The nation finally sees a breakthrough in debt ceiling talks–but is it already too late?
Though the debt ceiling debate has been raging in Washington for weeks, during President Obama’s Tuesday press conference the nation finally received inklings of a potential breakthrough. But with a mere two weeks left before the federal government runs out of money to pay its bills, Capitol Hill still has a long road ahead of them.
The President and leaders of the House and Senate have been deadlocked in talks for the past few weeks, and their seeming inability to reconcile their differences–widespread Republican refusal to increase revenues (a.k.a. upping taxes) and Democratic reluctance to cut entitlement program spending–has caused the enough market worry for two major credit ratings agencies to threaten lowering the U.S.’ triple-A credit rating for the first time in history. His announcement that the Gang of Six, a bipartisan group of six senators that has been meeting about the deficit problem for months, has come up with a plan that he considers “balanced” comes as a welcome surprise.
However, we’re not out of the dark yet. Creating supposedly $3.7 trillion in savings, the plan includes spending cuts and tax increases that have already provoked skepticism and displeasure from both sides of the aisle. Many question whether a package like this will pass the House and Senate in time. In President Obama’s own, grave words, “The problem we have now is we’re in the 11th hour and we don’t have a lot more time left.”
Then, too, is the fact that this plan might not be entirely in line with the President’s thoughts on the matter. He was careful to say that his office hadn’t yet had the chance to fully vet the Gang of Six plan. “I think what you’re going to see is some significant overlap,” he said in response to a reporter’s question about when the White House would announce its support of the plan. “But obviously just because we might agree in principle with a range of issues with six senators or seven senators, that doesn’t get us out of the House of Representatives; that doesn’t get us out of the Senate.”
Though Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid have been working with the President closely in deficit reduction negotiations, they also have been busy drafting the “Cut, Cap and Balance” bill, which passed the House Tuesday afternoon. This bill, which White House Communications Director Dan Pfeiffer denounced as “dodge, duck and dismantle” in a conference call on Monday, would cut fiscal spending by $111 billion by next year, cap future spending at around 20% of GDP and introduce a Balanced Budget Amendment for ratification by the states.
The President has announced in previous statements that he would veto this bill if it were passed, concerned with the impact of short-term, drastic spending cuts on the economy and the “extreme, radical, unprecedented” nature of the Balanced Budget Amendment, according to a staffer. Today, however, he called the Balanced Budget Act “necessary” and a “failsafe” in order for talks to continue productively. “In the event that we don’t get an agreement, at minimum, we’ve got to raise the debt ceiling,” he stated.
Whether some modification of the Gang of Six’s plan is pushed forward, or the Balanced Budget Act makes it past the Senate to the President’s desk, both remain to be seen, but either way, resolving this issue will mean difficult cuts to government programs and tax increases for some. Within the African American community, which a recent report from the Economic Policy Institute found to be significantly harder hit than the White community by this recession, things look to get worse before they get better. However, the government default projected to occur if the debt ceiling is not raised by the August 2 deadline would undoubtedly have a much graver impact.