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This afternoon, the White House issued a statement announcing its support for Senate Majority Leader Harry Reid’s (D-Nev.) debt-reduction plan. The phrasing seems carefully chosen — remember, Reid’s plan isn’t “balanced,” so it’s in conflict with President Obama’s demands — but is ultimately complimentary.
“The President has been advocating a balanced plan that would reduce our deficit by $4 trillion by making large cuts in domestic and Pentagon spending, reforming entitlement programs, and closing tax loopholes for corporations, millionaires and billionaires. This sort of approach won support from Democrats and Republicans in the Senate, but the House Republicans walked away after insisting that the budget be balanced on the backs of seniors and the middle class.
“Now, faced with the ‘my way or the highway,’ short-term approach of the House Republicans, Senator Reid has put forward a responsible compromise that cuts spending in a way that protects critical investments and does not harm the economic recovery. All the cuts put forward in this approach were previously agreed to by both parties through the process led by the Vice President. Senator Reid’s plan also reduces the deficit more than enough to meet the contrived dollar-for-dollar criteria called for by House Republicans, and, most importantly, it removes the cloud of a possible default from our economy through 2012. The plan would make a meaningful down payment in addressing our fiscal challenge, and we could continue to work together to build on it with a balanced approach to deficit reduction that includes additional spending reforms and closing tax loopholes for corporations, millionaires and billionaires.
“Senator Reid’s plan is a reasonable approach that should receive the support of both parties, and we hope the House Republicans will agree to this plan so that America can avoid defaulting on our obligations for the first time in our history. The ball is in their court.”
Yes, this is probably a good time to note that Republicans reflexively oppose everything President Obama supports, which means the White House endorsement immediately imperils the Reid offer.
That said, one the specific points in the statement jumped out: the plan from the Senate Majority Leader features cuts that were “previously agreed to by both parties.” In other words, Harry Reid is calling the GOP’s bluff twice — once with the overall target, and again with the cuts themselves.
As for the plan itself, as advertised, it offers $2.7 trillion in savings, $1.2 trillion of which will come from discretionary spending cuts. Another $1 trillion relies on savings from ending the wars in Iraq and Afghanistan.
Remember, the Senate Majority Leader’s framework effectively uses the GOP ransom note as a blueprint. Reid’s plan (1) includes about $2.7 trillion in debt reduction, just as Republicans demanded; (2) brings in nothing in the way of new revenue just as Republicans demanded; and (3) requires only one debt-ceiling increase this Congress, just as GOP leaders demanded.
Will Republicans refuse to take “yes” for an answer? Almost certainly, yes, they will. But it will be interesting to hear them explain why Harry Reid gave the GOP everything the party claimed it wanted, and the offer was still deemed inadequate.
As for the process, if Reid’s plan is going to serve as the Democratic proposal to resolve the crisis, the Senate leadership is going to have to move quickly to put the plan in legislative form and start the clock on a vote. And if the House ignores Reid’s offer, and keeps pushing Speaker Boehner’s alternative, we can expect a legislative train-wreck later in the week, en route to a meltdown next week.
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c u n d gulag on July 25, 2011 3:50 PM:
The only, ONLY plan, that Republicans will accept is one that includes some sort of Medicare cuts, whether they really are healthy for the overall economy in the long term or not.
They need to bitch about Obama and the Democrats actually undermining Medicare, true or not, because that take the onus off of them for Ryan's Plan.
They can say, "Look WE talked about it. THEY did it!"
bdop4 on July 25, 2011 3:50 PM:
Sorry, but compromising with lunatics is NOT responsible.
MimIkatz on July 25, 2011 3:52 PM:
The markets are now focused on the impact of a downgrade due to punting, rather than default per se. The markets and ratings agencies and Chinese have to make it clear that a downgrade will result in a contractual mess, a rise in interest rates and ultimately a worsening of the deficit, not that the GOP cares.
My sense now is that the GOP wants to make Obama have to veto what they pass before the minimum number of them will accept the Reid measure as passed by the Senate. But this will take time and will also result in a downgrade. Plus anything that passes the House with GOP-only support won't pass the Senate. So Boehner won't get this. But that is what is behind the moving of the goal posts on the length of the deal.
