US CBO: Latest Reid Plan Includes Multi-Step Debt Hikes

WASHINGTON (MNI) ? The Congressional Budget Office late
Friday said a revised Senate debt-hike plan would save $2.2
trillion to $2.4 trillion over 10 years and includes a multistep
process for raising the debt ceiling in the future:

Analysis of the Impact on the Deficit of the Budget Control Act of
2011 as Revised in the Senate

July 29, 2011

Letter to the Honorable Harry Reid

Summary

The Congressional Budget Office (CBO) has estimated the impact on
the deficit of the Budget Control Act of 2011, as proposed in the Senate
on July 29, 2011. The legislation would:

* Establish caps on discretionary spending through 2021, including
separate caps on new funding for war-related activities;

* Allow for certain amounts of additional spending for ?program
integrity? initiatives aimed at reducing the amount of improper benefit
payments and enhancing compliance with tax laws;

* Make changes to the Pell Grant and student loan programs;

* Reduce certain payments to agricultural producers;

* Establish a procedure for increasing the debt limit by $416
billion initially and subsequent procedures that could allow the limit
to be raised in two additional steps, for a cumulative increase of as
much as $2.4 trillion;

* Reinstate and modify certain budget process rules; and

* Create a joint Congressional committee to propose further deficit
reduction.

In total, if appropriations in the next 10 years are equal to the
caps on discretionary spending and the maximum amount of funding is
provided for the program integrity initiatives, CBO estimates that the
legislation would reduce budget deficits by about $2.2 trillion between
2012 and 2021 relative to CBO?s March 2011 baseline adjusted for
subsequent appropriation action. As requested by your staff, CBO has
also calculated the net budgetary impact if discretionary savings are
measured relative to its January baseline projections. On that basis,
CBO estimates that the legislation would reduce budget deficits by
slightly more than $2.4 trillion between 2012 and 2021.

The version of the legislation proposed in the Senate on July 29,
2011, contains several differences from an earlier version that was
proposed in the Senate on July 25, 2011. In particular, the more-recent
Senate version of the Budget Control Act of 2011:

* Reduces the caps on new discretionary funding in 2020 and 2021 by
$1 billion for each of those fiscal years;

* Contains revised language related to program integrity
initiatives aimed at reducing overpayments of certain federal benefits
and improving compliance with tax laws;

* Removes provisions governing spectrum auctions and related
spending;

* Changes the procedures for increasing the debt limit,
substituting a multistep process for the earlier single increase in the
debt limit; and

* Includes other small changes that would have no impact on
estimated budgetary effects.

** Market News International Washington Bureau: 202-371-2121 **

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