Dramatic developments in the debt-ceiling debate on Tuesday as the House passed the "cut, cap and balance" bill while Oklahoma Sen. Tom Coburn rejoined the "Gang of Six," whose $3.7 trillion package suddenly leapt back into contention.
"I think we're now seeing a potential for a bipartisan consensus," President Obama said Tuesday afternoon about the 'Gang of Six' proposal. President Obama will be meeting with top Democrats Wednesday afternoon and financial markets once again seem to be betting on a resolution prior to Aug. 2, whether it's via the 'Gang of Six' plan or the so-called McConnell plan that would allow the President to raise the debt ceiling by $2.5 trillion in three steps over the next year.
"I am nervous and get more nervous every day…but I think at the end of the day we will have a deal by Aug. 2," says former Obama economic adviser Jared Bernstein, now a senior fellow at the Center on Budget and Policy Priorities. "I believe the White House is deeply committed to avoiding default."
In related news, the latest WSJ/NBC News poll finds 38% of Americans believe the debt ceiling should be raised vs. 31% who say it shouldn't. That's "a dramatic shift" from a month ago, when 39% said it shouldn't be raised and only 28% said it should be lifted, The WSJ reports.
As you'd expect given his pedigree, Bernstein applauds the White House for "negotiating very hard" and says Obama "has been bending over backward…maybe too far…to try to negotiate a deal."
Conversely, he is critical of House Republicans for failing to negotiate in good faith. "The minute [House Majority Leader Eric] Cantor got up and walked away from the table, even the patina of negotiation was absent."
Setting aside political ideology, Bernstein makes an interesting observation about the past four major deficit reduction deals: Revenue increases (a.k.a. tax hikes) made up a bigger portion of the packages, between 38% and 82%, than in Obama's original "grand bargain" proposal, which included roughly 33% revenue and 67% spending cuts.
"That kind of balance — adding revenue — that's important, not just for Zen Buddhist balance terms," he says. "It's important because if you don't take some of the weight off the spending cuts with revenues you end up doing far more harm than good by your cuts to programs and policies that are critical to vulnerable populations." (See: Cut, Cap and TAX Would Be "Win for Fiscal Sanity," Greenhaus Says)
In case you're curious, Bernstein notes "that top level, 82%, that was the 1984 Deficit Reduction Act signed by that wide-eyed radical Ronald Reagan -- who these days would be drop-kicked out of the Republican party for even suggesting adding revenues to the deal."
So much for being non-partisan.
- Jared Bernstein
- Ronald Reagan