DEFICIT UPDATE: NEW OBAMA-BOEHNER DEAL

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

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In a remarkable turn of events, Obama and Boehner are said to be discussing a $3 trillion deal that would be similar to their earlier outline for a grand bargain and/or the Gang of 6 proposal, BUT WITHOUT ANY NEW TAX REVENUE from closing tax loopholes and eliminating tax breaks.

In contrast, the Gang of 6 proposal calls for $1 trillion in such new revenue, and for this reason appears DOA on the House side.

Talks between Boehner and Obama on this $3 trillion no-new-revenue deal are said to be in preliminary stages only, but this news is rocking the Hill.

Even the rumor of such a plan has Senate Dems enraged, so the chances of such a plan passing in the Senate might be slim. It would represent a total capitulation to conservative House Republican demands and lay waste to any Democratic claim of a balanced approach with “shared pain, shared burden”.

Boehner is scheduled to unveil his best proposal to resolve the debt ceiling crisis in a closed-door meeting of the House Republican caucus tomorrow.

There also are rumblings in the House about responding to a Senate take-it-or-leave-it Plan B with a simple House bill that would generate $1.5 trillion in savings (per the Biden Group proposal)l in return for a debt ceiling increase in that amount or less. This is another variation on a short-term extension, but would allow more time before the debt ceiling would need to be raised again by Congress. Senate Democrats might have a hard time voting against $1.5 trillion in cuts they had already approved in
Plan B.

Wall St. has been telling House Republicans to stop messing around and get the debt ceiling increased. Also, Senate Republicans have been chastising their House conservative brethren about the potential long term damage to their cause if they get blamed for a financial meltdown. These messages seem to be having some impact as the number of House Republicans willing to vote “no” on any increase in the debt ceiling at all seems to be decreasing. More are aligning with a statement about the importance of
avoiding default.

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