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Jared Bernstein’s Getting Nervous About Aug. 2 “But I Think We Will Have a Deal”

Aaron Task
Editor in Chief
Daily Ticker

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.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com

For more Daily Ticker coverage of the debt ceiling debate see:

U.S. Hits the Debt Ceiling: What Does It All Mean?

Debt Ceiling Deadline Pushed Back: Will the GOP Budge?

Rep. Levin: GOP "Playing With Fire" On Debt Ceiling Vote

Debt Ceiling Vote a "Political Sideshow", Mish Says: Real Issue Is "Govt. Spending Run Amok"

"No Downside" to Not Raising the Debt Ceiling, Says Chris Whalen

Debt Ceiling Debate: The GOP Is "Blackmailing the American People," Sen. Bernie Sanders Says

Debt Ceiling Uncertainty: Big Banks Take Evasive Action, The FT Says

Deep Recession & Financial Chaos: "Very Dark Scenario" If Debt Ceiling Isn't Raised, Zandi Says

Finally, Someone Is Talking Sense On Our Huge Debt And Deficit Problem — President Obama

What If? "Huge Interest Rate Risk" If No Deal on Debt Ceiling, David Walker Says

"Dangerous Precedent" Being Set in Debt Ceiling Debate, Galbraith Says

It's Time to Roll Back Big Government: Rep. Ron Paul Says 'No' to Debt Ceiling Increase