You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Your Daily Dose of Debt Ceiling Gloom

Visit for breaking news, world news, and news about the economy

An agreement to raise the debt ceiling is hardly imminent. Anything from a Grand Bargain, with $4 trillion in deficit reduction, to no action whatsoever, with financial market catastrophe, remains possible. But the idea getting the most attention in Washington right now is a Not-So-Grand Bargain, along the lines of what multiple media outlets have reported in the last few days. Sources familiar with budget discussions on Capitol Hill are telling TNR that the terms of such an agreement might not be quite as awful as they could be. Then again, those terms would still reflect Republican priorities far more than Democratic ones. 

The plan taking shape would be a variation of the proposal that Senator Mitch McConnell introduced last week. Congress would raise the debt ceiling, sparing the U.S. from default. But the agreement would also call for a series of three votes, spread out over the next year, in which Congress could express its "disapproval." As long as Obama vetoed those resolutions, and as long as Congress didn't override the veto, the debt limit would rise automatically.

The plan would actually reduce the deficit, by as much as $1.5 trillion over ten years, by enacting spending cuts similar to the ones that Vice President Joseph Biden’s bipartisan working group had identified. Those cuts are likely to include significant reductions in non-health mandatory spending -- agriculture, federal employee compensation, and the like -- but also large cuts in non-defense discretionary spending -- Pell Grants, home energy assistance, and so on. The agreement would not reduce spending on Medicare or Social Security and, according to two sources familiar with congressional negotiations, it would probably not cut Medicaid. But it would not include new revenue, either. 

The proposal could also create a twelve-member committee, divided equally between Democrats and Republicans, to make additional recommendations for reducing the deficit. If at least seven members agreed on a plan, that plan would get fast-track consideration before Congress: In other words, lawmakers would actually have to vote on them, up or down, with no amendments or filibusters. It's entirely possible (some would say likely) that will lead to the very Medicaid cuts congressional negotiators currently seem inclined to forgo.

Too abstract? OK, here's a more concrete version. Assuming this plan could actually pass both houses of Congress, it would enact a series of cuts, some of them smart but some of them very painful, while asking wealthy Americans to pay not a dime in more taxes. Serious cuts in entitlements would wait, but that could simply mean postponing them to a time when Democrats have less leverage either to shape them or offset them with revenue. All of this might be necessary because a significant faction within the Republican Party is willing to threaten the U.S. economy, and perhaps the world’s too, rather than contemplate even token increases in revenue, even if it's only on corporations and on people whose taxes are far lower than they were just ten years ago. Oh, and this focus on deficit reduction has almost completely distracted us from the most pressing question of the day, which is how to put people back to work.

Do I sound frustrated? That's because I am. And, yes, maybe I should be more patient. For example, the package could include some efforts to boost the economy and create jobs, such as extending unemployment insurance and renewing the payroll tax holiday, and it could postpone the actual cuts for a year or two, at which point the economy will (hopefully) be resilient enough to withstand them. 

Whatever the terms of the deal, there’s always the possibility that it will help liberals politically – that if the plan can’t really put the deficit issue “to rest,” as Obama has been speculating, it can at least burnish the Democrats’ credentials as responsible fiscal stewards and the president’s reputation as a grown-up leader. Steve Benen today posts survey numbers suggesting that may happen. But every time I think about those possibilities, I think about exchanges like the one that took place on Sunday, during NBC’s “Meet the Press,” when host David Gregory talked about popular disgust with "Washington" and suggested that “nobody is really willing to compromise to make a deal.” (See video clip above) 

For Gregory's benefit and everybody else's: Obama has offered significant cuts to all three entitlement programs and even House Democrats, though unwilling to support benefit cuts in Medicare, have signaled a willingness to approve other reductions -- if only Republicans would consider small increases in revenue. The offer still stands and Obama, by all accounts, is still lobbying hard for it. But, as of this writing, Republicans steadfastly refuse to say "yes" even to this lopsided deal. 

P.S. If this item sounds a bit disjoined, that's because the copy you are reading reflects four rounds of revision, based on constantly changing reports from people close to the negotiations. I decided finally to publish what I could verify, but I would not be the least bit surprised if it's all moot within an hour.