As debt threat grows, Congress keeps running in circles

McClatchy NewspapersJuly 27, 2011 

WASHINGTON — With stocks tanking and next Tuesday's debt-default deadline looming for the country, no sign of compromise between Democrats and Republicans emerged Wednesday in Congress.

Both parties continued to pursue separate tracks as Senate Majority Leader Harry Reid, D-Nev., and House Speaker John Boehner, R-Ohio, went back to their drawing boards to revise their plans to cut federal spending and increase the debt ceiling. The nonpartisan Congressional Budget Office issued studies that found that both plans fell short of their promised spending cuts.

Both men shrugged off the CBO reports as minor obstacles easily fixed. Republican officials said the House of Representatives could vote on Boehner's revised bill as early as Thursday, while the timing of Reid's retooled measure remained unclear.

Meanwhile, anxiety over the debt stalemate in Washington erupted on Wall Street as stocks on the Dow Jones industrial average plunged 198.75 points, most in the final hour of trading, to close at 12,302.55. Many authorities have warned that Washington's failure to raise its debt ceiling by Tuesday could cause financial markets to panic and kick the weak U.S. economy back into recession.

Both Reid's and Boehner's plans would slow the already sluggish U.S. economy, according to an analysis Wednesday from Macroeconomic Advisers, a prominent St. Louis-based forecaster. Reid's plan would slow U.S. growth by about one-quarter of a percentage point per year from fiscal 2012 through 2015, while Boehner's would slow growth by about 0.1 percentage point per year on average over the same period. Both plans would reduce federal spending, which stimulates the economy.

Senate Democrats united behind Reid's plan, but Boehner appeared to be still scurrying for GOP votes in the Republican-controlled House to put his measure over the top. Many conservatives oppose his deficit-cutting plan as too weak, and many also refuse to vote for any plan that raises the debt ceiling.

Boehner told House Republicans in a closed-door meeting to "get your ass in line" and support his bill, according to his staff and lawmakers who were present.

"We're making progress," Boehner told reporters afterward.

Reid also sounded confident about his bill's chances, saying that all it needs is "tweaking" that can be done "fairly easily."

While President Barack Obama remained on the sidelines Wednesday, aides said backstage talks continued with Congress.

"Conversations continue at all levels, including the highest," White House Press Secretary Jay Carney said.

White House senior adviser David Plouffe suggested that the House vote on Boehner's plan will kill any talk about it as the basis for a bipartisan compromise.

"Once that's done, we've got to move on to solving this problem," he said.

The CBO found that Reid's plan would fall well short of its $2.7 trillion deficit-cutting goal. The CBO estimated that his proposal would cut $2.2 trillion from budget deficits over the next decade. While Reid's proposal projected savings of $1.2 trillion in discretionary spending cuts, the CBO said it would save only about $751 billion there.

Reid's biggest savings would be $1 trillion saved as the wars in Iraq and Afghanistan wind

down. Another $375 billion would be saved from interest payments on the reduced debt.

"We'll continue to add savings," Reid said. "And we're confident the final bill will meet our bottom line of raising the debt ceiling through the end of 2012."

The CBO estimated that the Boehner plan would cut only about $850 billion from deficits over 10 years, far short of the $1.2 trillion initial GOP goal.

Several Republican House members reacted furiously Wednesday to an email sent by a junior staffer on the Republican Study Committee, a group of conservative House Republicans, urging outside interest groups to lobby against Boehner's bill.

"This action was clearly inappropriate and was not authorized by the chairman (of the committee) or other members of the staff," Brian Straessle, a spokesman for the committee, said in a statement. "This has never been — and never will be — the way we do business at the RSC."

Some House Republicans who support Boehner's plan said the staffer's email, and the additional day before a vote because of the CBO numbers, might aid Boehner in winning over GOP lawmakers.

"I think it played a role," Rep. Peter King, R-N.Y., said of the Republican Study Committee email. "There is no other alternative for Republicans at this stage, it's basically a good agreement and also we'll weaken ourselves as a party for the next year and a half. ... It would come as a vote of 'no confidence' if we vote it down."

Later, Boehner modified his plan slightly to include more savings, and CBO said it would now cut deficits $917 billion over 10 years — still far from the $1.2 trillion he proposed Monday. But Republicans called the adjustment significant, saying it was now above the $900 billion initial increase in the debt limit Boehner would permit.

Still, several Republicans remained opposed to Boehner's plan despite heavy pressure from the speaker, House Majority Leader Eric Cantor, R-Va., and House Majority Whip Kevin McCarthy, R-Calif.

"There's strong pressure, absolutely, very persuasive ... but right now I'm still a no," said Rep. Phil Gingrey, R-Ga., who supports the so-called "cut, cap and balance" bill that passed the House last week but died in the Senate. "I had a strong feeling, and still do, that maybe if we even go beyond Aug. 2 that maybe the president and the Democratic majority in the Senate will come around to cut, cap and balance."

Pressure's also mounting on Boehner and Republicans from tea party groups. Judson Phillips, the founder of Tea Party Nation, a social website, called on Boehner "to go."

"Boehner's been around for a long time, and he's part of the old guard," Mark Meckler, a Tea Party Patriots co-founder, told a Washington breakfast with reporters Wednesday. "People are looking for a new way of doing things in Washington, D.C., and I think there's a concern that he can't provide leadership in that sort of way."

Such bashing of Boehner, along with GOP predictions that the public will blame Obama if the U.S. defaults on its debt, riled Sen. John McCain, R-Ariz.

"This is the kind of crack political thinking that turn(ed) Sharron Angle and Christine O'Donnell into GOP candidates," McCain said on the Senate floor, referring to failed tea party-backed Senate candidates from Nevada and Delaware.

"The reality is the debt limit will be raised one way or the other. ... If conservatives defeat the Boehner plan, they will not only undermine their House majority, they will go far to re-electing Mr. Obama and making entitlements that much harder to reform," McCain said.

From the other side of the political spectrum, a coalition of self-styled "progressive" liberal groups plans to hold a rally Thursday on Capitol Hill to demand that Congress not cut Social Security, Medicare or Medicaid and that it not permit the U.S. to default on its debt.

(Steven Thomma contributed to this report.)

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