July 8, 2011
The line now is that we're either going to see a major debt-ceiling deal in the next 48 hours or we won't see any deal at all until we stop paying bills and public outcry or market panic forces a deal.
So the question then becomes why would we see a deal in the next 48 hours? Has anything happened over the last few weeks that'd break the stalemate that doomed the fiscal commission, the Gang of Six, Paul Ryan's budget, and President Obama's April deficit speech?
Well, there's the pressure of debt ceiling, for one thing. But I don't buy it. The Republicans are doing a pretty good job convincing one another that the debt ceiling doesn't require compromise: either Obama will fold or the anticipated consequences will fizzle. There's no evidence that the GOP is really gripped by a fear of what might happen in early August.
The White House is emphasizing its willingness to look at entitlements, including Social Security, but it's not obvious that they're willing to go much further on them than they went in their April speech. So why will concessions that weren't sufficient then suddenly be sufficient now?
Republicans have drawn a much harder line on taxes, with Cantor stating that new revenues, rather than just higher rates, are off the table, and Boehner, McConnell, and pretty much every other Republican backing him up. So it seems, if anything, that it's become harder to cut a deal on revenues.
Perhaps some Republicans have come to see the politics of this turning against them as the Obama administration has done a pretty good job making the GOP seem truculent and unyielding. But if so, they're doing a pretty good job keeping this new concern to themselves.
Perhaps Boehner has simply decided that it's worth putting a $4 trillion deal on the table and seeing if the size of the promised deficit reduction is sufficient to lure members of his party to the table. But that seems like a pretty big risk for a speaker who's been relatively risk averse about signaling a willingness to compromise that exceeds that of his troops.
All in all, I'm just not seeing it. The groundwork isn't there for a $4 trillion deal to be struck and approved in the next week or so, or even the next few weeks. But as I said at the end of yesterday's Wonkbook, I've been wrong before.
Five in the morning
1) The parties say they're making progress in debt talks, report Lori Montgomery and Paul Kane: "Negotiations over the national debt entered a critical phase Thursday as President Obama challenged congressional leaders to embrace an ambitious but politically painful strategy to raise revenue and make changes to popular federal retirement programs. Top Democrats were open to the idea, and House Minority Leader Nancy Pelosi (D-Calif.) pledged her 'full cooperation' after meeting with Obama and other senior lawmakers at the White House. Republicans were more skeptical, with one prominent exception -- House Speaker John A. Boehner (R-Ohio). Boehner enthusiastically endorsed Obama’s call for a far-reaching plan. Later at the Capitol, Boehner made his own pitch to reluctant Senate Republicans, arguing in a closed-door luncheon that securing the nation’s economic future requires bold action."
2) The Treasury Department is preparing its plan B if the debt limit isn't raised, reports Richard Cowan: "Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money. But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters. Treasury has studied the following issues: Whether the administration can delay payments to try to manage cash flows after August 2. If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt. Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments."
3) House Democrats are drawing a line at Social Security and Medicare cuts, report Mike Lillis and Erik Wasson: "House Democrats are lining up in opposition to any debt-ceiling package that cuts benefits to Medicare or Social Security. Republican leaders have argued that cuts to the popular entitlement programs are necessary to reduce deficit spending and bring the nation's finances into balance. But a long list of House Democratic leaders and rank-and-file members said in separate appearances Thursday that cuts in Social Security or Medicare benefits are a non-starter. 'I...want to have clarity about where House Democrats stand,' House Minority Leader Nancy Pelosi (D-Calif.) said during a press conference at the Capitol. 'We do not support cuts in benefits to Social Security and Medicare.'
4) Obama will veto a short-term debt limit increase, report Carrie Budoff Brown, Jake Sherman, and John Bresnahan: "President Barack Obama told congressional leaders Thursday that he would veto a short-term deficit deal, eliminating an option floated by Senate Republicans to extend the debt limit for only a few months, according to sources familiar with the negotiations.
The president went further during his private meeting than he had a day earlier in public, when he simply said he opposed a short-term measure. By drawing a harder line, Obama aims to avoid revisiting the debt limit again until after the 2012 elections...Obama discussed three options with the congressional leaders: a short-term measure of only a few months, which the president opposes; a deal worth about $2.5 trillion; and a deal that tops $4 trillion."
So the question then becomes why would we see a deal in the next 48 hours? Has anything happened over the last few weeks that'd break the stalemate that doomed the fiscal commission, the Gang of Six, Paul Ryan's budget, and President Obama's April deficit speech?
