To the extent that there’s anything routine about the federal government’s fiscal state with just 14 days until the Treasury runs out of cash, the events on Capitol Hill appeared to fall into a pattern. The House today will pass the “Cut, Cap and Balance Act,” which would cap spending below the historical level and force a balanced budget amendment before increasing the debt limit. The Senate will reject it. Then the Senate will go forward on the McConnell-Reid plan to raise the debt limit and attach some spending cuts along with Catfood Commission II.
That was the theoretical plan, anyway. But plenty of conservatives in the House are not aboard, although it’s unclear that all of them would be needed. I’m not totally concerned about that. But the re-emergence of the Gang of Six, now Five Guys in the absence of Tom Coburn, ought to worry people.
More than half the Senate was convened early Tuesday morning by Sen. Mark Warner (D-Va.) for a briefing on a deficit-reduction plan being negotiated by group of five senators from both parties once known as the “Gang of Six.” [...]
Senators were effusive about the plan after the briefing meeting, calling it “great” and saying it would likely gain support from a majority of the Senate.
“We’ve gone from a Gang of Six to a mob of 50,” said Sen. Joe Manchin (D-W.V.) after the meeting.
More than half of the Senate arrived to hear about the debt-reduction plan Tuesday morning, and the general atmosphere was positive, said Sen. Susan Collins (R-Maine) [...]
“They have done so much work that a lot of the issues have been gone through, and they’re in the midst of drafting statutory language,” Collins said. “I believe it should be considered in conjunction with the debt ceiling plan.”
And that’s the problem. The Gang of Six will probably become the template for Catfood Commission II. We’ll see if that can fit in a sweet spot between Democrats and Republicans to find 218 votes in the House. But Collins wants to put it into motion now, two weeks before default. That’s functionally impossible, and it puts competing plans on the table with a short window for passage. Actually there are more plans than this, as Tom Coburn, the Senator who walked away from the Gang of Six, unveiled awhopping $9 trillion deficit reduction package yesterday.
If you need to get sixty votes, the last thing you need are competing plans, none of which can capture the necessary threshold. Now you can see Collins or others holding out for the Gang of Six, which would lose votes on the other side of the ledger. And now that the Gang of Six exists, maybe McConnell-Reid can’t find the votes as Senators peel off. This is precisely what you don’t want to happen in the middle of a high-stakes negotiation.
I’d say that default, seen as more remote once McConnell-Reid kicked into gear, has now become a much more distinct possibility.
UPDATE: This is to say nothing of the content of the grand bargain, which is basically Bowles-Simpson with a small rightward slant, and which would cut safety programs significantly.
Roughly half of the Senate’s 100 members sat through an hour-long briefing on the plan, which was designed by a group of lawmakers known as the “Gang of Six” and would cut spending, overhaul entitlement programs such as Medicare, rework the tax code, and make significant changes to Social Security.
A key question remains whether the plan might receive any support in the House, where Republicans have strongly resisted any new proposal that could bring in new taxes. The gang’s plan would bring in $1 trillion in new tax revenue over 10 years by narrowing several tax breaks. But Mr. Conrad said it would also lower tax rates and end the alternative minimum tax. He said the combination of tax changes would be viewed by budget experts as a $1.5 trillion tax cut.
“I think the vibe in the room was very positive,” said Sen. Kelly Ayotte (R., N.H.), who attended the meeting. “My first impression is that this is a very credible plan.”
The $3.7 trillion deficit-reduction plan would come from roughly 74% spending cuts and 26% new taxes, Mr. Conrad said.
My favorite part is this: “Direct key congressional committees to find specific levels of deficit-reduction within their areas of jurisdiction. If the committees fail, then a group of senators—five Democrats and five Republicans—will be able to confer and offer their own deficit-reduction plan as a replacement.” Hey, just kick it over to 10 Senators to make decisions for the whole country!
…Tim Fernholz grabs an executive summary of the proposal. More later.