There now appears to be only three possible outcomes to the debt hike negotiations, and all three would seem to lead to the eventual loss of the U.S.’s AAA credit rating. One possibility is that there is no deal, the debt hike is not raised, and much of the federal government is shutdown. The U.S. Treasury would still have enough revenues to avoid defaulting on the debt, but the credit agencies would downgrade our debt anyway.
The other two possibilities are the passages of either Speaker John Boehner’s, R-Ohio, or Majority Leader Harry Reid’s, D-Nev., debt hike plans. But, as The Examiner’s Phil Klein points out, while both plans would prevent a government shutdown, neither would produce a bipartisan agreement on a long-term plan to reduce the debt. The ratings agencies are now demanding such an agreement if the U.S. wants to avoid a downgrade. Since no long-term debt agreement is possible until either Obamacare is repealed or President Obama wins reelection, that downgrade now seems inevitable. The only question is who will get the blame.
If the Boehner plan passes, then Obama can blame House Republicans for the downgrade and possible subsequent recession. But if the Reid plan passes, it becomes much harder for Obama to shift the blame. He would become the presumptive owner of the historic loss of the United States AAA credit rating.
Around the Bigs
The Washington Examiner, CBO: Boehner plan cuts deficit by $1 bln in 2012, $851 bln over 10 years: Speaker John Boehner’s, R-Ohio, debt hike plan would only cut discretionary spending by $5 billion in 2012, according to the Congressional Budget Office (CBO). In total, the plan would reduce discretionary spending by $695 billion compared to current projections for 2012 through 2021, cut mandatory spending by $20 billion, and save $135 billion in interest payments.
The Washington Examiner, Competing plans stall in Congress ahead of debt ceiling deadline: The White House Office of Management and Budget issued a formal veto threat of Speaker John Boehner’s, R-Ohio, debt hike plan yesterday, but President Obama may never have to use it as Boehner’s plan appears to lack the votes necessary to pass the House. After the CBO score the Boehner plan cut far less spending than it claimed, Boehner’s office said they would tweak the bill to included more spending cuts. Meanwhile, in the Senate, Majority Leader Harry Reid, D-Nev., has not yet secured 60 votes for his debt hike plan either.
The Hill, Cantor tells House to ‘stop whining’ about Boehner debt-ceiling plan: Majority Leader Eric Cantor, R-Va., told House Republicans at a closed-door conference meeting to stop “grumbling and whining” and vote for the Boehner debt hike Tuesday.
Reuters, U.S. likely to lose top rating: A majority of economists polled by Reuters predict that the United States will lose its AAA credit rating from one of the three big ratings agencies regardless of whether or not the debt limit is raised. Economists also predict a 20 percent chance of a new recession within a year.
The Wall Street Journal, The GOP’s Reality Test: The Wall Street Journal editorial board comes out strong in favor of the Boehner/Reid debt hike plans: “The idea seems to be that if the House GOP refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue, and the public will turn en masse against . . . Barack Obama. The Republican House that failed to raise the debt ceiling would somehow escape all blame. Then Democrats would have no choice but to pass a balanced-budget amendment and reform entitlements, and the tea-party Hobbits could return to Middle Earth having defeated Mordor. This is the kind of crack political thinking that turned Sharron Angle and Christine O’Donnell into GOP Senate nominees.”
San Francisco Chronicle, U.S. agent admits he erred with Mexico gun cartels: William Newell, the former special agent in charge of the Phoenix field division of the Bureau of Alcohol, Tobacco, Firearms and Explosives, who oversaw the failed Operation Fast and Furious gun-trafficking sting, admitted “mistakes were made,” but refused to admit he allowed guns into Mexico.
The Washington Examiner, Under Obama, Millennials move into the GOP column: Michael Barone notes that high unemployment seems to be taking a toll on Obama’s brand among Millennials. In 2008, the Pew Research Center found that white voters under 30 chose Democrats over Republicans by a 7-point margin. By 2010 that number had shifted to a 1-point Republican edge.
The Wall Street Journal, A Tale of Two Shale States: Pennsylvania has scored thousands of jobs and millions in revenues by embracing hydraulic fracturing. New York has chosen to side with environmentalists, missing out on the Marcellus shale boom.
Politico, SwiftVets revenge: Capt. Wade Sanders, the Vietnam swift boat veteran who introduced John Kerry to the Democratic Convention in 2004, was stripped of his Silver Star last week.
Perry: The Wall Street Journal says there is one small problem with Texas Gov. Rick Perry’s jobs miracle: of the 1.5 million job Texas has added since 2000, about 300,000 of them are government jobs. Employment in the public sector has jumped 19 percent under Perry while the private sector workforce only grew by 9 percent.
Pawlenty: Former Minnesota Gov. Tim Pawlenty came out against Boehner’s debt hike plan yesterday, explaining, “I am for the plan that will cut spending, cap it, and pass a balanced budget amendment, but unfortunately this latest bill does not accomplish that.”
Romney: A few months ago it was former Massachusetts Gov. Mitt Romney losing supporters to Pawlenty. Now it is the other way around. New Hampshire state Rep. Shaun Doherty, R-Pelham, left Pawlenty’s campaign steering committee yesterday, and announced she is now supporting Romney.
At The Corner, former Sen. Fred Thompson tells House Republicans they have already won the debt hike fight and advises them to “rake in your chips, stuff them in your pockets, and tell the dealer to deal the next hand.”
Also at The Corner, Yuval Levin notes that the debt hike fight has exposed “a Democratic Party incapable of openly offering a liberal agenda to voters.”
House Budget Committee Chair Paul Ryan, R-Wis., makes his case for the Boehner debt hike.
The Washington Post‘s Greg Sargent spells out the Democrats remaining debt hike strategy: “The next move is to sit tight and wait for the House to vote on Boehner’s proposal. The idea is that with mounting conservative opposition, it could very well be defeated. … At that point, the Senate would then pass Harry Reid’s proposal, and then kick it over to the House, which would increase pressure on Boehner to try to get it passed, since he was unable to pass his own plan.”
Liberals are taking solace from their debt hike loss by enjoying Minority Leader Nancy Pelosi’s, D-Calif., impassioned speech to a crowd of union workers on Capitol Hill Tuesday: “The budget deficit is an excuse for the Republicans to undermine government plain and simple. They don’t just want to make cuts, they want to destroy. They want to destroy food safety, clean air, clean water, the department of education. They want to destroy your rights.”