Last night at 8 p.m., a few hours before House Speaker John Boehner postponed the vote on a package that would have extended the debt ceiling in exchange for spending cuts, NBC's Luke Russert tweeted, "This is one of those rare DC moments where not one reporter knows what's really going on."
Today, it's still true that we don't know what's really going on, as the political world and financial markets reel from the Ohio lawmaker's inability to secure support from his caucus and pass a debt-limit package.
It's not that Boehner's plan wasn't right-wing enough; in exchange for an initial $1 trillion increase in the debt limit, the speaker's plan would reduce spending by $1.2 trillion, impose limits on future spending, and require Congress to vote on a balanced-budget amendment. What's more, it would require Congress to create a bipartisan committee to reduce the deficit by another $1.8 trillion. Rather, the most right-wing members of the House Republican caucus were adamantly against any plan to raise the debt ceiling.
If it had passed, Boehner's bill would have been dead on arrival in the Senate, further distancing Congress from a final compromise. In lieu of a House vote, the initiative has moved to the Senate, where Majority Leader Harry Reid has a proposal that meets the Republican goal of large spending cuts while raising the debt ceiling by $2.7 trillion and eliminating Boehner's proposal for a bipartisan committee on further spending cuts. Most important, whether a bill comes from the House or Senate, Boehner will need Democratic votes for it to pass, which raises the odds for a deal that is a little more amenable to Democratic priorities, like further stimulus.
Even if Reid's bill isn't the main template for a compromise, Congress is still only a short step away from a final deal, as President Barack Obama asserted in a brief press conference this morning. Both sides have already agreed to $1.2 trillion in discretionary spending cuts, and it's possible that Democrats could accept Boehner's proposal to establish a bipartisan committee to seek out further savings. What's more, Obama suggested that the administration would be willing to accept a trigger mechanism to ensure that the cuts are carried out: "If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that, too, if it's done in a smart and balanced way."
Even if Reid's bill isn't the main template for a compromise, Congress is still only a short step away from a final deal, as President Barack Obama asserted in a brief press conference this morning. Both sides have already agreed to $1.2 trillion in discretionary spending cuts, and it's possible that Democrats could accept Boehner's proposal to establish a bipartisan committee to seek out further savings. What's more, Obama suggested that the administration would be willing to accept a trigger mechanism to ensure that the cuts are carried out: "If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that, too, if it's done in a smart and balanced way."
A balanced-budget amendment would most likely be off the table, as Democrats refuse to support the measure, but Reid has expressed his willingness to consider other ideas (or concessions, depending how you view it) in order to gain Republican support, "I will listen to any idea to get this done in a way that prevents a default and a dangerous downgrade to America's credit rating. Time is short, and too much is at stake, to waste even one more minute."
For those worried that the impending August 2 deadline isn't enough to spur Republicans into a compromise, the markets should both alarm you and assuage fears. Over the last week, according to The New York Times, big banks and companies have withdrawn $37.5 billion from funds that invest in Treasury debt and other ultra-safe securities, the largest weekly drop this year. Stocks in the United States, Europe, and Asia slid by up to 1 percent in response to the debt-ceiling impasse, and lenders have begun to react to the threat of default, removing funds from short-term lending markets. In all, the financial world has begun to shift from observation to worried caution, and if there's anything that should force a deal, it's this.
