Tuesday, July 12, 2011

McConnell's Debt Ceiling Proposal

Today, Senate Minority Leader Mitch McConnell proposed an interesting debt ceiling proposal that could amount to allowing Obama raising the debt ceiling through the 2012 election with absolutely no budget cuts to offset the increase.

Here is what the proposal amounts to as far as I can tell from media reports. Note: these details may change either due to reports being incorrect or the proposal itself changing:

  1. Congress would vote to allow Obama to "request" an extension of the debt ceiling by a total of $2.5 trillion dollars - first in a $700 billion tranche now, and in two $900 billion tranches later
  2. The debt ceiling increase would go into effect unless Congress passed a measure preventing it. This measure, in turn, could be vetoed by Obama, meaning that effectively 2/3 of both Houses would have to vote to NOT increase the debt ceiling for it not to happen
  3. Obama would be required to recommend offsetting cuts, presumably equal to the amount of the debt limit increase request. These recommendations could not include revenue increases. However, these are only recommendations. Congress would have to approve these budget cuts separately.
This plan comes with a few plusses and minuses. I think on balance, it comes with a lot more pros though:

Positives:
  • Obama could get his debt ceiling increase with no strings attached if none of his recommended budget cuts are agreed to in Congress.
  • It would prevent the United States from defaulting
  • Since one would assume that Congressional Republicans would vote to refuse to extend the debt ceiling, Democrats could attack them for voting in favor of national default.
  • Republicans can also be attacked for thinking that tax cuts for the rich are more important than ANY deficit reduction whatsoever.
  • The tea party base will likely be enraged at the GOP for effectively agreeing to a debt limit increase with no guarantee of budget cuts.
Negatives:
  • Obama would be required to unilaterally propose as much as $900 billion in budget cuts, with no option of including new revenues whenever he asks for an increase. The GOP probably feels that it could take Obama's own recommended cuts, stick them into a bill, and either dare the Senate Democrats to vote it down or dare Obama to veto his own budget cut recommendations, meaning they can attack either Senate Dems for not going along with their own President's budget cut proposals or they can attack Obama for being a hypocrite.
  • They can attack Obama for raising the debt ceiling and, potentially, Senate Democrats for blocking Congressional action to prevent it
I think the biggest catch with this plan is the required recommendations Obama requests, since it does put Democrats in a difficult situation if the House GOP just puts his own recommendations into a bill and passes it.

However, Obama may be able to counteract this by recommending cuts that he knows would be unpalatable to the GOP House and/or the Democratic Senate. And if either chamber, particularly the House, makes changes to his recommendations, that gives Senate Democrats cover to vote it down or Obama to veto them.

This one hitch is the main thing Obama and Senate Democrats would need to think about before agreeing to McConnell's proposal. They would want to make sure that they could either prevent any cuts from going into effect or at least have a plan to not be trapped into a corner by Obama's own required recommendations. Given that Biden and Obama have gone through two rounds of negotiations with the GOP - first with the budget and again now - one would think they would have a good idea of what cuts would and wouldn't be acceptable to each side, especially the GOP.

 
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