"OK, So..." Everything You Need to Know About the Debt-Ceiling, July 24-30

We left off last week with a Boehner-Obama breakup that would've made the writers of Dawson's Creek green with envy. On Friday, it was rumored the two were close to striking a deal on the debt-ceiling, but then Boehner started acting all weird and not returning Barry's phone calls. So Obama was all like "what's going on? I thought we had something here?" So then Boehner comes out and says "sorry, but I just don't feel the same way...it's not me, it's you." Then Obama was all like, "whatever, your loss." ...I make light of the situation because it's the best I can do in the face of sheet frustration. Actually, following the debt-talks is sort of like calling up your ex: an intriguing prospect at first, but one that ultimately leaves you grasping for a way to understand and cope with everything that just happened. 

A real shame about those two kids, I thought they were gonna make it.

Just as the stalemate was breaking last week with the Gang of Six plan and the Boehner-Obama talks, the slightest flicker of hope that our leaders in Washington would get something done was suddenly extinguished. I mean honestly, sometimes The Onion might as well be a real news site. Granted, Boehner's withdrawal was due to conservative Republicans' revolt over the idea of tax increases which Boehner was supporting in his private talks with Obama, but still. So after Friday's breakup, and an unproductive meeting at the White House on Saturday, we're seemingly back at square one. With the White House sidelined, the responsibility for raising the debt ceiling now lies with Congress (as it always has really). And right now, the House and Senate are on different trajectories drafting different plans. So we're sure to have another interesting week that might just push this whole debate into the 11th hour of August 1 if present trends continue.

I just want to back up a second to say that there is no law requiring Congress to cut the deficit when raising the debt-ceiling. It's simply a procedural, yes or no vote, and it has happened literally dozens upon dozens of times in the past. All this talk about cutting the deficit is simply a political maneuver that's been tacked onto the debt-ceiling vote.

Having said that, here's what's happening this week:

Sunday, July 24

  • House Speaker John Boehner insists that raising the debt-ceiling must be a two-tiered plan. Such a plan would raise the debt-ceiling by ~$1T by August 2 and make another raise contingent upon further cuts, entitlement and tax reform. The second raise would happen during election season 2012. President Obama and other Democrats have roundly rejected this approach, insisting that any debt-ceiling hike must go through the end of 2012. Another debt-ceiling debate, some contend, would accomplish little other than political posturing.
  • Senate Majority Leader Harry Reid announces he is drafting a plan that would cut $2.7 trillion from the deficit over the next 10 years. He believes the plan should please the GOP since the cuts exceed the $2.5T debt-ceiling raise and does not include any new taxes. However, this may be a sticking point for many Democrats who insist that revenues must be apart of any deficit-reduction deal.

Monday, July 25

  • CitiGroup releases an analysis that says any deficit reduction measure that falls short of $3.7T could put the nation at risk of having its triple-A credit rating downgraded.
  • John Boehner meets with the Republican conference to outline his debt-ceiling plan. The plan would raise the ceiling by $1T while cutting the deficit by $1.2T dollars over the next 10 years and require a vote by both house of Congress on a balanced budget amendment. The plan would also require that another debt-ceiling hike (during election season) be contingent upon bipartisan commission that would identify another $1.8T in cuts, including entitlement programs. Democrats dislike the plan because it extends the political posturing into next years election. Some on the right dislike it for not going far enough.
  • Boehner acknowledges that his short-term plan is "not perfect," and it faces staunch opposition from Democrats and the President.
  • Details of Harry Reid's plan are released. It will not affect Medicare/Medicaid, Social Security, or revenues. Here are some details:*
    • $1.2T discretionary spending cuts, including defense. Before John Boehner broke off talks on Friday, he had agreed to this amount.
    • $100B in Mandatory Savings that were negotiated by the Biden Group. These savings include:
      • $40B in integrity savings (making things like the IRS, gov't employee pensions more sound)
      • $30B Freddie Mac/Fannie Mae reforms
      • $15B in Spectrum sales (bandwidth for things like cellphones)
      • $10-15B in agriculture reforms (cutting subsidies for things like corn ethanol)
      • Higher Ed. reforms whose savings will support Pell Grants
    • $1T in savings from winding down the wars. This figure was also used by Paul Ryan's budget plan, which was supported by 235 House Republicans and 40 Republican Senators. (Although I have a hard time taking this figure seriously since, well, who knows what will happen?)
    • $400B in interest savings on the debt.
    • Establishes joint Congressional committee to find future savings. A bipartisan committee with 12 members from both chambers of Congress will propose additional savings that will be voted upon by the end of 2011 in an expedited fashion.
  • Although Reid's plan does not include revenues, it should garner strong Democrat support since it protects entitlement programs. Republicans seem poised to oppose it based on the $1T in war savings. This figure was in the Paul Ryan budget resolution, which was supported almost unanimously by Congressional Republicans. Additionally, this figure was also apart of the Cut, Cap & Balance plan the House passed LAST WEEK! Reid dares Republicans to vote against it.
  • Dueling Press Conferences
    • In a prime-time press conference, President Obama faults the GOP for refusing to compromise. "The American people may have voted for a divided government, but they didn't vote for a dysfunctional government," the President said. He urges Congress to take a balanced approach to reduce the deficit and urges any American who feels the same way to contact their representatives and tell them. CONGRESSIONAL WEBSITES ALMOST IMMEDIATELY CRASH due to the amount of traffic they receive. Good job, people!

