Tag Archives: debt impasse

Wow, and in the nick of time!  Who could have predicted it! ;~)

If press accounts (see here and here)  can be believed, Boehner, McConnell and the  President are on the cusp of forging a budget agreement almost precisely along the lines I forecast a few days back: essentially, Obama agreeing to the substance of Republican debt reduction policies in order to get a debt extension that will take this issue off the table until after 2012.

The key negotiating point that bridged the differences was a the form of a  “trigger” that would be pulled if the joint congressional committee did not come back with the specific spending cuts needed to meet the deficit reduction target agreed to in the plan.  That trigger apparently will consist of two elements: first, if the joint committee’s recommendations are not adopted by the both congressional chambers, Congress must send a balanced-budget amendment to the states for ratification.  Second, automatic across-the-board spending cuts, including reductions in Medicare and defense, would kick in.

Otherwise, the plan includes essentially all the elements of the deal negotiated last week by Reid and Boehner from which Obama evidently initially pulled back. It includes:

• A very short-term debt ceiling extension, attached to a military spending bill, to avoid default on Tuesday.
• An overall cut of $2.8 trillion in spending, including $1 trillion that falls within spending caps over 10 years. Significantly this dollar amount should be enough to get agreement for a debt extension beyond the 2012 elections – but see the next point.
• The creation of a joint congressional committee that will specify, by this Thanksgiving, how to achieve the additional $1.8 trillion in cuts.  If the recommendations are not adopted, the trigger is pulled,  leading to automatic cuts.
• No new tax revenue.

Before everybody starts patting me on the back for my prognostic skills, however, keep in mind that this deal could still fall apart. There are both substantive and political risks.   Politically, this is going to be a tough deal for Senate Democrats on the Left to swallow. Essentially, the bill represents a concession to every Republican demand. Will Senate Democrats filibuster it?  If it passes, the Leftist Blogosphere (TPM, the Daily Kos, FDL) will go positively insane. Second, will the Tea Party-backed House Republican caucus accept the trigger mechanisms?  There is reason to be skeptical that Congress will ever allow across the board spending cuts to occur.  Remember, they tried this with Gramm-Rudman-Hollings in the mid 1980’s and Congress proved amazingly adept at manipulating the budget figures to avoid invoking sequestration. Tea Party activists might not buy into the deal because of the risky trigger mechanism.  Finally, this does nothing – at this point – to address entitlement reform which, in the end, is the big budget driver.

But, at this point, this is a deal that avoids default – one driven by a political logic that almost guaranteed an end result along these lines.

I’ll be on later today with an update and more in-depth analysis.  I want in particular to address, once more, the 14th amendment issue that Obama’s fervent supporters (and critics too) were so sure  he would invoke.

Addendum (2 p.m.) Everyone (Boehner, Reid and McConnell) have publicly confirmed that a deal is in the works, and all three express guarded optimism that something will be worked out.  The sticking point seems still to be the form of the trigger mechanism that kicks in if  Congress doesn’t act on the recommendations by the joint congressional committee for specific cuts.  The idea is that both sides must agree to a trigger that threatens their interests – so, threats to cut Medicare payouts to healthcare providers will presumably not be acceptable to Democrats, and the threat of deep Defense cuts  will presumably force Republicans to act.   I wouldn’t be surprised, however, if the Obama administration is also trying to get a face-saving provision that says something about tax increases being considered after 2012, when the economy is in a better position to tolerate them.  This will be for show, but the Democrats can at least show this fig leaf to their party members.

Based on these comments, I remain optimistic that an agreement will be announced later today.

Addendum (4:30 p.m.).  As expected, Reid’s effort to invoke cloture in order to bring his measure to the Senate floor failed, 50-49 earlier today, although Reid can still try again if the agreement now being negotiated falls apart.   So far, I don’t see anything that appears to jeopardize that agreement.

Addendum (5:45 p.m.)  Reid has signed off on the deal.  Now the hard part begins – selling it to their respective caucuses!

