What to Worry About Now That We May Have a Debt Deal

There is still plenty of drama left in Washington

When the 1 a.m. Sunday vote over the debt deal was delayed last night till 1 p.m. Sunday, the mood in Washington seemed to change. The delay indicated to many that Republican Senator Mitch McConnell was negotiating with the White House. Suddenly, things were looking up.  As of Sunday morning, ABC’s Jonathan Karl reported that there is a tentative debt deal in the works, and congressional leaders are sharing the plan (based largely off McConnell's proposal) with their respective members. According to ABC's Jon Karl, here are the key elements (as of now, changing by the minute it seems):

• A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).
• They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.
• The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase).  This deficit reduction could take the form of spending cuts, tax increases or both.

In light of this almost agreement, here are a couple of things to feel good about:

We won't default! At this point, the details are by no means fully hammered out. Senator Charles Schumer told Politico that "there's no final agreement" yet, and that both sides are still wrangling over the trigger mechanism that would precipitate automatic cuts. But he added: "If there's a word that would right here that would sum up the mood, it would be relief...default is far less of a possibility now than it was a day ago."

No major downgrade! Business Insider reported that Moody's chief economist Mark Zandi, who is not a member of the ratings agency, told CNN that "based on what I've heard from them, I think this would be sufficient..to avoid a downgrade" and this is "great news… if they can pull this off I think we will be in good shape."

Now for some things to worry about, before we start going into withdrawal:

The "trigger" issues they are still "wrangling" over may not be such a minor detail: ABC's Jake Tapper reports that:

The White House believes the trigger to force Congress to pass the deficit reduction recommendations of the super-committee should be threatened cuts to both discretionary domestic spending and the Pentagon – 50/50. House Republicans are pushing for the across the board cuts.

Democrats do not think the threat of the sudden imposition of more than $1 trillion in across the board spending cuts is enough of a threat to House Republicans. They think a lot of them would like that and thus the super-committee would be doomed to fail.

We're still not sure when this will end: Business Insider also reports that, according to NBC's Chuck Todd, a short-term extension of the debt ceiling is possible to give both sides time to hash out the final details on an agreement.

In fact, there may not be a deal at all: CBS News' Mark Knoller tweeted that, when asked if there was a deal, David Plouffe, senior adviser to Pres Obama, said "No, there's not" -- although he did seem optimistic against default. Meanwhile, Sen. Lindsey Graham says he expects only about half of the GOP conference in the House to back the deal.

Even if there is, not everyone is thrilled about how it all turned out: CNN/Daily Beast's Howard Kurtz tweeted: "If there are $3 trillion in cuts and no tax hikes, Obama will have to explain how it is that the Republicans got 98 pct. of what they wanted." And economist Paul Krugman said any spending cuts will slow the economy further during the recession. He says "we will envy Japan" during their "lost decade." He added that with these spending cuts, unemployment may be above 9 percent at the end of 2012.