President Obama is hailing the new plan from the Senate's Gang of Six to cut the deficit by $3.7 trillion, raise the debt ceiling and save the U.S. from going into default. The president's hopes immediately run into obstacles. First, there are serious questions about whether the very general framework of the Gang of Six's plan can be turned into legislation that passes the House and Senate before the August 2 deadline.
Second, there's the reality of entrenched Republican opposition to any increase in the debt ceiling. This comes from what Rachel described last night as the "Let's burn the whole thing down" caucus. The threat that this caucus would intentionally let America default on its debt and tank the economy has become a tremendous weapon for Republicans because it is so scary.
Supposedly somewhere closer to the middle is Congressman Paul Ryan (R-Wisconsin), who wants what he has always wanted: Big cuts in Medicare. The Republicans' esteemed budget guru, Mr. Ryan released a critique of the Gang of Six plan in which he says "it increases revenues while failing to seriously address exploding federal spending on health care." That leaves the far-right Republicans still opposed because they're opposed, and the Ryan moderates ready to insisting on large and unpopular cuts in programs like Medicare (and maybe Social Security).
It's not clear how much the Gang of Six would lop off healthcare spending. The Center on Budget and Policy Priorities says they're carrying two numbers for now -- the larger one, backed by Senator Tom Coburn (R-Oklahoma) would cut $500 billion. What's more, the Gang of Six plan calls for $1 trillion in new revenue; remember that Republicans have opposed new revenue since rejecting their own earlier call for it. Despite the headline, the amount of new revenue is not clear. It depends on whether the Bush tax cuts are made permanent for everyone, including those making more than $250,000 a year.
Factor all of that in, and you can see why a deal is hard to reach in a hurry. Last night, Yale Law professor Jack Balkin walked us through President Obama's 14th Amendment powers to raise the debt ceiling on his own if time runs out.
"He can't do it until there's an absolute, dire emergency. He has to act with authorization. But sometimes, if catastrophe is occurring and emergency is occurring, there's no time to act, the president has to act to save the country. In that case, he draws upon his emergency power. But we really don't want a situation in which the president does this before there's absolutely no other alternative, because that's really the kind of argument that George W. Bush made during his first term in office. We have to wait until the very last minute."
The stock market surged after President Obama welcomed the Gang of Six proposal, a sign that Wall Street thinks it could be good for the economy. Investors don't like that "absolute, dire emergency thing" half so much.