If it sounds familiar, it’s because it is. The House is now voting on a version of the Reid debt reduction proposal even though Reid doesn’t even have the votes to bring it to the floor in the Senate as yet.   Nonetheless, House Republicans want to make clear that the current Reid proposal has no chance of passing the House.  It’s too nice a day for me to watch the vote unfold, so let me tell you beforehand how it will turn out: Reid’s bill will go down to defeat,  particularly since it was taken up under special House procedures called “suspension of rules” that are normally utilized for non-controversial measures.  Under the suspended rules, there is limited time for debate – 20 minutes for each side – and there are no amendments allowed.  Passage requires 2/3 of the House – and that’s not going to happen in a Republican-dominated chamber.  So the Reid bill will fail on almost straight party line vote.

Meanwhile, back in the Senate, Reid is trying to drum up the requisite 60 votes to invoke cloture sometimes in the wee morning hours of Sunday – a first step in his own bid to bring a debt ceiling bill to vote.  Minority Leader Mitch McConnell has other ideas, however, and has already informed Reid that he has 43 Republican Senators pledged to oppose the latest Reid plan, which would essentially give President Obama the power to raise the national debt limit in two separate stages of $1.2 trillion each.  This would be paired with $2.4 trillion cuts in spending over the next ten years.

With Boehner’s bill tabled in the Senate, and Reid’s bill not likely to even come to a vote, the stage is set for a deal that will almost certainly center in part on the preferences of the four Republican Senate moderates who didn’t sign McConnell’s letter: Alaska’s Murkowski, Maine’s Snowe and Collins, and Scott Brown who holds the Kennedy seat in Massachusetts.  At this stage I’m betting both sides will agree to a short-term extension of the debt ceiling past August 2 to let negotiations play out.

One interesting twist to the negotiations is McConnell’s demand that President Obama take a public seat at the negotiating table, rather than participating behind the scenes.  With his approval level at 40% – the lowest Gallup rating for his presidency – the debt dispute is clearly taking a toll politically not just  on Congress, but on Obama as well. The recent bad economic numbers aren’t helping either.  With this backdrop, McConnell wants to make sure that Obama cannot portray himself as the mediator in chief – the “adult” responsible for bringing the two feuding children to the table.  Instead, McConnell wants Obama to roll up his sleeves and join the food fight. Even some Democrats are apparently voicing private complaints that Obama has not been forceful enough in these negotiations.

The next 24 hours should be crucial.  If word begins to leak regarding the outlines of a compromise deal, I’ll come back online.  Meanwhile, where’s Jack Bauer when you need him?

Big doings today that set the stage for the last minute compromise that I have been predicting for several weeks now. As expected, the House passed a revised version of Speaker Boehner’s bill by a 218-210 vote to raise the debt ceiling to $14.3 trillion, but only after Boehner sweetened the pot to include language that a balanced budget amendment be passed by the House and Senate before a second increase in the debt would be allowed next year. Even with this provision, Boehner still lost 22 Republicans – most of them Tea Party caucus members and/or fiscal conservatives.  The measure received no support from Democrats in the House.

Shortly after House passage, the Senate – again as expected – moved quickly to table consideration of the House bill, 59-41, again on a largely party line vote. Six Republicans joined all the Senate Democrats in voting to table the House bill: Sens. Jim DeMint (S.C.), Lindsey Graham (S.C.), Orrin Hatch (Utah), Mike Lee (Utah), Rand Paul (Ky.), and David Vitter (La.).  One should not make the mistake of assuming that these Republicans will now support Reid’s version of the debt extension – they will not.  By tabling consideration of the House bill for now the Senate leaves open the possibility of taking it up later, but amending it by substituting a version of Reid’s bill which, if it passes the Senate, would then be sent to the House. The strategy here is to send the House a bill with almost no time left before the August 2 default deadline, leaving the House with two choices: sign on to the Senate  bill or be blamed for default.

Meanwhile, in a sign that Reid recognizes that his own debt limit bill in its current form lacks filibuster-proof support, the Majority Leader refused to take Minority Leader Mitch McConnell’s suggestion to immediately move to a vote on Reid’s bill  (more precisely, a move to invoke cloture which would prevent a Republican filibuster).  Reid’s refusal indicates that – at this juncture – he does not have the 60 votes he needs to pass his debt extension.

None of this was surprising, but all of it was necessary in order to demonstrate to the ideological purists in both wings of the party – and their activist supporters – that the only way to resolve this debt crisis will require compromise. (Now if we can only drive a stake through the heart of this 14^th amendment nonsense!) Neither side is going to win this debate, and neither side gains from a default.

