Republicans and Democrats Splinter Into Bewildering Array of Factions on Debt Ceiling Limit Demands

Tick Tock. Each passing day sends the budget impasse closer to the August 2 deadline. Yet with each passing day, conflicting demands make a compromise even more unlikely.

Please consider Congressional leaders increase pressure on group discussing debt-reduction deal

Congressional leaders from both parties made new and competing demands Wednesday in exchange for their votes to raise the nation’s debt limit, increasing pressure on a bipartisan group attempting to negotiate a debt-reduction deal with the White House.

Top Senate Democrats, led by Majority Leader Harry M. Reid (Nev.), said they have told Vice President Biden, who is leading the talks, that any agreement on raising the legal borrowing limit must include an effort to boost the flagging economic recovery alongside deep spending cuts sought by Republicans.

The Democrats said they would prefer to see new spending on roads, bridges and other transportation projects; new investment in green energy; or additional resources for job training to show that the party is working to create jobs and lower the nation’s 9 percent unemployment rate.

The Democrats’ call came on the same day that conservative advocacy groups asked Republicans to sign a pledge saying that they vow to vote against an increase in the $14.3 trillion debt limit without sharp and immediate spending cuts, new caps on annual spending and an amendment to the Constitution that would require Congress to balance the budget.

“Politicians of all stripes, Democrats and Republicans, have spent this country to the brink of insolvency,” said Sen. Rand Paul (R-Ky.), who said he would not vote to raise the debt ceiling without winning a balanced-budget amendment.

As negotiators race to produce a bipartisan compromise before an Aug. 2 deadline, the proliferation of demands suggests that any deal could face significant obstacles on the road to final passage. In both the House and the Senate, Republicans and Democrats are splintering into a bewildering array of factions and issuing ultimatums that cannot all be met.

In the Senate, for example, a bipartisan group is pushing for a far more ambitious deal to reduce the debt. That group — led by Budget Committee Chairman Kent Conrad (D-N.D.) — is considering withholding its votes for a long-term debt-limit increase unless it sees far more than the $2 trillion in savings that has been the goal of the Biden talks.

Meanwhile, the no-taxes message of the Republican Party was underscored Wednesday by Senate Minority Leader Mitch McConnell (Ky.), who ruled out any revenue increase — even if it came through closing tax loopholes — as part of the talks.

“They couldn’t even get that done when they owned the government. . . . So, look, taxes aren’t going to be raised,” McConnell told reporters at a breakfast held by the Christian Science Monitor.

Irreconcilable Differences

Some Democrats want more spending in return for budget cuts. My math says that makes no sense. Meanwhile, Budget Committee Chairman Kent Conrad (D-N.D.) wants more budget cutting, clearly in conflict with most Democrats.

Count Rand Paul as a "no" vote in any case. I would love to see a balanced budget amendment but that is unlikely to be part of any compromise.

Democrats are willing to accept a payroll tax cut as part of the package, but how would that be paid for? Regardless, the idea is a dumb one. It will not do a damn thing to get businesses to hire anyone. Nor would another repatriation holiday.

Indeed, the latter would probably hurt small businesses because none of them have tax shelters like GE and Google.

Financial Chicken

Armageddon will not happen if the debt ceiling is not raised. Unfortunately, in spite of what appears to be irreconcilable differences, some sort of sorry compromise will be worked out.

Expect Republicans to cave-in with counterproductive tax cut sweeteners in this game of Financial Chicken. I hope I am wrong.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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