Six Possible Paths Ahead in the Debt-Ceiling Debate
By Jay Newton-Small Tuesday, July 26, 2011
According to President Obama, Congress has become mired in negotiations to raise the debt ceiling and trim federal deficits. The way ahead is unclear – every path has hurdles, if not roadblocks, obstructing the way. As Congress rapidly approaches the Aug. 2 deadline to raise the debt ceiling and avoid a government default on its credit obligations, there are now six possible paths forward:
The House bill passes: House Speaker John Boehner declared on Monday night that there is “no stalemate in Congress.” His way forward is a bill that, until Sunday, he was drafting with Democratic congressional leaders. The bill would enact $1.2 trillion in cuts immediately and then empower a commission – a variation of an idea put forth by Senate Majority Leader Harry Reid – to scour entitlements and other spending to find another $1.8 trillion in cuts over the next six months. Congress would then hold a second vote on these cuts and to raise the debt ceiling through December 2012. Democrats object to holding two votes – if raising the debt ceiling is hard now, imagine doing it in the middle of the 2012 primary season (the Iowa caucuses are on Feb. 6). They also don’t like the prospect of cutting entitlements.
Even Boehner’s own conference is not enamored with the plan. A coalition of several dozen right-wing members who support a more stringent House plan, known as Cut, Cap and Balance, which failed to pass the Senate, panned Boehner’s proposal on Monday. And when asked if he could get even a majority of Republicans to vote for his plan, given the GOP criticism, Boehner in a press conference deferred to House Majority Whip Kevin McCarthy, who said that they hoped to get Democratic support given that five Dems voted for their Cut, Cap & Balance bill. “We ask all Democrats that want to join with us to put this House on the right path that they could join with us on this bill,” McCarthy said. Unfortunately for them, they are going to need a lot more than five Democratic votes, which is unlikely. Without strong support in the House and tepid Republican support in the Senate, Boehner’s plan faces many obstacles to becoming law.
The Senate bill passes: Senate Majority Leader Harry Reid walked away from talks with Boehner on Sunday, opposed to the idea that the country should or could handle two debt votes in the next year. Instead, he is proposing a debt ceiling increase offset by $2.7 trillion worth of cuts. The plan is potentially appealing on paper as it meets House GOP criteria that 1) the debt ceiling increase through the 2012 elections must be offset by an equal or greater amount of cuts – $2.4 trillion according to the Treasury — and 2) it must not include any new revenue increases. This, Democrats say, is a major concession: that they are willing to give trillions of dollars in cuts without any shared pain from the GOP in the form of tax increases. Republicans argue that Reid’s bill is full of gimmickry. For example, more than $1 trillion of the “cuts” are savings from accelerated troops draw downs in Iraq and Afghanistan. But Republicans counted savings the same way in the $6.2 trillion budget introduced by Paul Ryan. The plan also includes a commission, though this one would not look at entitlements and the second vote would lack the teeth of an accompanying debt ceiling increase. Obama and Democrats feel this is the best way forward, but it remains to be seen if Reid’s plan – or anything for that matter – can pass the House.
The Senate & House bills are combined: There’s only a week left till the deadline, but – theoretically – if both chambers end their game of chicken and pass their own bills by the end of the week, House and Senate leaders could go through a quick conference process to reconcile their differences. There are many similarities between the two bills and the two chambers could bang out a compromise over the weekend and ram it through both chambers before the deadline. The likelihood of the bills passing, the leaders getting along and both chambers passing a new version in time is not good. But, it’s still a distant possibility.
The Grand Bargain comes back: Sure, Obama and Boehner twice tried to take the political leap on a grand bargain of $4+ trillion in cuts. And they got really, really close. Boehner said on Fox News Sunday that his final offer still remains on the table. And, frankly, the calculus that got both of them interested in a grand bargain remains the same: the political cost of doing something small is similar to the cost of doing something big, so they might as well go big. If Boehner’s bill fails to launch in the House, he has all the more reason to go back to the negotiating table with the President, rather than swallow the Senate bill. And the President has said that the only circumstances under which he’d accept a short-term extension is if they were hammering out the details of a big deal. But, as Boehner also said on Fox on Sunday, it is “hard to put humpty dumpty back together again.” And after the grand bargain shattered twice – three times if you count House Majority Leader Eric Cantor’s abandoning of Vice President Joe Biden’s deficit negotiations – there’s not a lot of trust left.
No deal is reached: The markets don’t seem to think this is a possibility — and for my 401(k)’s sake, I certainly wish it wasn’t. But the two parties have never been further apart on a deal than they were on Tuesday. It’s hard to imagine who finally gives in. And, so, it’s not irrational to predict that the Treasury Department will have to take radical action in suspending government services to avoid a default after Aug. 2. Despite every congressional leader’s confidence that a deal will be struck, no leader actually has a path to prevent it. That’s terrifying.
Some combination of all of the above: With so few viable options, it’s not hard to imagine that the deadline is missed and the ensuing panic forces Congress to enact some combination of 1-4. Or they go right up to the brink and some combination of 1-4 happens. As Doc Brown from Back to the Future said, “Road? Where we’re going there are no roads.”
Read more: http://swampland.time.com/2011/07/26/six-possible-paths-ahead-in-the-debt-ceiling-debate/#ixzz1TE3HVU8m
No comments:
Post a Comment