So, how will the debt impasse be resolved?  First, one more round in the vote carousel needs to play out.  Reid will need to revise his bill in order to attract at least 7 Senate Republicans to reach the 60-vote filibuster proof total.  If Democrats can do that, they would then send the “bipartisan” proposal back to the House with very little time for Boehner to respond.  That would put pressure on the Republicans to either accept the Reid bill or potentially take the blame for inducing a national default after Aug. 2.

Anticipating this, Boehner will take up the current Reid bill tomorrow in expedited fashion – technically, under “suspension of rules”.  In essence, that means the final and only vote on Reid’s measure is to suspend normal House rules and to pass Reid’s bill – but by a 2/3 majority vote.  The vote is purely symbolic, but it does signal that even if Reid’s bill somehow passes the Senate in its current form, it is dead in the House.

So, what is the endgame?  It will likely end – for this round – like this.  Democrats’ primary concern is to prevent a two-step process- they are holding out for an extension of the debt ceiling that is high enough to take us beyond the 2012 election.  What can Republicans extract for agreeing to this?  I can think of two things: a straight vote on a balanced budget amendment and deeper spending cuts with no revenue offsets.  And that is almost surely how this current budget impasse will be resolved.  Although Obama has stated that he won’t agree to a short-term debt ceiling extension, he will almost certainly be willing to compromise on this point in order to give both sides another few days to finalize an agreement.  So, I expect Republicans to concede on the two-step process in return for getting steeper spending cuts and no revenue offsets, and an up-or-down vote on a balanced budget amendment. If they are close to an agreement of this type, Obama will surely agree to a short-term extension of the debt ceiling.

The fallback option – which I expect Tea Partiers in the House to reject – is a version of the McConnell plan to allow Obama to raise the debt limit subject to a 2/3 override vote in both chambers of Congress – a ceiling that would in effect give Obama a blank check.  Unless this is paired with significant concessions to the House Tea Partiers, such as a clean balanced budget vote, I don’t  see this going anywhere.

That’s how I see the endgame playing out.  Before we get there, however, both sides – egged on by party activists like Krugman and Limbaugh – will undoubtedly ratchet up the rhetoric.  That will surely dominate media coverage, but don’t be deceived – negotiations for a bipartisan compromise are ongoing and will result in a compromise that will prevent a debt default.

More in the morning, and keep those comments coming….

As Speaker Boehner and the Republican House leadership struggle this morning to lock down the votes needed to pass the Republican debt limit bill, there were a couple of other developments.

First, the President gave a brief statement this morning that essentially reiterated his belief in the necessity of a bipartisan compromise, and he once again urged people to write their congressman, noting that when he last made this pitch, the public response was overwhelming.  Again, however, it’s not clear to me that the people who are writing in are doing so in favor of bipartisan compromise; my guess is that the communications are coming mostly from issue activists on both sides of the political divide, telling their representatives to hold tight against the forces of evil.

What was more interesting is what Obama did not say: once again, he did not offer his own plan, nor did he promise a veto threat of the existing plans, despite previously releasing a Statement of Administration Policy (SAP) noting that his adviser would recommend a veto.  As Peter Baumann reminds me, this is typical language when preparing a veto threat.  But there are exceptions – Obama was much more explicit in promising to veto the Republican Cut, Cap and Balance bill.  I think it’s significant that he has not yet gone that far with the Republican bill.  Of course,  his Press Secretary is arguing that the veto issue is moot, since the Republican bill will never pass the Senate.

As if lawmakers needed any more incentive to act to prevent a default, the second quarter economic report was not good, with growth the slowest since the recession “officially” ended.  This is not good news for Obama’s reelection prospects.

Finally, Tom Harkin joins the growing line of Democrats arguing that Obama would be justified in invoking the 14^th amendment to end the debt impasse.

It is fascinating, and not totally unexpected, to hear Democrats who bitterly complained about George W. Bush asserting strong executive power to act in a national emergency now reversing field and urging Obama to emulate Bush, while Republicans have suddenly become the defenders of the Constitution.  It all about whose ox is gored.

At this point, depending on the whip count, Boehner is planning to bring the Republican bill to a vote today.  Meanwhile, the House Rules committee has issued a rule that will allow the House to vote on the Reid bill as well.  In the Senate, Reid has acknowledged that they can’t wait for the House to act to start deliberations, so they will begin debate today as well.

It is make or break time. More later today as developments come in.