Well, there's the pressure of debt ceiling, for one thing. But I don't buy it. The Republicans are doing a pretty good job convincing one another that the debt ceiling doesn't require compromise: either Obama will fold or the anticipated consequences will fizzle. There's no evidence that the GOP is really gripped by a fear of what might happen in early August.
The White House is emphasizing its willingness to look at entitlements, including Social Security, but it's not obvious that they're willing to go much further on them than they went in their April speech. So why will concessions that weren't sufficient then suddenly be sufficient now?
Republicans have drawn a much harder line on taxes, with Cantor stating that new revenues, rather than just higher rates, are off the table, and Boehner, McConnell, and pretty much every other Republican backing him up. So it seems, if anything, that it's become harder to cut a deal on revenues.
Perhaps some Republicans have come to see the politics of this turning against them as the Obama administration has done a pretty good job making the GOP seem truculent and unyielding. But if so, they're doing a pretty good job keeping this new concern to themselves.
Perhaps Boehner has simply decided that it's worth putting a $4 trillion deal on the table and seeing if the size of the promised deficit reduction is sufficient to lure members of his party to the table. But that seems like a pretty big risk for a speaker who's been relatively risk averse about signaling a willingness to compromise that exceeds that of his troops.
All in all, I'm just not seeing it. The groundwork isn't there for a $4 trillion deal to be struck and approved in the next week or so, or even the next few weeks. But as I said at the end of yesterday's Wonkbook, I've been wrong before.
Five in the morning
1) The parties say they're making progress in debt talks, report Lori Montgomery and Paul Kane: "Negotiations over the national debt entered a critical phase Thursday as President Obama challenged congressional leaders to embrace an ambitious but politically painful strategy to raise revenue and make changes to popular federal retirement programs. Top Democrats were open to the idea, and House Minority Leader Nancy Pelosi (D-Calif.) pledged her 'full cooperation' after meeting with Obama and other senior lawmakers at the White House. Republicans were more skeptical, with one prominent exception -- House Speaker John A. Boehner (R-Ohio). Boehner enthusiastically endorsed Obama’s call for a far-reaching plan. Later at the Capitol, Boehner made his own pitch to reluctant Senate Republicans, arguing in a closed-door luncheon that securing the nation’s economic future requires bold action."
2) The Treasury Department is preparing its plan B if the debt limit isn't raised, reports Richard Cowan: "Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money. But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters. Treasury has studied the following issues: Whether the administration can delay payments to try to manage cash flows after August 2. If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt. Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments."
3) House Democrats are drawing a line at Social Security and Medicare cuts, report Mike Lillis and Erik Wasson: "House Democrats are lining up in opposition to any debt-ceiling package that cuts benefits to Medicare or Social Security. Republican leaders have argued that cuts to the popular entitlement programs are necessary to reduce deficit spending and bring the nation's finances into balance. But a long list of House Democratic leaders and rank-and-file members said in separate appearances Thursday that cuts in Social Security or Medicare benefits are a non-starter. 'I...want to have clarity about where House Democrats stand,' House Minority Leader Nancy Pelosi (D-Calif.) said during a press conference at the Capitol. 'We do not support cuts in benefits to Social Security and Medicare.'
4) Obama will veto a short-term debt limit increase, report Carrie Budoff Brown, Jake Sherman, and John Bresnahan: "President Barack Obama told congressional leaders Thursday that he would veto a short-term deficit deal, eliminating an option floated by Senate Republicans to extend the debt limit for only a few months, according to sources familiar with the negotiations.
The president went further during his private meeting than he had a day earlier in public, when he simply said he opposed a short-term measure. By drawing a harder line, Obama aims to avoid revisiting the debt limit again until after the 2012 elections...Obama discussed three options with the congressional leaders: a short-term measure of only a few months, which the president opposes; a deal worth about $2.5 trillion; and a deal that tops $4 trillion."
5) Today's job report will clarify whether the current slump is temporary, reports Neil Irwin: "As the signs of a weakening economy mounted this spring, there was a common argument from analysts: The causes of the slump were temporary, and growth is poised to strengthen after those factors -- such as higher fuel prices and the Japanese earthquake -- dissipate. A report on the job market due out Friday morning will be the clearest evidence yet whether that theory is correct. The last report showed exceptionally weak job creation in May: Only 54,000 jobs were added that month, the Labor Department said -- a rate that, if sustained, would cause the unemployment rate to rise rather than fall...The question now is how weak the underlying pace of job growth really is.
Was the lousy May number a true indication of the state of the job market? Or was it an aberration?"
