WASHINGTON, DC-Less than 24 hours after the House of Representatives voted 269-161 to raise the debt ceiling by $2.1 trillion, the Senate followed suit with a final vote of 74-26. The bill now heads to President Obama’s desk for signature, a move he is certain to make after he anointed the agreement underpinning legislation on Sunday night as a viable approach.
The $2.1 trillion is enough to fund the government until 2013, after the elections. In exchange, lawmakers have specified $917 billion in spending cuts over 10 years. Additional cuts will be decided by a bipartisan panel of 12 members of Congress. If the committee cannot identify these savings, additional built-in spending cuts kick in.
Driving the bill was the specter of the US defaulting on its debt obligations, along with threats from rating agencies that a downgrade in the country's AAA credit rating was in the offing. That may still happen--the ratings agencies have made clear that they will be looking at whether the plan addresses the US’s long-term deficit.
If the ratings agencies do downgrade the US debt, they may also downgrade certain states as well, including Maryland and Virginia. This, too, was threatened in the run up to the agreement, on the grounds that these states are heavily dependent on government spending. The bill doesn’t necessarily lessen the risk for the DC region. The Pentagon and defense spending were included in the round of cuts under the bill--which will certainly have an impact on local real estate.
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