43 Senate Republicans Sign Letter Opposing Reid’s Plan, Impasse Continues; Exchange with a Reader Over Tax Hikes

The impasse continues. Bloomberg reports Senate Republicans Will Reject Reid’s Debt Plan.

Senate Republicans will block Majority Leader Harry Reid’s debt-limit plan this weekend, Minority Leader Mitch McConnell said as a partisan impasse over deficit reduction continued days before a threatened default.

Reid’s bill “will not pass,” McConnell said today as the Senate resumed debate on the measure. He said 43 Senate Republicans signed a letter opposing Reid’s plan.

Reid, a Nevada Democrat, who offered modifications to a Democratic plan that he said are designed to attract Republican support, has accused Republican leaders of rebuffing his efforts to negotiate.

Reid said when he attempted to engage McConnell, a Kentucky Republican, in talks, “we had no one to negotiate with.” The majority leader plans a 3 p.m. news conference today.

Shortly after the Senate rejected Boehner’s plan, the House scheduled a preemptive vote for today on Reid’s proposal -- planning to defeat it even before the Senate takes it up. The House, back in session, plans to vote at about 2 or 2:30 p.m.

The Senate plans a procedural vote on Reid’s plan at about 1 a.m. tomorrow. A Senate vote on the plan then could be held at about 7 a.m. on Aug. 1, allowing the measure to return to the House before the Aug. 2 deadline.

The new plan would yield debt savings of $2.2 trillion -- about the same as the total borrowing authority extended -- and call on a 12-member bipartisan congressional committee to draft legislation to lower the deficit to 3 percent or less of gross domestic product.

Senator Scott Brown, a Massachusetts Republican, said his staff has been working with Reid’s to put “more teeth” in the joint committee plan.

Senator Lisa Murkowski, an Alaska Republican, said “absolutist” lawmakers aligned with the Tea Party have put the U.S. “on the brink.”

“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills -- we do -- but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said earlier yesterday at the White House.

Senate Budget Committee Chairman Kent Conrad expressed confidence that lawmakers will head off a default.

Once again, and as recently noted in Great Divide; Boehner Rams Through Bill that Senate Quickly Rejects; Obama's Idle Threats and Fear Mongering the idea of a default is complete silliness.

Nonetheless, expect both parties and president Obama to crow when a gaseous plan is passed that will allegedly have "saved the US from default"

Fear Mongering

Caroline Baum repeated my message on Friday in Obama, Geithner May Regret Threats of Default

Instead of dangling the default threat every chance they get, Obama and Geithner should be telling the world that the U.S. has every intention, and the resources, to meet its debt obligations. They should shout it from the rooftops, put a banner on the Treasury Direct website, and use the Sunday talk shows to reassure investors, not frighten them.

Toothless Details

Senator Scott Brown wants to put “more teeth” in the joint committee plan. One tooth would suffice because the plan is currently toothless.

Guaranteed Vote is Meaningless

This whole idea of McConnell's about abdicating responsibility to a "powerful" committed with a "guaranteed" vote on proposals is of course ridiculous.

Look at the rejection of Reid's plans in the Senate and House, and the Rejection of the Boehner's plan in the Senate. Look at the whining of Nancy Pelosi about cuts to Medicare and Medicaid, and Social Security.

So what does the "guaranteed vote" do but put lipstick on a turkey?

The "Gang-of-Six" put together a $4 trillion proposal that was a down payment on attacking the deficit and that could not pass. Somehow a "Gang-of-Twelve" is going to do better. Please be serious.

The more people you put into a mix, the harder it will be to get an agreement. Even if by some miracle an agreement from the "Gang-of-Twelve" is reached, you still have a hurdle of passing the "guaranteed vote" in the House and Senate.

This "Gang-of-Twelve" idea is nothing but a plan to put off doing anything about the deficit until after the election. Republicans and Democrats will both have wimped out if that is the "solution".

Exchange with Reader "Grant"

Reader "Grant" responded to my post, and we had the following exchange.

Grant: Why you take Obama at his word when he says he was willing to make "hard choices" continues to elude me, especially given his track record of reneging on pretty much every campaign promise he made (wars, transparency, civil liberties, indefinite detentions, etc.) still mystifies me.

Mish: Nowhere did I say the Democrats would have accepted. Indeed I think and have stated several times before they wouldn't. However, the offer would put Republicans in a No-Lose situation.

Would Democrats have gone along? If not, Obama and the Democrats would have been seen as the deal-killers, not Republicans. If the Democrats accepted, it would have been well worth it.

Republicans win if the deal was accepted, they win if the deal was rejected.

Grant: Except this scenario already played out. Who got the blame? Not Obama. Not the Democrats. Boehner and the GOP did.

Mish: And why is that Grant?

The answer is Republicans would not accept any tax hikes. My deal allowed them.

Some Things Far More Important than Trivial Tax Hikes

Some things are far more important than concession on closing a few loopholes to get $1 trillion in tax hikes. President Obama repeatedly said he was willing to make "hard choices". Republicans could easily have put him to the test.

My proposal was to challenge Obama to accept the tax hikes he asked for on a 3-1 ratio of cuts-to-to hikes in return for these three things Republicans want.

1. Scrapping Davis Bacon
2. Ending collective bargaining of public unions
3. National right-to-work legislation

I would gladly trade $1 trillion in tax hikes for those badly needed measures. Would Democrats have accepted? Probably not but one never knows unless one tries. However, either way the Republicans would have won.

Had Obama backed down it would have been his fault. Had he accepted the bargain would have well worth it.

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