This legislation creates a two-step process for the president to increase the statutory debt limit by a minimum of $2.1 trillion, and as much as $2.4 trillion, following the enactment of up to $2.4 trillion in spending cuts and other deficit reduction measures, or the passage of a balanced-budget amendment to the Constitution. The measure guarantees that at least $2.1 trillion in spending cuts will occur.
There will be an initial $917 billion in savings over 10 years, primarily through the imposition of spending caps on discretionary spending, which would allow the president to immediately seek a $900 billion increase to the existing $14.3 trillion debt limit. Under the bill, $400 billion of that increase would occur immediately, but the other $500 billion would be subject to a congressional resolution of disapproval.
The measure also creates a bipartisan Joint Select Committee on Deficit Reduction composed of 12 lawmakers to recommend $1.5 trillion in additional deficit reduction that Congress would have to consider later this year. The measure requires the joint committee to issue its recommendations by Nov. 23, and for the House and Senate to vote on them without amendment by Dec. 23. If enacted, the president would be allowed to seek an equal increase in the debt limit — which also would be subject to a congressional vote of disapproval. The president could also seek a $1.5 trillion increase in the debt limit if Congress adopts and sends to the states for ratification a balanced budget amendment.
If Congress does not enact at least $1.2 trillion in deficit reduction legislation from the joint committee, the measure requires up to $1.2 trillion in automatic spending reductions, including cuts to defense and mandatory spending such as Medicare. The president subsequently would be allowed to seek a $1.2 trillion increase in the debt limit.
For fiscal years 2012 and 2013, the bill establishes a “firewall” between defense and non-defense spending, specifying minimum levels of defense funding. It also provides $17 billion in mandatory funds over two years to help fill the funding gap in the Pell grant program, and it includes numerous changes to the federal student loan program, including eliminating the ability of most graduate students to take out subsidized student loans.
Finally, the measure requires the House and Senate to vote on a balanced-budget amendment to the Constitution between Sept. 30 and Dec. 31.