CBO confirms that debt-ceiling plan would cut $2.1 trillion

The nonpartisan Congressional Budget Office on Monday confirmed that the debt-ceiling compromise now slowly working its way through a political minefield would cut deficits by at least $2.1 trillion over 10 years.

The finding, reported in a letter to Speaker John A. Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.), is fresh ammunition for supporters of the plan in the face of conservative opposition that the spending cuts are too small. Liberals are also unhappy, arguing that Democrats are caving in to the GOP by not insisting on raising more revenue by closing tax loopholes on the richest.

According to the budget office’s analysis, the compromise includes an immediate spending savings of $917 billion, about the same amount proposed by Boehner last week. Using Boehner’s number might help push the overall package through the House, which is controlled by Republicans but where conservatives led by the “tea party” movement are unhappy with the overall number.

The second step in the process would come from the Congressional Joint Select Committee on Deficit Reduction, a special congressional committee that would be mandated with finding $1.5 trillion in spending cuts. If the committee fails to find that amount, there would be an automatic trigger chopping $1.2 trillion. The budget office used the smaller figure to reach the $2.1 trillion total.

“CBO estimates that the legislation -- apart from the provisions related to the joint select committee -- would reduce budget deficits by $917 billion between 2012 and 2021,” according to the letter to the congressional leaders. “In addition, legislation originating with the joint select committee, or the automatic reductions in spending that would occur in the absence of such legislation, would reduce deficits by at least $1.2 trillion over the 10-year period. Therefore, the deficit reduction stemming from this legislation would total at least $2.1 trillion over the 2012-2021 period.”

The compromise plan, announced on Sunday after weeks of bitter fighting between Republicans and Democrats, would raise the debt ceiling from its current $14.3 trillion. The Obama administration has argued that the debt limit would be hit Tuesday and that without action, the government would face default.