Monday, July 18, 2011

UPDATE: Some progress being made on debt crisis

There are a number of reports out of Washington that a deal may finally be shaping up to raise the debt ceiling and end the crisis just in time to avoid disaster.  It looks like some form of the McConnell/Reid plan to allow Obama to raise the debt ceiling on his own will emerge with some spending cuts and the creation of a new commission/panel to seek a big deficit reduction deal later on.  Also, it appears that at least some of the Tea Party Republicans in the House are accepting the reality that failure to raise the debt ceiling would be a disaster for the country.  Here are a few of the reports.

From the Washington Post:

Most lawmakers were focusing on the new Senate plan, originally proposed last week by McConnell and further developed by Reid. Under the plan, Obama would be able to raise the debt ceiling three times over the next year for a total of $2.5 trillion. Congress could also vote on a resolution of disapproval each time, assigning blame to Obama for increasing the nation’s debt.  In addition to the $1.5 trillion in spending cuts, the plan would create a new committee of 12 lawmakers, which would issue a report to Congress by the end of the year on how to cut trillions more from federal deficits over the next 10 years. This panel would seek agreement where Obama and Republicans haven’t been able — primarily over changes to entitlement programs and whether raising new tax revenue should play a key role in cutting the deficit.

From Firedoglake:

McConnell-Reid, the fallback option to match an elaborate scheme to raise the debt limit without Republican votes to a cuts-only package amounting to around $1.5 trillion in deficit reduction, has moved into the forefront as the only way to end the stalemate. The deal would not include tax increases or cuts to Medicare and Social Security (it’s unclear to this point where it leaves Medicaid), but it would include a … panel which would make recommendations on entitlements (and possibly tax reform) that would be guaranteed an up or down vote in each chamber of Congress.

Both sides acknowledged on the Sunday shows today that McConnell-Reid was likely the only possibility to avoid a debt default.

LA Times reports Freshman Tea Party Republicans finally getting the message that default is NOT an  option and the debt ceiling MUST be raised.

At a closed-door meeting Friday morning, GOP leaders turned to their most trusted budget expert, Rep. Paul D. Ryan of Wisconsin, to explain to rank-and-file members what many others have come to understand: A fiscal meltdown could occur if Congress fails to raise the debt ceiling.

House Speaker John A. Boehner of Ohio underscored the point to dispel the notion that failure to allow more borrowing is an option.

"He said if we pass Aug. 2, it would be like 'Star Wars,'" said Rep. Scott DesJarlais, a freshman from Tennessee. "I don't think the people who are railing against raising the debt ceiling fully understand that."

The warnings appeared to have softened the views of at least some House members who, until now, were inclined to dismiss statements by administration officials, business leaders and outside economists that the economic impact would be dire if the federal government were suddenly unable to pay its bills.

Freshman Rep. Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was "sobering."

"It illustrates to us that doing nothing is unacceptable," he said. "I think the conference understands this is a defining moment for us. It's time to put the next election aside."

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