Advancing a Free Society

Strategic analysis of the Budget Control Act

Monday, August 1, 2011

This is the third of three posts on the Budget Control Act.

The other two posts are:

  1. Quick summary of the Budget Control Act; and
  2. Understanding the Budget Control Act.

I cover three topics in this post: what important players won in this deal, the core concepts and tradeoffs within the deal, and what the different strategies might be this Fall under this bill if (when?) it becomes law.

The President’s priorities

The President knows he will get debt limit increases through early 2013 no matter what House conservatives/Tea Party members do. Those Members can no longer “hold a debt limit increase hostage” before the 2012 election.

We could also describe this as eliminating liquidity risk through 2012.

Assuming someone doesn’t find a way out of the enforcement mechanisms in the bill (1 in 3 chance), there will be at least $2.1 T in deficit reduction over the next 10 years as a result.

Continue reading Keith Hennessey…