President Obama unveiled a final legislative proposal at the weekend, giving Washington just 48 hours to agree on a deal before the US is faced with defaulting on its payments.
On Sunday 31st July 2011, the US President addressed his nation for a second time in under a week with arguments for a compromise which would see $1 trillion in spending cuts over 10 years and the formation of an oversight committee to enforce big cuts in US government spending before November 2011.
The President said:
“That’s why the second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. In this stage, everything will be on the table. To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don’t act. And over the next few months, I’ll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job.”
The enforcement mechanism means that in the event of no agreement on tough spending cuts, a special set of cuts would be automatically deployed. These would be equally split between defence spending and domestic budgets. Social Security, Medicare beneficiaries, and low-income programs would be shielded from the automatic budget cut.
Under the new deal, Barack Obama will be able to increase the United State’s debt limit by $2.1 trillion. This will mean that the President is unlikely to need another debt limit increase before 2013.