With last week’s multiple negotiating sessions at the White House between Congressional leaders and the President yielding no agreement, the House and Senate are now taking two very different approaches to raising the debt ceiling. The House will be voting on the Cut, Cap, and Balance Act, while the Senate leadership will continue negotiating on the fallback plan first proposed by Senator McConnell (R-KY). With two weeks left until the deadline and both chambers going in radically different directions, no solution seems imminent.
The Cut, Cap, and Balance Act being voted on in the House this week would authorize a $2.4 trillion increase in the debt ceiling, contingent on the House and Senate passing a balanced budget amendment to the Constitution. As soon as the House and Senate passed such an amendment, which would require a super-majority of 2/3 of the members in each chamber voting in support, the debt ceiling increase would be triggered. The legislation would also severely cut federal spending in Fiscal Year 2012 by $111 billion: $76 billion would be cut from non-security discretionary accounts, while $35 billion would be cut from mandatory spending programs. On top of that, spending caps would be put in place over the next decade that would reduce overall federal spending below 20% of GDP (by way of reference, it is currently at about 25% of GDP). The House is expected to vote on the bill tomorrow; assuming passage, it could also be taken up this week in the Senate where it is expected to fail.
Meanwhile, the Senate leaders McConnell and Harry Reid (D-NV) are negotiating the makeup of a fallback plan first proposed by Senator McConnell that would increase the debt ceiling by approximately $2.5 trillion in three separate increments over the 18 months. Each time the debt ceiling would need to be increased the President would have to identify and propose an equivalent amount of deficit reduction to offset the increase. Congress could then override the President’s proposal, but it would take a super-majority of 2/3 of the members of both chambers to vote for a resolution of disapproval. In effect, the McConnell-Reid plan would cede tremendous power to the President to determine how to pay for the debt ceiling increases, with the trade-off being that Congress would politically cede ownership of the explosive debt issue to the President. A number of conservatives have come out in opposition to the plan, citing the authority being granted to the President. The White House has also been cool to the idea, knowing that the President being forced to request a debt limit increase three more times before re-election could be politically difficult. A final agreement has not yet been signed off by Senators Reid and McConnell, but it could presumably include about $1.5 trillion in spending cuts that were agreed to by both parties under the Biden negotiations, as well as a discretionary spending freeze over the next two years at a level $20 billion below the levels enacted in Fiscal Year 2011.
This will be a pivotal week in the debt ceiling discussions, and much will be at stake depending on how Cut, Cap, and Balance fairs in the House and Senate and if the Senate leadership can negotiate an agreement acceptable to both parties based on the McConnell-Reid fallback plan.