Facing debt stalemate, White House seeks Plan B
Still no deal.
That's the situation facing the country Tuesday, one week before the Obama administration's August 2 deadline for raising the debt ceiling to avoid economic catastrophe.
With both a Senate Democratic plan and a House Republican plan looking unlikely to clear Congress, White House press secretary Jay Carney said Tuesday that "we're working on Plan B" - though he acknowledged the White House couldn't get there alone.
"Congress has to come together," he said. "There has to be a product that can pass the House and the Senate and be signed into law. We're part of that process." Carney declined to describe what this Plan B might look like, saying only that the White House was discussing alternatives with members of Congress.
Washington awoke Tuesday to a largely unchanged landscape following a primetime speech on the debt fight by President Obama and response from House Speaker John Boehnerthat seemed to do nothing to move the conversation forward.
Mr. Obama declined to present specific details of a possible compromise plan, instead calling for a renewed attempt at a "grand bargain" deal that includes both spending cuts and revenue increases. That's an approach that most people in Washington thought was effectively dead, and Mr. Obama's decision to focus on it - instead of the plan from Senate Democrats, or a new proposal - left many in Washington scratching their heads.
Boehner, meanwhile, gave a defiant speech that essentially doubled down on his party's no-compromise posture, one driven by the Tea Party hard liners who make up a large chunk of the House Republican caucus.
Boehner is pushing Mr. Obama to sign a two-step plan that would increase the debt limit for about six months (in addition to cutting $1.2 trillion in spending) before the fight begins anew. The GOP-led House is set to vote on that plan Wednesday, though it's not clear it can pass, since many fiscal conservatives say it does not go far enough to cut spending and balance the budget. The influential fiscal conservative group The Club for Growth came out against the Boehner plan Tuesday, and the nonpartisan Congressional Budget Office said late Tuesday it would save about $150 billion less than Boehner claimed.
Even if the plan did pass, however, it could likely not get through the Democrat-led Senate. The White House has repeatedly said it would not sign a short-term plan, which it said creates economic uncertainty and could lead to a downgrade in the nation's Triple-A credit rating. On Tuesday afternoon, the White House issued a formal veto threat of the bill.
Senate Majority Leader Harry Reid, meanwhile, called the Boehner plan "dead on arrival in the Senate, if they get it out of the House." He said it "was written for the tea party, not the American people."
House Republicans have also scheduled a Thursday vote on a balanced budget constitutional amendment, something strongly favored by fiscal conservatives; that bill has even less chance of passage than the Boehner plan, but holding the vote could help the Republican leadership get the votes to pass the Boehner bill Wednesday.
There is also a plan from Senate Democrats which would seem to satisfy Republican demands: It does not include revenue increases, and would include spending cuts in excess of the amount the debt ceiling would be increased. Reid described the plan on the Senate floor Tuesday morning as "everything the Republicans have demanded wrapped up in a bow and delivered to their door."
But that plan has problems too, including the fact that $1 trillion of its $2.7 trillion in cuts essentially come from an accounting trick: Counting savings from winding down the wars in Iraq and Afghanistan - something the nation is already planning on doing - as spending cuts. Boehner says the plan cannot pass the House, and it's not clear that it has the 60 votes necessary to break a filibuster in the Senate.
Dueling debt plans: How they compare
Mr. Obama barely mentioned the Senate plan in his speech Monday night, though he did signal support for it; Carney today called it a "legitimate compromise measure" and said the White House believes it could pass both chambers "if folks gave it a fair shake."
Carney also continued to push for the "grand compromise" deal that Boehner walked away from Friday, saying it "is still on the table and is out there and ready to be taken up." But with House Republicans vowing not to support anything that includes revenue increases - even when paired with trillions in spending cuts - it's hard to see how that plan gets resurrected.
Republican Sen. Pat Toomey of Pennsylvania said Tuesday "it's increasingly possible we will not have raised the debt ceiling by Aug. 2." He and other Republicans are pushing a bill that would mandate the government prioritize interest on its debts, Social Security benefits and military payrolls in the event a deal cannot be reached.
The Obama administration has said that without congressional action, the U.S. will breach its limit on borrowing next Tuesday, August 2, though it now appears the nation may have an extra week or so of wiggle room to pay its bills. A breach could cause the U.S. to default on its debt as well as a host of other negative outcomes, including the suspension of Social Security checks, military pay and other obligations, and potentially cause global financial chaos.
Credit ratings agencies have warned that they are poised to withdraw the United States' triple-A credit rating without guarantees that it will not default, and they have also suggested that the credit rating is in danger without a significant deficit reduction effort. That would potentially mean an increase in the cost of borrowing both for the U.S. government and for Americans seeking home and car loans and a higher interest rate for those seeking to pay off credit card debt.