The major remaining stumbling blocks to a debt limit deal 

Once Senate Majority Leader Harry Reid’s bill loses the upcoming 1 am cloture vote, there will officially be no active debt limit bills in Congress. This means that in the coming days, leaders of both parties will have to hash out a compromise that will be able to pass both chambers before the Aug. 2 deadline to raise the debt limit. I thought it would be worthwhile to lay out the major stumbling blocks to a deal that we’re likely to be hearing about.

 -- Will the debt limit increase come in one increment or two? President Obama and Democrats in Congress want assurances that the debt limit will be raised $2.4 trillion, which it projects would last past next year’s election. House Speaker John Boehner’s bill would raise it in two stages, and make the second increase contingent upon a joint committee of Congress enacting an additional $1.8 trillion in cuts as well as passage of a Balanced Budget Amendment. Last night, Reid embraced a procedural idea by Senate Minority Leader Mitch McConnell, R-Ky., to give Obama the ability to raise the debt limit in two parts while allowing Congressional Republicans to claim they didn’t directly vote for it. But that brings us to the next stumbling block.

-- Will the spending cuts exceed the debt limit increase? House Speaker John Boehner, R-Ohio, has insisted that any dollar increase in the debt ceiling must be matched with a higher dollar level of spending cuts. Reid insists that his plan accomplishes that, but he claims roughly $1 trillion of spending cuts from winding down the wars in Iraq and Afghanistan, which Republicans don’t count as real cuts because the wind down is expected to happen anyway.

-- How binding will the recommendations of a new deficit reduction committee be? Both Reid and Boehner’s plans include the creation of a bipartisan joint Congressional committee to find additional deficit savings. But Boehner’s plan makes the second debt ceiling increase contingent on its recommendations being adopted. If Reid doesn’t want that amount of uncertainty hanging over the next debt ceiling increase, then both sides will have to agree on some way to give the commission teeth. Reid told reporters last night that there had been a lot of discussions about what sort of “triggers” would be involved, but ultimately, everything reverts back to the fundamental disagreement between the two parties throughout the talks. Republicans want triggers that mean automatic across the board spending cuts, and Democrats want triggers to include tax increases. Boehner’s endorsement of the committee in his own plan is already being criticized among some conservatives as a back door tax increase, and that attack line would build steam if he agreed to any tax increase trigger. And if the triggers were all on the spending side, it would increase liberal suspicions that the committee would lead to slashing entitlements.

-- What about defense spending? This issue hasn’t gotten as much attention as the others, but it is likely to emerge as a major sticking point. The Boehner and Reid plans both cut and cap discretionary spending by around the same amount, but Reid’s plan includes a separate cap on security-related spending. As I reported the other day, this translates into hundreds of billions more in defense cuts under Reid’s plan. “The Reid bill guts defense, I mean guts it, and leaves domestic spending alone,” House Budget Committee Chairman Rep. Paul Ryan, R-Wis., told me Friday. “And ours doesn’t do that.” When I asked Sen. Chuck Schumer, D-N.Y., about that charge, he told me “that’s not true.” He insisted that Republicans had agreed to the defense cuts weeks ago in Reid’s bill during talks with Vice President Joe Biden. Regardless of who you believe on this, it’s clear that we haven’t heard the last of the defense cuts issue.

This post wasn’t intended to predict how these issues will be resolved, but I do believe that some compromise bill will pass the House with Democratic votes making up for Republican defections, and then get through the Senate. The final bill will raise the debt limit and avert the immediate crisis, but it will do little to address the underlying problem of our nation’s unsustainable debt burden.

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Philip Klein

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