After a third straight day negotiations at the White House, there appears to be little movement on increasing the debt ceiling. Senate Republican Minority Leader, Mitch McConnell, is proposing a plan that would prevent the federal government from defaulting on payments to bond holders, as well as keep funding the rest of the government at current levels. How House Speaker John Boehner and House Majority Leader Eric Cantor feel about this scheme is not yet clear, as it basically increases the debt limit, giving Barack Obama the blank check he wants without any spending cuts.
Under McConnell′s plan, the nation′s debt ceiling $2.5 Trillion dollars, but in one third increments between now and next summer. Obama would have to formally request each increment, which would then be voted on by the Congress. If Republicans vote to disapprove the increased increments, then Obama would just veto the vote and the debt ceiling would increase. The theory behind this scheme is that Republicans can claim they opposed the increase through their vote and put all the blame on Obama, since only a super-majority vote in Congress could overturn Obama′s veto, which simply would not happen.
This idea is even worse than Rep. Ron Paul′s one to just have the Federal Reserve tear up the bonds they bought through quantitative easing. Frankly, that has been about the best idea put forward so far. But Sen. McConnell is getting wobbly on us. He is afraid of the perception of being an obstructionist, forcing the government to cut spending and live within its means. Today, Obama warned that some 70 million checks need to be authorized August 3, and that without an increase to the debt ceiling, many Social Security and Medicare payments may not go out. Just days ago, Treasury Secretary Timothy Geithner said the number was 80 million checks.
Rep. Eric Cantor seems to be holding the line on preventing any deal that does not include spending cuts and stopping any increases in tax rates. A ′big deal′, which would fund the government′s budget deficits through 2012 seems unlikely at this moment. Cantor′s alternative is also to do smaller increases to the debt limit, but each increase must be matched by spending cuts. Something the Democrats are opposed to. One thing is for certain, whoever thought that by getting Obama directly involved in the negotiations would help was seriously mistaken. Efforts to return back to the plan put together by the Joe Biden working group of $2 Trillion in spending cuts may be difficult to pass now.
So the debt ceiling kabuki dance continues at the White House. Barack Obama is now playing the Social Security card to scare Americans into supporting an increase to the debt limit. House Speaker John Boehner and House Majority Leader Eric Cantor are hanging on to connecting spending cuts with any increases to the debt ceiling. Senate Republican Minority Leader Mitch McConnell is now floating a ′duck and cover′ plan which would give Obama what he wants without any spending cuts, just to avoid a government default or shutdown.