It is widely assumed that at the end of the day, Republicans and Democrats in Congress will compromise and cut a deal on raising the debt ceiling.It’s widely assumed because everyone from Treasury Secretary Tim Geithner to House Speaker John Boehner to Senate Majority Leader Harry Reid has told anyone who would listen that this is what is going to happen.
One hopes they are right. Last week, Moody’s issued a statement saying that if something wasn’t done to get US fiscal policy under some kind of control, the credit rating of the United States of America would be downgraded. That would be a disaster of significant scale.
There’s a growing number of people in Washington, however, who think that the nation’s political leaders don’t know what they’re talking about.
They point out that these leaders don’t have a deal on the debt ceiling in their back pocket. They don’t even have the outline of such a deal. The various commissions and “working groups” and all the endless meetings to produce a rough draft of such a deal have gone, basically, nowhere.
Let’s review the bidding. The President’s Commission on Fiscal Responsibility and Reform unveiled its report in December of last year. The White House disowned it, gently but definitively.
The Gang of Six (US Senators, working on a sp-called “grand bargain”) labored mightily to come up with a comprehensive deficit reduction plan of their own. It became the Gang of Five late last month when Sen. Tom Coburn (R-OK) grew so frustrated that he abandoned ship. They’re still working on their plan, but so far, not even a rough draft document.
House Budget Committee Chairman Paul Ryan introduced his plan in early April, to much fanfare. There was a special election in New York shortly thereafter. Rep. Ryan’s outline for “overhauling” Medicare went down to screaming defeat (A Democrat was elected to represent a solidly Republican district). And that was the end of that.
In between Paul Ryan’s proposal and the downsizing of the Gang of Six, President Obama gave a “major policy address” on the deficit that turned into a campaign speech about the need to protect Medicare. The president’s proposals for deficit reduction were immediately dismissed as unserious.
Throughout all this posturing and positioning, a growing number of members of Congress convinced themselves that the debt ceiling needn’t be raised. It can be handled through clever fiscal management, they say. These people are known in Washington as “deniers.” Their number seems to swell with each passing week.
Which leaves the Biden Group, chaired by Vice President Joe Biden. The Biden Group was created by President Obama to navigate some kind of compromise on raising the debt ceiling.
The first thing it did was abandon any pretense that it could deal with the larger issue of long-term deficit reduction. It rejected even the possibility of a “grand bargain.” Instead, it sought to fashion a dollar-for-dollar swap: every dollar of increase in the debt ceiling would have to be offset by a corresponding dollar decrease in federal spending.
As the Obama Administration is seeking to raise the debt ceiling by roughly $2.5 trillion, the Biden Group was charged with the task of finding $2.5 trillion in budget cuts.
According to informed reports, they have $1.25 trillion in budget cuts hashed out and agreed to. (We’ll believe that when we see it). They just can’t come to any kind of resolution on the next $1.25 trillion. And it seems increasingly unlikely that they will before the August 2nd deadline.
Democrats are hoping that the Republicans will be blamed for shutting down the government. Republicans are hoping that Democrats will be punished for profligacy. This dynamic doesn’t produce resolution. It produces awe-struck amazement that the national leadership of the two major political parties in the United States of America would play a game of chicken with the nation’s credit rating hanging in the balance.
A veteran lobbyist told us the other day that “no deal by the second (of August)” was a “50-50 bet.”
“I can’t believe I’m saying that to you,” he said. “But I think it’s true.”
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