US Fiscal: A Deal in Sight

Published on October 11, 2013

This morning, that Irish joke keeps coming to mind about asking for directions and being told well, I wouldn’t start from here.

*** It will not be pretty to get there from here, as there is at least one more nasty round of political twists and turns to be had over the weekend. But we do think with no small degree of wariness if not weariness, that by Sunday night or Monday, the final shape of a deal to end the shutdown and to extend the debt ceiling will be in place, with passage to end the crisis coming perhaps by Monday but no later than Wednesday. ***

Here is how things stand this morning:

Speaker John Boehner’s strategy we outlined yesterday afternoon (SGH 10/10/13, “US Fiscal: Another Twist, to the Same End”) — to go first with a short debt ceiling bill and punt the Continuing Resolution over to the Senate — is stalled and is highly unlikely to go to a House vote.

Instead, the House Republican leadership put another proposal to the White House late last night and is waiting for a response. It includes the CR as well as the debt ceiling, though is constructed with sequenced end dates on the short term debt ceiling extension and CR. That is intended to give them some negotiating leverage on the fiscal policy issues of the sequester trade for entitlement reforms they have sought since last spring.

For most of today, the leadership will be huddling with its members to pull together a final version of the combined short term CR and debt ceiling extension. There could be one last round through the weekend to include amendments to reflect a last gasp of Tea Party demands on Obamacare and to probably incorporate some revisions to reflect the White House response later today.

But the final version of the combined bills is likely to include only minimal amendments, if any, on the Obamacare defunding front. Whatever is needed to get the combined CR and debt bill passed will be put to a floor vote, even if it is written on the assumption of Democratic votes to pass.

Perhaps it should be given to Speaker Boehner that his almost Herculean efforts to work with his Tea Party faction to punt the CR battle to the Senate at least succeeded in cajoling his Senate counterparts to push forward and unify around their own compromise proposals.

For they look now to be so rapidly coalescing around the proposals pitched by Maine’s Susan Collins — which will also include some elements of a CR as well as a debt ceiling extension — that it is highly likely to mean Senate Majority Leader Harry Reid will back down from his own one year plus standalone debt ceiling bill.

Although Reid is threatening to push ahead with a cloture vote on his debt ceiling bill, he will be short of the six Republican votes he needs for it to go anywhere. That means the Senate Majority Leader will either now or by Sunday, incorporate Republican “asks” on a CR in order to get a vote passed in the Senate.

The “Deal” May Emerge Monday Morning

In other words, we think it highly likely that by Sunday night or Monday, after all the other legislative last twists and turns to maximize political advantage and positioning has been exhausted, there will be two rival bills either passed or nearly passed in both the Senate and House.

More importantly, they will look far more similar than different in the cold light of Monday morning when the market pressure for a deal with be bearing down on Capitol Hill.

How those two bills get reconciled — and reconciled quickly — is, frankly, unclear to us at this point. In substance, it will be the Republicans who are giving in, albeit on the Obamacare issues they never really wanted to fight in the first place. President Obama and the Democrats will have undertaken what they said they would not do, negotiating a deal while the government is still shutdown and a threat of default.

But we do now believe that the final version of a combined CR and debt extension bill will clear the Senate and likewise be passed in the House in a straight up or down vote. Exactly when is anyone’s guess, probably sometime on Monday; but depending on whether both sides need one more go even then to exhaust the demands on their fringes, it could happen Tuesday or Wednesday, but happen it will.

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