Plan B is fast becoming Plan A for raising the debt ceiling and averting a fiscal crisis. With the White House’s push for a “grand bargain” fizzling and two weeks to go before the Aug. 2 debt default deadline set by Treasury Secretary Timothy Geithner, Senate leaders are negotiating a way to sidestep a default while providing maximum political cover for Members of Congress who believe they face a potentially career-ending vote.
Of course, the Senate plan would do little to put a dent in the deficit, and it falls well short of the $4 trillion deficit reduction package that Standard & Poor’s warned last week was needed to avoid a downgrade of the United States’ first-rate AAA bond rating.
For now, both chambers are moving forward this week with votes on a tea-party-backed Cut, Cap and Balance plan that would tie a debt ceiling increase to passage of a constitutional amendment requiring a balanced budget and deep spending cuts. “We have to check the boxes,” Senate Majority Whip Dick Durbin (D-Ill.) said Sunday on CBS’ “Face the Nation.” “One of them is to engage in this debate,” even though he said there’s no chance the GOP effort would succeed.
The votes in both chambers appear to be designed to give Members a face-saving way to eventually vote for the Plan B proposal.
“Everyone gets to vote on their Plan A before they go to Plan B,” a Senate GOP aide said.
The proposal being written by Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) builds on McConnell’s fallback plan to give President Barack Obama the authority to raise the debt ceiling by $2.5 trillion in three installments. It would also kick the broader budget fight over that elusive $4 trillion grand bargain to a new joint committee empowered to bring a deficit reduction bill to the House and Senate floor for votes by the end of the year.
To save time, Democratic aides said the still-forming Reid-McConnell package would likely be substituted for a Sense of the Senate resolution now pending. If it passed the Senate, the House would be expected to add a package of more than $1 trillion in spending cuts and to send it back to the Senate for final passage.
The House, however, isn’t yet on board with that approach. For many tea party loyalists in Congress, the McConnell language is a classic Washington dodge and a cop out. But barring some breakthrough, the House may still fall short of the votes for a plan the president will sign before Wall Street starts hitting the panic button.
Republican Study Committee Chairman Jim Jordan (Ohio), who is championing the Cut, Cap and Balance legislation, said on “Fox News Sunday” that conservatives would not support the McConnell plan. But he said it’s possible Democrats and some Republicans could pass something without his group.
White House budget director Jacob Lew predicted Sunday that a catastrophic debt default would be averted.
“There will be a fringe that believes that playing with Armageddon is a good idea, but I don’t think that’s where a majority will be,” the director of the Office of Management and Budget said on CNN’s “State of the Union.”
Senate Minority Whip Jon Kyl (R-Ariz.) also predicted flatly that the debt ceiling would be raised with help from GOP Members, even if they don’t get the spending cuts they want.
“I don’t think Republican leaders will allow the country to go into default,” he said Sunday on ABC’s “This Week.”
Speaker John Boehner (R-Ohio) last week acknowledged that McConnell’s idea might “look pretty good a couple of weeks from now.” His deputy, House Majority Leader Eric Cantor (R-Va.), defended the Cut, Cap and Balance proposal Friday in a floor colloquy with House Minority Whip Steny Hoyer (D-Md.), but he also noted that he didn’t want to risk not raising the debt ceiling.
“I don’t want to pass Aug. 2 without increasing the debt ceiling. I understand there’s a lot of uncertainty if that were to happen, a lot of risk associated with that — risks I am not willing to take,” Cantor said.
The intraparty struggle is far from over, however. Conservative Sen. Jim DeMint (R-S.C.) pledged to lead a filibuster of the McConnell plan. “No Republican was elected to give President Obama more power and that’s what this plan does,” he tweeted Friday.
On Sunday, he dismissed the threat of a default on the debt if the Aug. 2 deadline passes without a deal.
On NBC’s “Meet the Press,” DeMint asserted that there would be plenty of money to pay the interest on the federal debt. “We’ve got to draw a line in the sand now, because the day of reckoning is going to come, and the longer we put it off, the bigger the problems are going to be for our country,” he said.
But Republicans, including Sen. John McCain (Ariz.), have acknowledged they don’t have the votes to pass a constitutional amendment — and they cannot allow a debt default.
Standard & Poor’s also warned last week that breaching the Aug. 2 deadline would lead to a “selective default” rating on the debt, even if interest payments are made, and that it likely would have severe short-term and long-term consequences.
Rep. Charlie Dent, a co-chairman of the Tuesday Group, said last week he supports the strategy put forth by leadership for now but thinks that a contingency plan needs to come together. “My fear is the balanced budget amendment won’t pass in both chambers, and then what?” the Pennsylvania Republican said.
And Sen. Mike Johanns (R-Neb.) said the pressure on Congress would ratchet up dramatically if the deadline is breached and Social Security and other payments are affected. “In the abstract, it’s awfully easy to make the case, ‘Well, I won’t raise the debt limit.’ The reality of that is that people suffer because of that decision. …That will change the whole dynamic overnight,” Johanns said.
House Minority Leader Nancy Pelosi (D-Calif.) noted that Democrats in 2008 provided the votes for the financial industry bailout bill after many Republicans abandoned their leadership and the bill failed on the floor. That caused the Dow Jones industrial average to drop more than 777 points — enough to spook Members into voting for it a few days later.
“I don’t need to see markets drop 400 points, but the Republicans may need to see markets drop 400 points,” she said last week.
John Stanton, Jessica Brady and Daniel Newhauser contributed to this report.