Alan on July 25, 2011 3:54 PM:
I'll naively go out on a limb and predict that this will be the Democrats last and best offer and that the Republicans will accept it sometime next week.
samsa on July 25, 2011 3:58 PM:
I will give you money and my next two months income. Would you then promise to not torture my kids before killing them?
alki on July 25, 2011 4:00 PM:
What annoys me is that, once again, The Rich get off scot free. The Rs shill so well for them.
Neil B on July 25, 2011 4:03 PM:
I don't get why Democrats needed to fall back to a "no new taxes/revenue" plan - after all, Boehner & crew's big complaint was that they had agreed to 800B of revenue increases (even if maybe from loophole reform) and that Obama tacked on an extra 400B. I've also heard that 400B was already talked about, it was mentioned in Time magazine a couple weeks ago and was at least in part based on the existing tax cut expiration being assumed (which Dems have the right to take as presumed "background" regardless of what Repubs want to do with it.) That also reminds me, isn't the existing expiration, even though extended, taken into account (IIUC, the extension was that, not a legislative lift of the expiration.)
JS on July 25, 2011 4:03 PM:
I like how "Boehner's Merkle" makes at least 40 members of the Tea Party Caucus vote to raise the debt ceiling.
Not only is this something the group has categorically ruled out, but Boehner thinks he's going to get them to do it this week, and again in six months or so after they hear from the whackadoodles who voted them into office? After they've seen the efforts of new TeePee primary challengers rise up against them??
max on July 25, 2011 4:07 PM:
"Will Republicans refuse to take “yes” for an answer? Almost certainly, yes, they will. But it will be interesting to hear them explain why Harry Reid gave the GOP everything the party claimed it wanted, and the offer was still deemed inadequate."
After watching this gang of kooks from the GOP they will probably reverse field and say the deal isn't big enough.
retr2327 on July 25, 2011 4:09 PM:
I'm inclined to think from the tone of the White House statement that they do not believe Reid's plan will pass, and are not trying to help it pass.
dbeach on July 25, 2011 4:12 PM:
Saying this plan has no revenue increases is a little bit misleading, I think. My understanding is that this plan includes no provision for extending any of the Bush tax cuts, so absent further action there's quite a bit of revenue above the "current policy" baseline.
JM917 on July 25, 2011 4:13 PM:
Has anybody suggested how Reid's plan--whatever its merits--gets past a GOP filibuster led by the likes of DeMint, Kyl, Rand Paul, Mike Lee, etc.? They'll still be yackity-yacking while the Dow goes through the floor and the nation defaults. And then they'll blame Obama.
KarenJG on July 25, 2011 4:15 PM:
As I said on TPM's facebook post, I think this deal is the best of a bad lot. Yes, it makes me angry that this is, in fact, the best deal on offer, and that the rich still won't be paying even a less-unfair share.
But. It doesn't put Medicare/Medicaid/Social Security on the table, and it doesn't take the expiration of the Bush tax cut off the table. Given the power of the Crazy Caucus in the House, I don't think we'll see any other alternative that does both of those two things - so, if I were Czarina, I'd take this deal, even I did have to hold my nose to do it.
square1 on July 25, 2011 4:16 PM:
this is probably a good time to note that Republicans reflexively oppose everything President Obama supports,
Well, there is only one way to put that to the final test: Obama needs to come out in favor of Cut, Cap, and Balance.
Sure, there is the risk that Republicans would finally accept yes for an answer, and the country would be saddled with a job-killing, Medicare-destroying, Social Security-attacking monstrosity. But it is a little late to worry about the merits of the legislation, isn't it?
Daddy Love on July 25, 2011 4:18 PM:
Republicans reflexively oppose everything President Obama supports, which means the White House endorsement immediately imperils the Reid offer.
Don't you think that's the point?
Chris on July 25, 2011 4:22 PM:
NY Times headline: "Senate and House Still Far Apart on Debt in 2 New Plans"
"The Democratic Senate and Republican House put themselves on a legislative collision course as they pushed different plans on how to raise the debt limit and avert a possible default."
The stock market is down, and it appears that it's the fault of both Republicans and Democrats. The easily confused folks at the New York Times told me so.
Nobody in the media seems to understand that this is a hostage negotiation.
