Less than three days from potential default, the White House and Congressional Republicans reached a potential deal to raise the debt ceiling and lower the deficit late last night. Republican Senate Leader Mitch McConnell (R-KY) said on CNN’s State of the Union today that both sides were “very close” to a deal that will cut $3 trillion over 10 years, saying negotiators have made “dramatic progress” over the weekend. Democrats appear less confident that the deal will hold, but still expressed optimism.
The deal is based on Senate Majority Leader Harry Reid’s (D-NV) proposal, but includes a “trigger” mechanism which would make deep across-the-board cuts if the bipartisan committee created by the bill to look for ways to reduce the deficit fails to produce a proposal that can pass Congress. The deal includes other provisions aimed at gaining GOP votes, the Washington Post’s Felicia Sonmez reports:
The process would involve a “resolution of disapproval” by Congress that would allow the debt ceiling to be further raised next year if one-third of either chamber agrees – an idea first proposed by McConnell in a “Plan B” he unveiled several weeks ago. The move would shift the political burden of raising the debt ceiling to the White House from congressional Republicans.
Also included in the nascent proposal would be a provision calling for a vote on a balanced budget amendment to the Constitution – an element that has become a rallying point for House conservatives. But one potential sticking point in any House vote is that the plan calls only for a vote on such an amendment, not the passage of one…
The proposal starts with a bill — Reid’s plan — that was itself an enormous concession to the GOP, intended to call their bluff on raising the debt ceiling, but goes several steps farther. It would force a second vote on the debt ceiling, though with a much easier threshold for passage, even though President Obama has insisted on raising the debt limit through the next election all at once. The supposed concession to Democrats in the trigger mechanism is that it would include defense cuts, which some Republicans oppose, but would also include Medicare cuts, which all Democrats strongly oppose. The deal is lopsided, as many Republicans, especially of the Tea Party wing, have agreed that Pentagon spending should be on the table for cuts all along. The details of the trigger are still in flux, however, and Sen. Chuck Schumer (D-NY) said today that he’ll push for something that will be “equally tough on Democrats and Republicans.”
Moreover, the deal includes zero revenue increases and no call for comprehensive tax reform, and achieving these things through the new bipartisan deficit commission will be almost impossible as Republicans are sure to reject it. Still, White House economic adviser Gene Sperling said today on State of the Union that the White House “fine” with the idea that the bill will be “only spending cuts.” He added that Obama won’t seek new revenues before the 2012 election anyway, and will in fact be pushing for a payroll tax cut.
As ThinkProgress’ Matt Yglesias notes, the fallout from this deal may extend far beyond the plan itself:
[A]t this point the biggest damage is to the overall system of government. Obama has successfully transformed massive debt ceiling hostage taking from an act of breathtakingly irresponsible brinksmanship into a proven effective negotiating tactic. Suppose he gets re-elected in 2012. What’s he going to do when this issue recurs in 2013? Every time the president’s party has fewer than 60 votes in the Senate, we may face a recurrence of this crisis.
The emergence of a deal may, however, prevent a downgrade from the credit rating agencies.