McConnell outlines new proposal on debt ceiling

Senate Minority Leader Mitch McConnell moved Tuesday to head off a potentially disastrous U.S. default by offering President Obama new authority to raise the federal debt limit without cutting government spending.

With debt-reduction talks between the White House and GOP leaders stalled, McConnell (R-Ky.) said his proposal offers a “last-choice option” for meeting an Aug. 2 deadline to raise the legal limit on the national debt. Senior Democrats privately embraced the idea, saying it could offer a detour around the looming crisis.

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The proposal would transform the political dynamics of the debate, placing the entire burden for raising the $14.3 trillion debt limit on Obama. Republican lawmakers would be spared from voting to raise the limit and could shift their campaign for unprecedented spending cuts to the congressional appropriations process, where the risk of stalemate is shutting down the government instead of capsizing the U.S. economy. However, they would lose the approaching deadline as leverage to pursue their cost-cutting agenda.

The proposal is “not my first choice,” McConnell told reporters. But with a bipartisan agreement looking increasingly doubtful, he said, “we’re certainly not going to send a signal to the markets and to the American people that default is an option.”

McConnell’s proposal came as Obama warned that Social Security and disability checks could be delayed next month if the two sides fail to reach an agreement, piling fresh hardship on millions of families and putting new pressure on the sputtering recovery.

“I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue, because there may simply not be the money in the coffers to do it,” Obama said in an interview with CBS News.

The White House reacted cautiously to the McConnell plan. Press secretary Jay Carney said in a statement that Obama is still committed to “seizing this unique opportunity to come to agreement on significant, balanced deficit reduction.”

Publicly, Senate Majority Leader Harry M. Reid (D-Nev.) left the door open to the idea. “I’m willing to look at this,” he told reporters. Privately, Reid has consulted with McConnell about making the proposal more palatable to reluctant Republicans by creating a joint committee to draft an enforceable debt-reduction plan, according to senior sources in both parties. Details are still being worked out, but the new committee would be stocked with Democratic and Republican lawmakers, and their budget-cutting plan could be fast-tracked to a vote in each chamber.

House Minority Leader Nancy Pelosi (D-Calif.) thanked McConnell for offering the plan as the leaders met at the White House on Tuesday afternoon for a third straight day of negotiations, according to a GOP source briefed on the meeting.

House Republicans were more openly skeptical. Aides said it would be extremely difficult to sell the plan to the rank and file, many of whom believe they were sent to Washington to radically reduce the size of government and have vowed for months to use the debt-limit debate to do it.

McConnell was quickly excoriated online by tea party bloggers, with Erick Erickson of the Web site RedState.com blasting the plan as “the Pontius Pilate Pass the Buck Act of 2011.”

Still, with less than three weeks left until the default deadline and no viable alternative in sight, House Speaker John A. Boehner (R-Ohio) declined to shoot it down. “I think everyone realizes there needs to be a backup plan if we can’t come to an agreement,” he told Fox News.

Little progress in meeting

By all accounts, negotiators made little headway during the two-hour session at the White House on Tuesday. Treasury Secretary Timothy F. Geithner opened with a sobering account of the consequences of default. With Ireland and Italy veering closer to their own debt crises, Geithner warned that this is the wrong time for the United States to be testing its luck with world markets, according to a Democratic official, speaking on the condition of anonymity to discuss the closed-door talks.

The two sides then sparred over the advantages of a mid-size deal that would reduce borrowing by roughly $2.4 trillion over the next decade vs. a grander, $4 trillion debt-reduction compromise Obama and Boehner had been trying to forge in private last week.

Since pulling the plug on the deal, Boehner has been largely silent in the meetings, leaving House Majority Leader Eric Cantor (R-Va.) to present details of the House’s position. On Tuesday, people in both parties said, Obama tried to reestablish Boehner’s primacy.

Cantor, who is advocating a smaller deal, at one point demanded that Obama offer the details of his vision for a “grand bargain.”

“Where’s your paper?” he asked angrily.

Obama snapped back: “Frankly, your speaker has it.  Am I dealing with him, or am I dealing with you?”

Boehner spokesman Michael Steel later said that the White House has not supplied Boehner with a detailed plan.

Details of ‘backup plan’

McConnell also gave details of what he called his “backup plan” if the two sides fail to reach an agreement. Under the proposal, Congress would change the rules surrounding the debt limit for the remainder of Obama’s first term.

That measure would create a new legal structure authorizing the president to raise the debt limit by as much as $2.5 trillion in three installments. The first, an increase of $700 billion, would come immediately. The next two, worth $900 billion each, would come this fall and sometime next summer.

On each occasion, Obama would be required to submit to Congress an explicit request for an increase, along with a menu of proposed spending cuts equal to the requested increase. The submission of the president’s first request would automatically raise the debt limit by $100 billion to give the Treasury Department breathing room while Congress considers the request.

Lawmakers would then have 15 days to pass a resolution of disapproval, giving them an opportunity to go on record against raising the debt ceiling. But Obama could veto the resolution, and the debt limit would then rise, providing that at least 34 Democratic senators stood firm in upholding his veto.

McConnell’s strategy makes no provision for spending cuts to be enacted. Aides said lawmakers could pick and choose from the president’s list when they put together appropriations bills in a separate process.

Obama’s responsibility

Sen. Lamar Alexander (R-Tenn.) said the proposal would defuse the extreme tension surrounding the current debt-limit debate and restore its traditional contours.

“Throughout the history of the country when the president has asked for a debt limit, he’s gotten it. I believe the number is about 89 times. His party has given it to him,” Alexander said. “It gives the president 100 percent of the responsibility.”

But the measure’s failure to enforce spending cuts presents a major hurdle in the House, where rank-and-file Republicans on Tuesday threatened to reject even a $4 trillion debt-reduction plan that failed to conform to their demands.

Arriving back at the Capitol after the White House meeting, Cantor declined to comment on the McConnell plan. But, he said, “we are still at a point where nothing can pass the House.”

montgomeryl@washpost.com

kanep@washpost.com

 
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