Debt Ceiling Dread: Two Plans, Two Parties, Oceans Apart
Policy + Politics

Debt Ceiling Dread: Two Plans, Two Parties, Oceans Apart

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House Republican Whip Kevin McCarthy, R-Calif., may have said it best when he noted that “It’s hard to negotiate with yourself.”  That's what House Republicans and Senate Democrats  were doing on Monday, as they unveiled competing plans for reducing spending and raising the debt ceiling after talks between the White House and Republicans collapsed last weekend.

With only a week left before the Treasury faces its first default in history, House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., left little room for compromise. House Republicans appeared to be laying down their final offer to President Obama and the Senate Democrats and saying, take it or leave it.  The deadlock is taking a toll on Americans who are now more pessimistic than ever about the economy according to a CNN poll.

Obama backs the Reid plan and is scheduled to address the nation tonight at 9 p.m. on the status of the troubled talks which have spun out of control in recent days amid growing concern about an economic crisis.  Earlier today, Obama renewed his call for the Republicans to return to the bargaining table to produce a balanced long-term deficit reduction plan  that included cuts in spending – including for Social Security, Medicare and other entitlement programs, and some increases in taxes on the wealthy and corporations.

“I’m willing to cut spending that we don't need by historic amounts to reduce our long-term deficit and make sure that we can invest in our children’s future,” Obama said in a speech to the National Council of La Raza, a major Hispanic group. “I’m willing to take on the rising costs of health care programs like Medicare and Medicaid to make sure they’re strong and secure for future generations.”

“But we can’t just close our deficits by cutting spending,” he added. “That’s the truth, and Americans understand that.  Because if all we all do is cut, then seniors will have to pay a lot more for their health care, and students will have to pay a lot more for college, and workers who get laid off might not have any temporary assistance or job training to get them back on their feet."

The White House and congressional Republican and Democratic leaders have been wrangling for months over a long-term deficit reduction plan essential to winning GOP support in the House for raising the $14.3 trillion debt ceiling. Treasury Secretary Timothy Geithner has warned that the government will begin defaulting on its obligations on August 2 unless Congress and the White House can agree on a plan to raise the debt ceiling.

While Obama and Boehner came close twice to agreeing on a “grand bargain” of deficit reduction, the talks collapsed in disagreements over tax revenue. Republicans have consistently opposed any type of tax increase as part of an agreement, although in the last go-round, Obama and Boehner appeared close to agreement on $400 billion of fresh revenues before Boehner pulled out under pressure from conservative Republicans and tea party allies.

The House last week passed a “cut, cap and balance” plan for reducing the deficit that included a controversial Balanced Budget Amendment to the Constitution that would make it virtually impossible to raise taxes in the future. Today, that was set aside by Boehner in favor of a two-step approach that would immediately raise the debt ceiling by up to $1 trillion – just enough to get the Treasury through the remainder of this year – and cut discretionary spending by $1.2 trillion over the coming decade. A new, joint House-Senate committee of 12 lawmakers   would then be instructed to come up with an additional  $1.8 trillion of deficit savings over 10 years by late this year, receiving fast-track powers to guarantee up-or-down votes on their legislative product should they produce a plan that wins at least seven votes in their special committee.

If such a plan were approved, President Obama early next year would then be able to request up to $1.5 trillion of additional borrowing authority, which Congress would only be allowed to block by a super-majority vote of disapproval.

“We believe it’s a responsible, common sense plan that meets our obligations to the American people and preserves the full faith and credit of the United States government,” Boehner said at the Capitol late this afternoon.

But Obama has repeatedly rejected Republican efforts to bifurcate the process and force a second Congressional vote on raising the debt ceiling next year, as the 2012 presidential and congressional campaigns are heating up.  Obama and the Democrats say that if it’s so difficult now to raise the debt ceiling, it would be virtually impossible next. Moreover, Geithner, Federal Board Chairman Ben Bernanke and other financial experts warn that the Treasury’s  Triple-A bond rating would be endangered and financial markets would be roiled if the  government stumbled along for months without agreement on major long term deficit reduction and entitlement and tax reform.

Reid, declaring that the House Republican approach was a “non-starter” and “amateur hour on Capitol Hill," today offered a counter proposal of $2.7 trillion in deficit reduction that would allow Congress to raise the debt limit through 2012.  Reid said the plan was crafted to address the Republicans’ demand that there be no tax increases and that there be a dollar-for-dollar match between spending cuts and the amount of additional borrowing authority granted to the Treasury.

The Reid plan includes $1.2 trillion of cuts in discretionary spending for domestic and defense programs, $100 billion in savings in mandatory programs other that Medicare, Medicaid or Social Security benefits, $1 trillion in savings from winding down the wars in Iraq and Afghanistan and $400 billion of savings in interest on the federal debt.  The Democratic plan would also establish a joint congressional committee to propose additional cuts, and that group’s recommendations would be guaranteed an up or down Senate vote, without amendments, by the end of this year.

Reid told reporters that the proposal satisfies Democrat’s core principals of protecting Medicare, Medicaid and Social Security and providing a long term extension to the debt ceiling that the markets are looking for, while also meeting the Republicans principal demands throughout months of negotiations.

 So now all of the Republicans have to do is say yes, Reid said. “Unfortunately the Republicans who used to run the Congress are being driven by the radical right wing that is so in tune with the Tea Party. “

Boehner and Reid gave conflicting versions of their meeting on Sunday to try to work out a compromise after Boehner formally broke off talks with Obama late Friday. Boehner said his plan “reflects a bipartisan negotiation over the weekend with our colleagues in the Senate,” and as a result wasn’t all that the Republicans would have preferred. Reid said there was little agreement during the talks and that “It appears to me at this stage the Republicans are more interested in embarrassing the president than doing what’s right for the country.”

Sen. Chuck Schumer, D-N.Y., told reporters that the Senate Democratic leadership has tried in every way to reach out to the Republicans, “When they don’t budge an inch and we move in their direction .... After a point you have to say maybe they either can’t help themselves or they want a default.”