–Despite Dueling Debt Hike Plans, Dem Concessions Make Deal Possible
–House Speaker’s Plan Calls Only For Votes On Balanced Budget Amendment
–Key Sticking Points Will Be Specific Spend Cuts, Two-Step Debt Hike
By John Shaw
WASHINGTON (MNI) – Despite the sharply partisan rhetoric enveloping
the debt ceiling debate and the emergence Monday of two very different
plans by House Speaker John Boehner and Senate Majority Leader Harry
Reid, it is possible to see the vague outlines of an agreement on the
debt ceiling and deficit reduction.
This accord is possible mostly due to critical Democratic
concessions, but also because of a significant concession made by
On the surface the two parties are far apart.
Boehner is proposing a two-step debt ceiling increase that would
raise the debt ceiling by $1 trillion this year and $1.6 trillion next
Under Boehner’s approach, passing the initial $1 trillion debt
ceiling increase would require Congress to pass $1.2 trillion in
spending cuts through imposing caps on discretionary spending.
Approval of the second tranche of $1.6 trillion would require
passage of $1.8 trillion in spending cuts in entitlement programs that
are identified by a special congressional panel.
Under Boehner’s plan, the House and Senate would also have to vote
on a balanced budget constitutional amendment between this October and
the end of the year.
Reid on the other hand has proposed a debt ceiling bill that would
cut spending by $2.7 trillion over ten years and allow for passage by
Aug. 2 of a $2.4 trillion debt ceiling increase.
Reid’s plan calls for $1.2 trillion in discretionary savings, $1
trillion from winding down the wars in Iraq and Afghanistan, $400
billion in interest savings and $100 billion in entitlement savings.
Of the $100 billion in entitlement savings, $40 billion comes from
program management reforms, $30 billion from Fannie Mae and Freddie Mac
reforms, $15 billion in spectrum sales, and between $10 and $15 billion
in agriculture reforms.
Despite all the sharp rhetoric, the two parties now agree that
passing the debt ceiling will require a deficit reduction package that
is made up only of spending cuts and those cuts must exceed $2.4
Boehner’s call for a House and Senate vote on a balanced budget
amendment is not something that Democrats are eager for — but they are
not fiercely opposed to it either. The Senate is almost certain to
defeat the amendment. Some House Republican leaders had been insisting
that both the House and Senate pass a balanced budget amendment as a
condition for the debt ceiling increase. This demand was dropped by
The only two issues that need to be resolved are the specifics of
the spending cut package and, critically, if the debt ceiling will be
increased in one installment this summer or by the two step process that
Boehner is proposing.
The U.S. has already reached its $14.29 trillion debt ceiling.
Treasury Secretary Timothy Geithner has said Congress must pass
legislation increasing the debt ceiling by August 2.
** Market News International Washington Bureau: (202) 371-2121 **