicians were 'playing chicken' with an issue of such importance for the global economy.

In the past, increases in the U.S. 'debt ceiling' have been routine, but Republicans, alarmed by President Obama's failure to set out ways to tackle the country's giant deficit, have demanded huge spending cuts as a condition for approving the increase this time.

Some have taken an even more hardline view. Voting against the measures on Friday, Republican presidential candidate Michele Bachmann said she would not vote for any bill that raised the ceiling.

U.S. stock markets last week posted their worst results for a year, while the dollar slumped as uncertainty increased.

What is the deal? The key points of the agreement

The deal would allow President Barack Obama to raise the debt ceiling in three steps. Congress would get a chance to register its disapproval on two of these, but would not be able to block them unless it musters a two-thirds vote in both the House and the Senate -- an unlikely prospect.
It envisions spending cuts of roughly $2.4 trillion over 10 years, which Congress would approve in two steps -- an initial $917 billion when the deal passes Congress and another $1.5 trillion by the end of the year.
The first group of spending cuts would apply to the discretionary programs that Congress approves annually, covering everything from the military to food inspection.

Agreement: Deal would allow Mr Obama to raise the debt ceiling in three stages

Those programs would be capped each year for 10 years. The caps would be relatively modest at first to avoid stifling the shaky economy -- spending for the fiscal year that begins October 1 would be only $6 billion below the current level of $1.049 trillion. The caps would have a greater impact in later years, when it is hoped that the economy will have recovered.

Some $350 billion of the $917 billion total would come from defense and other security programs which now account for more than half of all discretionary spending. Republicans are resisting this idea and it is one of the few areas of dispute left.

Automatic across-the-board spending cuts would kick in if Congress does not observe the caps in coming years.

A 12-member congressional committee, made up equally of Republicans and Democrats from each chamber, would be tasked with finding a further $1.5 trillion in budget savings.

That committee could find savings from an overhaul of the tax code and restructuring benefit programs like Medicare -- the politically risky decisions that lawmakers have not been able to agree on so far.

The committee would have to complete its work by November 23.

Congress would have an up-or-down vote, with no modifications, on the committee's recommendations by December 23.

If the committee cannot agree on at least $1.2 trillion in savings, or Congress rejects its findings, automatic spending cuts totaling that amount would kick in starting in 2013.

Those cuts would fall equally on domestic and military programs. Medicare would face automatic cuts as well, but Social Security, Medicaid, federal employee pay, and benefits for veterans and the poor would be exempt.

The plan also calls for both the House and the Senate to vote on a balanced budget amendment to the Constitution by the end of the year. It is not likely to receive the two-thirds vote in each chamber needed for passage, but its inclusion will make it easier for conservatives to back the overall deal.

http://www.dailymail.co.uk/news/article ... -deal.html

Republicans need to keep their hands off of Social Security and MediCare and their mouths shut about any cuts to either one. If Democrats want to scare the elderly, worry the disabled and rob retired workers of what they were promised every day of the some 40 to 45 years they worked and contributed to these retirement benefits, then let them, but don't you Republicans even dare to be part of this attempt to scam Social Security beneficiaries. Don't. You. Dare.

As to this debt deal, I consider it a huge victory for Republicans and America. But for anyone to think this is intended to be a solution, they need to wake up. This was a simple but historical turning point for the US Congress. This Congress agreed to spending cuts. This Congress resolved temporarily the debt ceiling issue. This Congress agreed to vote on a balanced budget amendment. These three, and the greatest of these IS the agreement to vote on a balanced budget amendment proposal and ship it off to the states for review, consideration and ratification.

Message to America. If you want the US government to stop borrowing then stop buying treasury notes and investing in government and start investing in CD's and businesses.

It is not the entitlements like Social Security and Medicare that are the problem.
It is the countless other worse-than-useless programs that stifle the economy while bleeding from it.