Former Senator Judd Gregg (R-NH) says Social Security checks will need to be halted before House Republicans will agree to a deal to raise the debt limit.
A deficit hawk and former Chairman of the Senate Budget Committee, Gregg turned down an offer from President Barack Obama to be his Secretary of Commerce.
Now an analyst with Goldman Sacks, Gregg said on a conference call this morning that there is a better than 50 per cent chance that Congress will not reach an agreement before August 2nd.
Gregg said that if that were to happen, it “would put the blame on the Republicans,” saying House GOP’ers are the biggest obstacle to a deal.
“In the Senate, you’ve got a centre of 40 members who are willing to sign on to something dramatic AND you have the President endorsing it — that’s good news. We have agreement on the problem and a resolution,” he said.
“BUT the House is nowhere near an agreement. The Gang of Six plan will not come to fruition in the next few weeks — maybe not even until the next election. The best thing that could happen is that a special committee might be set up to continue to work on the Gang of Six agreement. Ultimately, it won’t affect the debt ceiling debate in the short-term.”
Gregg added that he wasn’t any more optimistic about the “last-ditch” plan put forward by Senate Minority Leader Mitch McConnell (R-KY) and Senate Majority Leader Harry Reid (D-NV).
“The McConnell-Reid is too political; people say it’s a fallback, I think that’s wishful thinking.”
Gregg said he thinks “a small increase in the debt ceiling in exchange for a small decrease in spending (temporary) is most likely deal to happen.”
“The most viable: a group comes together to make cuts, and somehow Boehner and Cantor get a majority of the Republican members to vote for a smaller reduction in spending in exchange for a smaller reduction in spending. Or maybe they kick the can down the road for the next few weeks because they’re able to say they’re making progress. Hard to see that being the action unless there really is a coming together that’s visible between Boehner and the President.”
“My gut tells me that we’ll need a weekend of drama — maybe a weekend of the government not paying its bills — politicians need drama to make something happen. As soon as social security checks don’t go out, the politics will change. I suspect it’ll take artificial drama to get closure past the House.”
“Boehner understands that a shutdown is bad for his caucus and that there’s something viable short of a shutdown but right now… it’s a 50-50 chance that we go into a few days of disruption.”
Gregg said lawmakers don’t really care about the nation’s credit rating:
“Policy-makers only worry about a ratings downgrade at the margins. They don’t really care. The ratings agencies put themselves in a corner that’s foolish. I’ve always found them to be incredibly naive about the political process. To be so definitive is foolish.”
“For the ratings agencies to make this drop-dead date, it’s stupid and naive because we’ll straighten it out, but our process doesn’t allow it to do it overnight.”
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