T2 on July 25, 2011 4:23 PM:
Here is the GOP/Boner/Can't'or response:
"It is time the president and Dems present a serious plan to cut the deficit and save the country from default." Senator Reid's latest plan does none of that and is simply kicking the can down the road for political purposes only. THe House will not consider even reading the plan."
It's easy to write this stuff, huh?
E. D. on July 25, 2011 4:28 PM:
When the Repugs reject Reid's plan, which they will do, then it's time for President Obama, like Lincoln and Roosevelt before him, to act on behalf of the nation as a whole, raise the debt ceiling himself, and the Repugs be damned.
zeitgeist on July 25, 2011 4:29 PM:
Well, I favor neither since Obama should have stuck with either a clean bill only (preferred) or a balanced approach (with the massive support of the public).
But here we are. Given that, Obama should go on TV tonight and say "Option A, from Sen. Reid, is $2.7 T in cuts, some from defense, some domestic spending, no new taxes, and raise the debt ceiling until the end of 2012. Option B, from Rep. Boehner, is $1 T in domestic cuts now and a 6-month increase in the debt ceiling, a commission whose outcome is unknown, and another vote on the debt ceiling next January. I happen to think Option A makes more sense, but we've commission Gallup to do a large-sample poll tomorrow and whichever the public prefers, I'll live with. I ask the Republicans in the House if they will make the same commitment to the American People."
This puts the R's in a terrible spot: it is no longer House Repubs against Obama or the Senate. It is now House Repubs against the will of the American public
(yes I am confident they choose Option A. Everyone is sick of the debate and the last thing they want is to do it all over in January. and if I'm wrong, the Dems are still off the hook when the economny tanks because now it is even more clearly the public's fault rather than the indirect connection from the 2010 midterms.)
Joe Friday on July 25, 2011 4:30 PM:
"Will Republicans refuse to take 'yes' for an answer? Almost certainly, yes, they will."
Of course, because this isn't about deficit reduction for the Republicans, it's about killing Social Security, Medicare, Medicaid, Student Loans, and protecting tax cuts for the Rich & Corporate.
alki on July 25, 2011 4:32 PM:
@ E.D.....I like your approach best!
EdgewaterJoe on July 25, 2011 4:35 PM:
Reid pulled an Alinsky on the Republicans, and if the Bush tax cuts are still untouched then it's not really all tax cuts, is it? clever, and Think Progress is reporting at least two R's that are breaking away from the Boner plan.
we will soon see who pays for the R's -- Wall Street or the Kochs.
Anonymous on July 25, 2011 4:38 PM:
@Neil B on July 25, 2011 4:03 PM:
...Boehner ... had agreed to 800B of revenue increases (even if maybe from loophole reform) and that Obama tacked on an extra 400B. I've also heard that 400B was ... at least in part based on the existing tax cut expiration being assumed (...isn't the existing expiration, even though extended, taken into account...)
I think you're confused, although it might be me who is confused. With so many plans and numbers being bandied about, it's no surprise that *somebody* is going to get it wrong.
But here's how I understand it: the $800 billion is from the expiration of just the tax cut on income over $250,000, and that was agreed to by Boehner in exchange for Obama putting cuts to Medicare and SS on the table. That deal would also make the majority of the tax-cuts permanent. The $400 billion (that prompted Boehner's walk-out) was the loophole closing.
Also, no, I don't think the expiration of the tax cuts are figured into the CBO baseline. IIUC, the CBO takes what was "law" in the year previous, and extends it indefinitely to get their projections.
I hope anybody who knows differently will correct me!
neil b on July 25, 2011 4:38 PM:
So, how many Rs (and are there some Ds, given the awfulness of some BDs I could believe it) have promised not to vote for any debt ceiling increase, period; regardless of what the "deal" contains?
Ron Byers on July 25, 2011 4:40 PM:
They are just horsing around trying to tank the world economy. I think somebody needs to do an investigation as to how many of the house republicans are holding shorts on US treasuries.
neil b on July 25, 2011 4:43 PM:
Anonymous, yeah I didn't know which was which. As for taking into account, I was thinking more in terms of what the R&D negotiators were using to define figures (which sure as hell isn't "research and development.") I guess our economy isn't going to make it through rehab either. Any better scoop, anyone - since Boehner had been pushing that "Obama dumped a new 400B on us" line, but are so shifty and shifting and shitty lately ....
