The debt ceiling deal has finally passed and the limit has been increased to $2.4 trillion. This will help the government to borrow money till 2012 to pay the bills. However, a lot of people are not sure how this will affect us. Well, this won't be very clear until 23rd November, 2011. This is the deadline within which the special Congressional panel and Joint Select Committee on Debt Reduction to come up with measures to save $1.5 trillion by tax reforms and spending cuts.

Here are some of the ways in which the special Congressional panel has decided on spending cuts

• The new law emphasizes on spending cuts for more than $900 billion over the next decade.
• One-third of these cuts will come from defense spending.
• The debt deal will do away with federal subsidy for the graduate student loan program.

The results of these spending cuts will be:

• Higher education will become expensive.
• Pell Grants Program for low-income students will receive funding.
• Medicaid, Medicare and other state aided programs for poor will receive funding.

Tax Reforms:

It will be the responsibility of the Joint Select Committee on Debt Reduction, a 12-member bi-partisan panel of senators and representatives, to find the money to offset future increases in the debt ceiling. It has been noted that their goal is to save $1.5 trillion between 2012 and 2021 in order to avoid future increase in debt ceiling. Apart from spending cuts, this revenue will also be generated from certain tax reforms. Some of the ways in which the Committee is thinking of tax reforms are as follows:

• The individual and corporate tax benefits as well as loopholes will be examined.
• Tax reforms in the field of business tax deductions are also being examined.
• Tax reforms are considered even in the field of mortgage interest deduction for second homes.

The Congress has until December 23rd, 2011 to approve or defeat the panel's deal. However, a very important point to be noted is that no amendments would be allowed.