US Fiscal: The Short Option

Published on October 10, 2013

Things seem to be moving steadily forward in the direction we outlined earlier in the week (SGH 10/7/13, “US Fiscal: This Week’s Plan”), giving grounds for an ever cautious optimism.

*** Multiple proposals of a short term Continuing Resolution coupled to some variation of an attached debt ceiling extension — even a “clean” one — are percolating up on both the House and Senate sides that look destined to be at the center of the “not a negotiation” meetings at the White House later today. ***

*** We suspect even if a happy smiles announcement of a “breakthrough” doesn’t follow the White House meetings, there is going to be enough progress on both sides to put an agreement to end the shutdown and to extend the debt ceiling into shape by sometime next week. ***

An Assist from the Senate

Late Tuesday night, we had noted House Speaker John Boehner might signal an overture in kind to President Obama’s repeated willingness to consider a short term deal, despite the stern warnings by Senate Majority Leader Harry Reid not to do so. In the end, Boehner went about as far as he could in his defiant reply to President Obama’s press remarks, but nevertheless, movement towards a short term deal was set in motion on both the House side and especially in the Senate.

Indeed, Boehner was seeking and has received an assist from the Senate side to get out from under the impasse his immune-to-reason Tea Party dissidents put him in. Through most of yesterday, a handful of Republican centrists were putting a bit more flesh on a short term CR and debt ceiling extension that included a handful of policy proposals like the medical device tax repeal. The most recent version promoted by Maine’s Republican Senator Susan Collins builds on ideas earlier in the week offered by Ohio Republican Senator Rob Portman and has been given the blessing of Senate Minority Leader Mitch McConnell.

Senate Majority Leader Reid is for now rejecting the idea in order to keep his one year debt ceiling extension bill intact. But Republican Senate unity is now likely to coalesce around their own short term proposals, so Reid and the Democrats are going to have to find a formula to make the two proposals work if Reid is to maintain Senate momentum and keep up the pressure on Boehner and the House Republicans.

And indeed, the Republican Senate proposals are being mirrored on the House side by the proposal being put forward by Budget Committee Chairman Paul Ryan, who has finally emerged from the back room.

His proposal is likewise aiming at a short term CR to provide more time to nail down agreement on the broader budget issues — including some version of a trading away the sequester on discretionary spending for medium term entitlement reforms, which has long been a GOP core fiscal objective. It would also include a debt ceiling extension, but whose duration could be extended by the size and scope of the deficit reductions through the entitlement reforms.

Interestingly, House Democrat Minority Leader Nancy Pelosi has signaled the House Democrats are also willing to consider the short term options, albeit warily for fear of cuts that go too deep into the entitlement programs. But they too are edging towards the short term deal in something of a “fill in the details later” stance.

All this is suddenly turning Reid into the outside man, for even as President Obama tries his best to support Reid in the take-no- prisoners no negotiations stance, the President is so clearly wanting to get a deal cut and done, and the sooner the better.

So we do think the short term option is certain to make its way into the “not a negotiation” negotiating meetings later today at the White House.

A Version of a “Forcing Mechanism?”

The “big breakthrough” — we keeping thinking of that song by the Doors — is unlikely to be announced with great fanfare later today, but we do think there will be clearer signs of movement that will even warrant a sense of optimism.

We do think, as we noted at the end of a report earlier this week (SGH 10/8/2013, “US Fiscal: Senate Pincer Squeeze”), that one likely route to marry Reid’s demands for a far longer, one year-plus debt ceiling extension with the focus on short term CR is likely to be some form of the “forcing mechanism” in which a one year debt ceiling could revert back to the shorter duration of the CR if no further progress is made on the FY2014 and entitlement reforms being negotiated with the time given through the short dated CR.

Most of those on the Hill don’t like the idea because it smacks too much of the similar forcing mechanism of the Super Committee that led to the loathed sequester, and look where that got them. But the point is we think it may be where they end up even if it is definitely not where they want to start.

And the assumptions of progress almost totally hinges on the House Republican leadership finally bringing round enough of the ever distrustful Tea Party mutineers that Speaker Boehner can get near enough to his 217 votes to begin moving the necessary CR and debt ceiling bills to a floor vote. We think the House GOP is nearly there, and key to their success may lie with Ryan’s ability to convince enough of the Tea Party faction save for the core “suicide caucus” that their Obamacare obessions can be folded into the entitlement reform effort on the next round of the fiscal wars.

That means the sequence of moving from crisis to crisis is hardly over, but this one is pointing to resolution, but probably taking well into next week

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