Deficit Update: Double Dog Dare

Posted on July 21, 2011. Filed under: Uncategorized | Tags: , , , , , , , , , , , |

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Cantor is proposing a 30-day extension with spending cuts of $1.5 trillion as negotiated by the Biden Group, combined with a small increase in the debt limit. Not much in that for Democrats or the President, so this is being treated as a “double dog dare” from House Republican conservatives who, so far, have made no concessions at all.

This 30-day extension proposal is infuriating Obama, and may have been the precipitating event in the blow up at the White House last week. Obama and Administration spokespeople continue today to hammer the message that the President will sign a short-term extension ONLY if combined with a credible framework for a much larger deal.

But. . . the President will be forced to sign whatever bill gets us past the August 2nd default deadline, even if it doesn’t lay groundwork for a grand deal – and everyone knows it.

The Cantor proposal is gaining some traction in the House where Republicans are increasingly reluctant to go along with McConnell-Reid Plan B. No combination of House R and D votes sufficient to pass Plan B has has been assembled yet, a fact that is feeding interest in the Cantor 30-day extension option.

The Gang of 6 plan doesn’t seem to be getting much attention at all from House Republicans, although it has garnered the support of 15 Republican and 18 Democratic Senators.

Obama and Reid have asked the Dems in the Gang of 6 to come up with a list of elements from the Gang proposal that could be incorporated into McConnell-Reid. This is being done in an attempt to get the biggest deal possible out of the transfer of debt ceiling increase responsibility to the President, and to attract House Republican support. No indication yet that House Republicans might be swayed by this.

Meanwhile, the McConnell-Reid strategy may already be in time clock trouble. If the Senate completes action on its cut, cap, and balance bill Saturday and immediately takes up Plan B, that bill will be filibustered by several Senate Republicans. This will trigger a cloture vote which is likely to succeed. However, cloture allots time for closing debate that extends beyond August 2nd.

Only if Republicans give up some of the debate time allotted to them under cloture can the Senate act in time to complete the Senate first, House amendment, Senate re-vote strategy for McConnell-Reid. It is possible that both sides in the Senate may “yield back” cloture-allotted debate time to get Plan B to the House before August 2nd. Negotiations to arrange such a time agreement are underway now.

Some Senators are getting so fed up with the House that they are considering installing the Biden Group $1.5 trillion in cuts into the Senate version of McConnell Reid, then giving the House a take-it-or-leave-it up or down vote. That would put the onus on the House

to avoid default – if the Senate can get a $1.5 trillion spending cut version of Plan B passed in time.

Please read the outline for the Gang of 6 proposal carefully and get back to me with your comments and concerns. Note that it calls for $500 billion in spending cuts, $1 trillion in new revenue from closing tax loopholes and tax credits, and as much as $133 billion in revenue transfer (not a gas tax increase) to the HTF.

It will require major cuts and changes to Medicare, Medicaid, and Social Security. In fact, action to restructure Social Security is a pre-requisite under Gang of 6 for Congressional action on the rest of the plan.

Gang of 6 also contemplates elimination of the AMT, mortgage interest and charity deductions,and the income tax exemption for employer-provided portions of health care insurance. It claims to raise enough revenue to allow a deficit-neutral reduction in individual and corporate tax rates, but still fails to provide the amount of debt relief achieved under Simpson-Bowles.

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