First, the outline of the emerging debt ceiling deal (via Reuters):
1) The emerging deal includes a two-step process to cut the deficit about $2.8 trillion over a decade while increasing the debt ceiling by a similar amount to cover U.S. borrowing beyond the November 2012 election.
2) Lawmakers have already largely agreed on caps to annual discretionary spending over 10 years, although their estimates of the savings, $1 trillion, are greater than the nonpartisan Congressional Budget Office’s tally of $750 billion.
3) A further $1.8 trillion would be recommended by a special committee appointed by Congress that would make its recommendations by late November.
4) Negotiators Sunday were trying to overcome one of the last major sticking points — a proposed enforcement mechanism, or “trigger,” to ensure additional deficit reduction gets enacted into law. Across-the-board cuts would be triggered if Congress failed to act on the panel’s recommendations.
It seems as if the cuts triggered by the enforcement mechanism will hit Medicare providers and defense, if debt cuts can’t be agreed on. But it is also important to note that Republican leaders certainly believe that the structure of the super-committee will be such that it would be virtually impossible for it to recommend tax increases. This is key because the history of congressional committees and gangs would suggest that tax hikes would be on the table. A GOP aide describes it this way to me:
It has an undefined mandate of deficit reduction but the way that is constructed would essentially make it impossible to raise taxes. Anything scored by CBO is based on current law. Current law assumes that taxes are going to go up by three-and-a-half trillion dollars next year [over ten years]. So anything you do to the tax code, unless it starts off with a $3.5 trillion tax increase, it’s going to be adding to the deficit … It’s almost impossible for them to touch taxes because if they do, almost anything will be scored as a tax cut, making it that much more difficult to reach the $1.5 trillion that they need to get to.