Congress may be able to avoid running up against the looming debt ceiling after all. Although steering clear of such a scenario is not a done deal, the House of Representatives and the White House have reached a tentative agreement on a budget with the help of congressional Democrats.
Congress will vote on the budget deal tomorrow, and the administration has indicated its approval of the compromise. If passed on Wednesday, the Senate would have just enough time to vote on the agreement before the deadline to raise the debt ceiling (or, unthinkably, default) falls on November 3rd.
The deadline was moved up from November 5th by Treasury Secretary Jack Lew, who explained that the Treasury recently cancelled a sale of 2-year notes scheduled for November 2nd because the department wasn't certain it could settle the notes unless the debt ceiling is raised.
Congressional Battle Over Debt Ceiling
The day after the budget deal is put to a vote, the House will then vote tomorrow on who will replace outgoing Speaker of the House John Boehner (pictured, left). Chair of the important House Ways and Means Committee and former Republican vice presidential candidate Paul Ryan is expected to succeed Boehner, though the situation remains a messy battle with the House Freedom Caucus—the group of about 40 Republican representatives steeped in the Tea Party movement. Even though these conservative representatives are unlikely to support the new legislation on the grounds that it concedes 90% of the spending increases the Obama Administration wanted, they are equally unlikely to have enough votes to block its passage.
The Freedom Caucus could, however, throw a wrench in the normally cordial process of electing a new speaker. If these 40-odd representatives withhold support for Ryan, who the GOP is painting as a "unifying" figure amid the worst interparty conflict seen for either party in at least 50 years, the Republican establishment may be forced to form a coalition with their Democratic adversaries in order to govern.
While Boehner claims the new deal is similar to one that Ryan negotiated with Democrats in 2013 to cover short-term spending over the next two years, Mr. Ryan was not involved in the current legislation. Boehner didn't answer questions about the conspicuous absence. Ryan's vote on the deal tomorrow could be a strong signal about how he'll handle his incoming role in the speakership.
What's in the Bill
Among other things (like raising the debt ceiling), the legislation for the new budget includes increased spending caps for both defense and non-defense expenditures. Each will be increased by the same amounts: $25 billion next year and $15 billion in 2017. The specifics will be worked out by the House Appropriations Committee in the coming weeks. They will have until December 11th (when current government funds run out) to appropriate the money to avoid yet another government shutdown.
Legislators have said that the agreement will close certain tax loopholes for hedge funds, which is touted as way to generate more tax revenue. However, mandatory spending on entitlements like Medicare and Social Security, saw no cuts; instead, these programs will impose slightly higher premiums on recipients. A chunk of the future spending in the bill will also be paid for by an agreement to sell 58 million barrels of crude oil from U.S. strategic stockpiles. In the absence of this sort of special arrangement, the United States does not sell any of its oil production overseas as exports.