President Obama and congressional leaders reached a last-minute deal this week to raise the debt ceiling and slash federal spending. The 10-year agreement unfolds in two steps. The first cuts spending at federal agencies by roughly $900 billion over the next decade.
The debt ceiling is raised immediately by a similar amount, authorizing government officials to continue borrowing into 2012.
The second stage includes a joint congressional committee that would recommend $1.5 trillion in additional savings to be enacted by the end of the year. If the committee fails to act by late December, automatic spending cuts of $1.2 trillion would slash domestic and defense programs equally.
The so-called “Super Committee” is to be comprised of an equal number of Republicans and Democrats. Everything from budget cuts to tax increases will be on the table during the committee session. A flurry of lobbyists representing everything from defense contractors to farm groups are expected to swarm “Super Committee” members in the weeks ahead.
The agriculture sector is hoping to stave off a fresh round of budget recommendations. Minnesota Congressman Collin Peterson warned this week that the committee could effectively pre-determine the 2012 farm bill by slashing direct payments.
The debt ceiling deal also dealt a blow to a budding congressional compromise on ethanol subsidies. The John Thune-Amy Klobuchar plan would have peeled back more than millions of dollars of federal spending by eliminating the blenders credit and import tariff on foreign ethanol.
$1.3 billion, which represents two-thirds of the subsidies' 5-month price tag, would have been contributed towards debt reduction negotiations on Capitol Hill. The remaining $668 million would be redirected towards blender pump incentives. Despite the potential cost savings, some Republican congressmen deemed the plan a tax increase. It’s now likely the biofuel incentives will continue at current funding levels until the program expires later this year.