House Majority Leader John Boehner (R-Ohio) again asked President Obama on Friday to put his own plan for deficit reduction on the table as Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) work on a “backup plan” in case talks fail. President Obama still wants a “big deal,” but offers few details on how to get there. If a deal is not reached, the nation's credit rating could be downgraded, Standard & Poor's warns.
McConnell hinted at what the backup plan might look like on the Hugh Hewitt radio show Thursday night. A centerpiece of the plan appears to be the formation of a deficit reduction committee, made up of members of both parties in each house. The number of seats on the committee would be divided equally between Republicans and Democrats. The committee would have a set target amount for reducing deficits over 10 years or so, and entitlement reform would have to be part of the package. The committee's package would then go to each house for an up or down vote.
The rest of the backup plan would put into place the cuts already agreed to in the Biden negotiations, as a “down payment” on deficit reduction, and give the president the authority to raise the debt ceiling three times before 2012. Congress would only be able to override the president's debt ceiling increase with a two-thirds vote in each house.
One of the biggest criticisms heard from Republicans during budget negotiations is that Democrats have refused to put their own plan on the table. The last time a Democratic controlled House or Senate passed a budget was 2009. The Republican controlled House passed a budget this year, but the Democratic controlled Senate has not voted on any budget.
The president sent a budget to Congress in February, as he is required to do by law, but that budget increased spending over last year's budget, a position that even the president now rejects.
Obama gave an April 13 speech criticizing the House budget and offering some guidelines for what he would like to see in future budgets, but the speech was more like a campaign speech, harshly criticizing the Republicans' budget while offering few details of his own. Rather than specifying how he would reduce the growth in Medicare, for instance, Obama proposed an “independent commission” that would recommend cost savings for the program.
Republicans would prefer that Democrats put forward a plan with enough detail that the Congressional Budget Office can “score it,” or show an independent analysis of how much that plan would reduce budget deficits. This way, Republicans assert, the public will have a better understanding of the choices before them.
House Majority Leader John Boehner repeated this criticism at a press conference Friday morning.
“We're in the fourth quarter here. Time and again Republicans have offered serious proposals to cut spending and address these issues and I think it's time for the Democrats to get serious as well. We asked the president to lead, we asked him to put forward a plan, not a speech, a real plan, and he hasn't, but we will.”
McConnell's backup plan has been described by some House Republicans as a surrender on the budget negotiations.
David S. Addington, writing on The Heritage Foundation's blog, echoed those sentiments. “The [McConnell] Plan purportedly makes the Democratic President bear the political burden for increases in the debt limit to the benefit of Republicans, but the Plan does nothing for the good of the country.”
The advantage of the new McConnell/Reid plan with a bipartisan committee, however, is that it forces the Democrats to do what Republicans have been urging them to do all along – put their own plan on the table.
The split between McConnell and some House Republicans, led by House Majority Leader Eric Cantor (R-Va.), mirrors a broader split within the Republican party over the debt ceiling issue. On one side are the Republican with business and Wall Street interests who worry that a debt default would be bad for the economy. On the other side is the Tea Party movement with conservative interests who do not want to lose this opportunity to significantly downsize the federal government.
In a press conference Friday, Obama warned that not raising the debt ceiling could have “a whole set of adverse consequences."
“We could end up with a situation, for example, where interest rates rise for everybody all throughout the country, effectively a tax increase on everybody.”
Standard & Poor's (S&P) sounded a similar warning Thursday when it said the United States' credit could be downgraded if it defaults on any of its debt obligations. Moody's Investor Services issued a similar warning on Wednesday. Moody's and S&P provide independent credit ratings for investors. A lower credit rating could lead to higher interest rates, which would cost the government more when it borrows money.
Obama suggested on Thursday moving the meetings to Camp David over the weekend. That idea was shot down by congressional leaders.
Obama said that the two sides need to come to an agreement by Saturday morning. If not, more meetings at the White House will be scheduled.
Treasury Secretary Timothy Geithner has said that the debt ceiling needs to be raised by August 2 to avoid defaulting on debt payments.
The United States' national debt is now over $14.5 trillion, with over $114.6 trillion in unfunded liabilities.