With the August 2 default deadline a week away, President Obama will go on national television tonight, against the backdrop of dueling partisan plans to solve the debt impasse. Presumably Obama will try to position himself above the political fray but will also, at least implicitly, make the case for supporting the Senate plan unveiled last night by Senate Majority Leader Harry Reid. The Reid plan would pair an increase in the debt ceiling by $2.4 trillion through the 2012 election with a proposed $2.7 trillion cut in discretionary spending across the next ten years. The plan is controversial, however, because it includes a trillion dollars in proposed “savings” from winding down the U.S. military involvement in wars in Afghanistan and Iraq. Critics contend that savings from a reduced U.S. involvement in these wars will occur whether the Reid plan is passed or not, so this does not actually constitute additional budgetary reductions. (This is the exact criticism Democrats leveled at the Paul Ryan budget plan, which included a similar accounting gimmick. But now the shoe is on the other political foot.) Another $40 billion would come from reducing “waste, fraud, and abuse” – a perennial congressional scapegoat. In addition, the Reid bill would include $100 billion in mandatory program savings, including $30 billion in Fannie Mae and Freddie Mac changes, and additional cuts in agricultural subsidies. Interest savings from cutting projected spending would produce another $400 billion.
The key element of the plan, almost certainly inserted at the President’s request, was an increase in the debt ceiling past the 2012 election. And this sets up dueling votes with the House Republican plan, which centers on a two-step process. In step one, an immediate $1 trillion raise in the debt ceiling would be paired with legislation that would cut discretionary spending by $1.2 trillion over 10 years. However, the increase in the debt ceiling would only extend to early 2012. A second increase in the debt borrowing ceiling would be linked to agreement on an additional $1.8 trillion in spending cuts.
To identify the additional $1.8 trillion in cuts, the Republican House bill would create a bipartisan joint House-Senate committee to report back to Congress by November 23. Significantly, the committee’s deficit savings could be achieved either through spending cuts or tax increases, or a combination of both — whatever a majority of the committee and, eventually, the House and Senate will support. After the majority of the committee provides its recommendations to Congress, both chambers would be required to hold an up or down vote, without amendments or threat of a filibuster – by Dec. 23. (The Reid plan has a similar proposal to create a bipartisan budget cutting committee in the Senate, whose recommendations would get a guaranteed up-or-down vote in that chamber.) If the committee’s recommendation is shot down, however, there would be reprise of the current debt ceiling impasse, but this time in the heart of an election year – something the President wants to avoid.
To mollify conservative House supporters of the Cut, Cap and Balance legislation, the Republicans would hold a separate House vote on a balanced budget proposal. The House bill also includes caps on discretionary spending in future years.
Note that neither plan is very specific about where the cuts in discretionary spending will occur, but presumably they are targeting the same areas identified in the “grand bargain”, so in theory there is room for compromise between House and Senate in terms of what will be cut. Neither plan includes tax increases, although there is room for that in the second stage of the House plan. The major difference between the two is whether to adopt a two-step process or a single extension past 2012. Both sides claim the credit markets will oppose the other sides’ approach.
Note that both plans face severe obstacles, and carry heavy political risks. The House bill is more likely to pass its parent chamber. It still must be granted a Rule by the House Rules committee, but assuming that passes it could come up for a vote on Wednesday, where I expect it to pass the House on largely partisan lines, despite grumbling from conservatives who strongly support a balanced budget amendment, and who likely don’t’ want to raise the debt ceiling without deeper spending cuts. Boehner’s strategy is clear: by proposing the House bill as an alternative to Reid’s, he hopes to provide political cover to Senate Republicans to vote down the Senate bill. Note that Reid’s bill will face a potential filibuster threat and so will need to muster 60 votes to get through the Senate.
And that’s where the President comes in: his goal tonight is to put public pressure on Senate Republicans to back the Reid bill. However, I expect him to play the centrist, mediator-in-chief role to the hilt, by trying to position himself above the political fray and instead emphasizing the need to compromise. His speech will be followed by a Republican rebuttal by Boehner himself. I’ll be live blogging, technology allowed.
As always, I encourage you to join in.