Dealing with Debt
Debt hope: Obama praises 'Gang of Six' $4 trillion package
A bipartisan Senate plan to cut about $4 trillion from deficits over the next decade emerged as a possible debt-reduction compromise Tuesday, as President Obama touted its ideas as "broadly consistent with the approach that I've urged."
WASHINGTON — A bipartisan Senate plan to cut about $4 trillion from deficits over the next decade emerged as a possible debt-reduction compromise Tuesday, as President Obama touted its ideas as "broadly consistent with the approach that I've urged."
But while Obama's push gave new momentum to a deal to cut spending and raise the nation's $14.3 trillion debt limit, a final agreement remained elusive.
Determined Republicans in the House of Representatives won approval by 234-190 of a conservative plan to slash federal spending dramatically, but their "cut, cap and balance" plan won't become law, since the Democrat-led Senate won't go along, and even if it did, Obama has vowed to veto it if it reaches his desk.
In the Senate, Majority Leader Harry Reid, D-Nev., wouldn't endorse the complete $4 trillion package crafted by the bipartisan so-called "Gang of Six," saying he wanted to see more specifics. He warned that there's probably not enough time to adopt such an ambitious plan before the Aug. 2 deadline to raise the federal debt ceiling or force the government into default.
"I'm happy to work and use anything in the Gang of Six that we can, but remember, we only have 13 days," Reid said.
If the debt ceiling is not raised by Aug. 2, the government will run out of borrowing authority, possibly panicking global financial markets and kicking the frail U.S. economy back into recession. House Republicans insist that they would raise the debt ceiling only if Congress first passes deep cuts in future federal spending and approves an amendment to the Constitution mandating that future federal budgets must balance.
Nonetheless, Tuesday saw two promising developments: an Obama pledge to revive White House bipartisan budget talks, possibly as soon as Wednesday, and his nod to the gang's work. The bipartisan group met earlier this year seeking consensus on a deficit-reduction plan, disbanded in May, then reconvened Tuesday with about 40 senators from both parties.
Details remained vague, but indications were that their plan would raise about $1.2 trillion in revenue over the next decade, satisfying many Democrats, while reducing spending for Medicare and Medicaid, pleasing many Republicans.
Broad tax changes would end loopholes while lowering tax rates. Separately, Social Security would be restructured to stabilize its finances for 75 years.
Obama, while acknowledging he's not yet reviewed the plan, nonetheless called it "balanced," adding, that "it would not match perfectly with some of the approaches that we've taken, but I think that we're in the same playing field."
Senators from both parties hailed the plan.
Sen. Lamar Alexander of Tennessee, the chairman of the Republican caucus, endorsed it, noting that three gang Republicans are staunch conservatives.
Many Democrats also rallied around the plan.
"I would support this plan if it were considered on the Senate floor," said Sen. Michael Bennet, D-Colo.
Senate leaders were more circumspect. Reid and Senate Republican leader Mitch McConnell of Kentucky have spent days trying to craft their own, more modest approach to raise the debt limit in stages while deferring serious deficit reduction.
Obama on Tuesday said their less ambitious "fail-safe" plan "continues to be a necessary approach to put forward, in the event we don't get an agreement."
Logistically, enacting the entire Gang of Six plan before Aug. 2 would be virtually impossible. The nonpartisan Congressional Budget Office has to review and analyze any legislation, which can take days, and Senate procedural hurdles can also take days to overcome.
Even if the Senate passed the gang's proposal, then there's the Republican-led House, which has made clear that it will not vote for any plan that raises revenues.
Michael Steel, spokesman for House Speaker John Boehner of Ohio, said the Gang of Six plan "shares many similarities with the framework the speaker discussed with the president, but also appears to fall short in some important areas." Republicans want more savings immediately, more consequences for not achieving desired cuts and more structural changes to Medicare and Medicaid that go further than the gang has discussed.
On Tuesday, House Republicans were adamantly behind their "cut, cap and balance" plan.
"The president continues to say that he wants to do big things. We do as well," said House Majority Leader Eric Cantor, R-Va.
Democrats charged Republicans were doing nothing. "We are playing 'let's pretend' on the House floor," said House Democratic Whip Steny Hoyer of Maryland.
The cut, cap and balance plan would slash $111 billion from spending next year and scale back future spending to be held at not more than 22.5 percent of gross domestic product next year — it's currently around 24 percent — and to drop gradually to 19.9 percent of GDP by 2017.
Under the GOP plan, before the nation's debt limit could be raised, a balanced-budget amendment to the Constitution would have to be adopted, first by a two-thirds majority in each house of Congress — which Senate Democrats won't allow — and then by three-fourths, or 38, of the states.
While the House has not scheduled a vote on the amendment, the Senate hopes to vote on it later this week — effectively knocking it off the table.
Obama appears to be the political winner on the debt negotiations, so far as the public is concerned. The president hosted five days of talks last week, has held three news conferences since June 29 and remains involved privately in trying to work out a deal. A Gallup poll conducted July 15-17 found 47 percent thought Obama was putting the nation's interests first, while only 31 percent thought the same of congressional Democrats, and 24 percent for congressional Republicans.
The survey polled 1,106 adults. Margin of error is plus or minus 4 percentage points.