KarenJG on July 25, 2011 4:52 PM:
I am mortified to note that I am Anonymous in the above post! Ooops!
yellowdog on July 25, 2011 5:03 PM:
"It is now House Repubs against the will of the American public."
Now? If anything has become clear in this GOP-created farce, it is that the Congressional GOP is grossly out of step even with the majority of self-identified Republican voters, not to mention Dems and Independents.
If the GOP cared a lick about deficits--and, really, how can you take these folks seriously on this question--they would not leave the bargaining table, knowing that, by ginning up a fake crisis, they have created an opportunity to make a big long-term impact on what they say really matters to them. So why is the GOP House leadership refusing deals that should give them every reason to cheer? Why aren't they inking the deal, declaring victory, and blaming the bad parts of it on Obama?
It should be clear now, even to the dimmest journalist-stenographer in Washington, that something is dead up the GOP creek. They have put the nation's economy and global financial reputation at risk--and they have over and over again refused to accept any map that shows them a way out of their own labyrinth. Ten years ago, they did much the same thing with national security. They listened to the unwisest, most ideological elements in their own party. A few months ago, they went so far as to imperil a nuclear treaty with Russia that Ronald Reagan drew the blueprints for. This in a time of war.
What can be said of a party leadership that does not listen to its own members, to its own icons, to the president, to business leaders, to the markets, or the lessons of history and reason? As President Obama said the other day, any wound to our country from these events is entirely self-inflicted.
exlibra on July 25, 2011 5:03 PM:
dbeach on July 25, 2011 4:12 PM:
Saying this plan has no revenue increases is a little bit misleading, I think. My understanding is that this plan includes no provision for extending any of the Bush tax cuts,[...]
Why should it include such a provision? The Bush tax cuts had already been extended, for 2 years past their expiration date, during the lame duck session, in December. So now they're not due to expire till (alas and alack!) the end of '12. IOW, that issue is already covered for the period Dems want the debt ceiling extension.
"anityg plant". Any and all, just effing plant the tygs, and be done.
Josef K on July 25, 2011 5:33 PM:
A moment of silence, please, for the passing of this great country quietly into the dustbin of history.
A downgrade is inevitable now, and with it any realistic hope of the Obama Administration will even try to stimulate the economy. Congress will continue to be paralyzed, stagflation and mass unemployment will be 'the new normal', and the plutocrats will begin (rightly) to fear for their lives as the Tea Party embrace their nihilism.
Of course, there's the outside chance we'll avoid this grim future. But I wouldn't bet on it.
samsa on July 25, 2011 5:41 PM:
Could someone please take the time to explain to me as to why all such crises and negotiations end thus - against the best interests of the base of the Democratic party irrespective of which party has the Presidency, the Congress or the Senate? When the Dems have power, they are helpless, and when they don't they are - duh - powerless.
zeitgeist on July 25, 2011 5:48 PM:
samsa -
finally, a question i can answer!
why do all crises end adverse to the interests of progressives? because we care about the hostage. at the end of the day, the other side really doesn't.
that puts us at a structural disadvantage: if your spouse, your parent, your child were held at gunpoint, is there anything you wouldn't give up for a chance to save them?
and so in the end our side always folds because our desire to do right, for good government, to protect the country compels it.
and the wingnuts know it.
bilben on July 25, 2011 6:41 PM:
A few weeks ago, I watched Michele Bachmann explain that default on 8-2 won't matter because there will be enough revenues flowing in to pay the bondholders. I wonder if the GOP realizes that, under that theory, then Pres. Obama will have to exercise discretion as to which other obligations of the government should be paid, or not paid. Hey, what about cutting all benefit payments to GOP districts?
Mike on July 25, 2011 6:45 PM:
Well, I knew the GOP would get everything it wanted and progressives would get nothing. That's pretty much a given.
Mike on July 25, 2011 6:52 PM:
Also - I think the GOP has figured out that this is win-win for them.
Either they get all the budget cuts they want, or we default.
If we default, the immediate 40% spending cut ends the New Deal as we know it, and the rise in interest rates ensures that the Federal budget is consumed by massive debt service payments. Moreover, Obama also gets to "own" the tanking economy.