Deal or No Deal? ABC Says Tentative Deal to Raise Debt Ceiling Reached; White House Aid Denies Report; Does it Matter?

I was just getting ready to make a post titled After "Angry Exchange" Reid Postpones Senate Vote on His Plan; Majority Leader Conrad Hints at Raising Revenue Measures; Compromise in the Air.

Just before I hit enter on posting, word came that a deal was reached. I will continue with my original post (so that you can see sausage in the making) followed by the a description of the alleged yet White House denied deal.

Hints Compromise Amid Feud

Talk of compromise is in the air. House Majority Leader Conrad is surprisingly hinting at revenue raising measures. Meanwhile Senator Kyle suggests more progress is being made than it seems, even though Senator Reid postpones a vote on his proposal after an "angry exchange" with Republicans.

This negotiation smacks of a "don't blame me" effort from both parties that will put off all hard choices until later.

Reid Postpones Vote After Angry Exchange

The New York Times reports Hint of Deal as Congress Wrangles Over Debt Crisis

After a tense day of Congressional floor fights and angry exchanges, Senator Harry Reid, the majority leader, called off a planned showdown vote set for after midnight, but said he would convene the Senate at noon on Sunday for a vote an hour later. He said he wanted to give the new negotiations a chance to produce a plan to raise the federal debt limit in exchange for spending cuts and the creation of a new Congressional committee that would try to assemble a long-range deficit-cutting proposal.

The first indication off a softening of the hard lines that have marked weeks of partisan wrangling over the debt limit came in the afternoon when the two leading Congressional Republicans announced that they had reopened fiscal talks with the White House and expected their last-ditch drive to produce a compromise.

Following the House’s sharp rejection of a proposal by Mr. Reid to raise the debt limit and cut spending, Senator Mitch McConnell of Kentucky, the Republican leader and a linchpin in efforts to reach a deal, said he and Speaker John A. Boehner were “now fully engaged” in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.

The deal they were discussing, this person said, resembled the bill that Mr. Boehner won approval for in the House on Friday more than it did the one that Mr. Reid had proposed.

It would immediately raise the debt ceiling by about $1 trillion, accompanied by a similar range of spending cuts, and set up a new bipartisan committee that would work to find deeper cuts in exchange for a second debt limit increase that would extend through the 2012 election.

A failure of the new committee to win enactment of its proposal could then set off automatic spending cuts across the board, including to entitlement programs.

After Mr. McConnell sounded a hopeful note, Mr. Reid called members of the Senate to the floor to hear him dispute the claims by his Republican counterpart and accuse Republicans of failing to enter into serious negotiations even as the Treasury risked running out of money to pay all its bills after Tuesday.

“The speaker and Republican leader should know that merely saying you have an agreement in front of television cameras doesn’t make it so,” Mr. Reid said after returning from a visit to the White House with Representative Nancy Pelosi of California, the Democratic leader in the House.

The Treasury Department calculates that the government will exhaust its ability to borrow money at the end of Tuesday, forcing the government to pay its bills from a dwindling pile of cash. Independent analysts estimate the government has enough money on hand to pay all of its bills for another week, more or less, before it starts missing payments.

That sounds like more feud than compromise so let's take a look at the viewpoint on Bloomberg posted roughly three hours later at 10:41.

Majority Leader Conrad Hints at Raising Revenue Measures

Bloomberg reports Senate Postpones Vote on Reid Debt Plan as Talks Continue

“There are negotiations going on at the White House now,” Reid said on the Senate floor, and those involved in the talks wanted more time before a vote was held on whether the Senate moved ahead with his measure.

A planned 1 a.m. vote was pushed forward 12 hours, to 1 p.m. Reid said the Senate would convene at noon tomorrow.

“There are many elements to be finalized and there is still a distance to go before any arrangement can be completed,” Reid said of the talks involving Obama and congressional leaders.

Reid’s plan, which the House symbolically rejected earlier today, would lift the $14.3 trillion debt limit by $2.4 trillion.

Conrad, a North Dakota Democrat who is chairman of the Senate Budget Committee, said a few bipartisan groups of senators have drafted three alternative plans to supplement a proposal offered by Reid. The Republican-run House today defeated Reid’s plan.

The alternative plans include possible new revenue as part of their formula for cutting the federal deficit, according to Conrad. Republican leaders have said from the start of negotiations that a net increase in tax revenue is unacceptable.

“All three involve the possibility of revenue,” Conrad said. McConnell wasn’t among the Republicans involved in the alternative bipartisan plans, according to Conrad.

White House, Republicans Strike Tentative Deal To Raise Debt Ceiling

What follows now is breaking news of a deal. Please consider White House, Republicans Strike Tentative Deal To Raise Debt Ceiling

ABC News' Jonathan Karl reports:

ABC News has learned that Republicans and the White House have struck a tenative deal to raise the debt ceiling before the Aug. 2 deadline. It's not done yet, but here is the framework of the tentative deal they have worked out, according to a source familiar with the negotiations:

• Debt ceiling increase of up to $2.8 trillion
• Spending cuts of roughly $1 trillion
• Vote on the Balanced Budget Amendment
• Special committee to recommend cuts of $1.8 trillion (or whatever it takes to add up to the total of the debt ceiling increase)
• Committee must make recommendations before Thanksgiving recess
• If Congress does not approve those cuts by late December, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare.

A senior White House aide pushed back against the idea that a deal was struck.

"Talks continue, but there is no deal to report," the aide said.

Deal or No Deal?

Even if there is a deal, it is no bargain to anyone. A vote on a balance budget will not pass so why bother other than for political finger-pointing purposes?

$1 trillion in presumably back-loaded spending cuts is a farce.

The special committee will not accomplish a thing. Even if by some miracle it achieves another $1.8 trillion in spending cuts, that still only brings the total to a lousy $2.8 trillion, or $280 billion a year in a $1.4 trillion deficit.

This is not even a reasonable down payment on what needs to happen.

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