    • In a rare rebuttal, John Boehner fires back with his own press conference claiming the President is asking for a blank check (even though he has been vying for a "grand bargain" that includes entitlement reform). The Speaker also touts the progress the House has made, including the passage of a "bipartisan" plan to cut the deficit (the Cut, Cap and Balance plan the garnered a whopping 5 Democratic votes in the House and died in the Senate). Boehner's current two-step proposal would prolong current uncertainties by ensuring another debt-ceiling battle in 6 months. Democrats, and even some within Boehner's ranks, oppose the plan. It's uncertain if it could even pass in the House, putting Boehner at risk for some serious embarrassment.

Tuesday, July 26

  • Both Boehner & Reid's plans include some sort of bipartisan commission to identify further savings. Many in Washington are skeptical of this idea. And perhaps rightly so when you consider that in the past year the Simpson-Bowles deficit commission, the Biden Group, and the Gang of Six have done little to advance a serious deficit-reduction plan.
  • John Boehner announces that the bipartisan commission his plan would create would not raise taxes. (Again, kinda makes you wonder what the point of having a bipartisan commission is if certain ideas can't even be discussed.) Boehner also said the GOP is going to wait "very close to the deadline to present this whole plan to Obama."
  • The White House announces it would veto Boehner's plan, but notes that it won't need to since it will not pass the Senate.

Wednesday, July 27

  • The House Republican Conference meets to make deeper cuts in Boehner's plan after a CBO report says the plan falls short of Boehner's $1.2T spending cuts goal. A House vote on the plan is pushed back to Thursday.
  • QUOTE OF THE WEEK: In that same meeting, House Speaker John Boehner tells the GOP rank-and-file to "get your ass in line" and vote for his plan, predicting Senate Dems will fold and vote for the plan if it passes the House.
  • Also at that meeting, House Republicans chanted "Fire him!" as at Republican Study Committee (RSC) staffer when it was discovered he sent emails to conservative organizations asking them to put pressure on House GOP to reject the Boehner plan.  The RSC is a conservative caucus made up some 170 House Republicans. Conservatives dislike the Boehner plan on the grounds that it doesn't go far enough to cut spending. The debacle highlights the ideological divisions within the Republican party.
  • Refuting a claim made by John Boehner, every single Senate Democrat signs a letter saying they would vote against the Boehner plan if it passes in the House.
  • House Democratic leaders urge President Obama to invoke the 14th Amendment trigger, which gives the President unilateral authority to raise the debt-ceiling. The White House has previously expressed reluctance to do this.
  • Sen. John McCain rips Tea party lawmakers for pushing a balanced budget amendment to the Constitution, calling them "hobbits." (One does not simply walk into debt.)
  • Fitch Ratings, a credit rating agency, says U.S. Treasury bond may still be a secure investment even if the country defaults on its debts, while also predicting short-term volatility in the market.
  • Analysts cite concern over a U.S. credit rating downgrade even if the debt-ceiling is raised by August 2. This is one reason why Obama has opposed a short-term deal to raise the debt-ceiling (like Boehner's plan): such uncertainty in the market might cause a credit rating downgrade.

Thursday, July 28

  • 22 House Republicans have said they will vote against the Boehner plan, arguing it does not go far enough to cut spending. If every Democrat in the House votes against the plan, any more than 23 GOP defectors will sink the bill. Republican Senators are also skittish about the plan.
  • The House will not vote on the Boehner until later this evening after financial markets have closed. Clearly, the GOP leadership is hedging its bets in case the bill fails. Markets have been falling the past 3 days amid fears that the Congress might not raise the debt-ceiling by August 2.
  • Top Wall Street execs urge Congress to reach a deal on the debt-ceiling, warning that failing to do so could have "very grave" consequences.
  • In what could be seen as a bad omen, The U.S. Treasury Department says it is drafting a contingency plan on what bills to pay in the event that Congress fails to raise the debt-ceiling.
  • Who says bipartisanship is dead? Politicians across the political spectrum are making campaign money off the debt debate.
  • Boehner plan still not a lock as of this afternoon. Some in the media are calling the vote on his plan a deciding factor for the future of Boehner's Speakership. (Funny, I thought this was all about deciding the future of our country.)
  • The House delays the scheduled 6pm vote on the Boehner plan as they try to round up more Republican support. According to The Hill, 25 Republicans have indicated they will vote against the plan. The GOP can afford no more than 23  Repub "no" votes if all Dems vote against the plan, as is expected.

In last week's update, I recommended checking out  this op-ed analysis from Joe Scarborough. If you have time, check out his latest piece, which describes an August 3rd where the debt-ceiling wasn't raised.

Check back as the week progresses for more updated, like us on Facebook, or follow us on Twitter @natpriorities

LAST UPDATED: Thursday, July 28, 11:00pm

*Thanks to SAVE for All

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