The public mood will soon force a deal on the debt: Can Republicans force progress for America while accepting the least bad option?

Ryan Streeter
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Yesterday showed the world where America stands in its debt negotiations: a state of disarray.

The House passed its Cut, Cap and Balance bill 234-190 just as the newly reconstituted Gang of Six in the Senate put forward a plan to cut $3.7 trillion over ten years through a mixture of tax and spending reforms.

Because the Gang of Six’s plan “increases revenues while failing to seriously address exploding federal spending on health care,” as Paul Ryan points out in a statement, it stands no chance of finding any support among House Republicans.

So, in the past week, we have the House Cut, Cap, and Balance, the Coburn $9 trillion Back in Black deficit plan, the Gang of Six plan, and the McConnell plan.

The panoply of ideas at the 11^th hour suggests not agreement on the outline of a deal, but just how much the parties involved disagree. Two things will force a simpler solution that no one likes: a negative reaction in the markets and increasing public dissatisfaction with Washington.

On the latter point the new WSJ-NBC poll shows the American public clearly shifting toward wanting a deal to avoid default. In the past two months support for not raising the debt ceiling has dropped from 46% to 31%, while support for an increase has gone from 16% to 38%. While 38% is low, it is a plurality, and the percentage of people who say they are unsure has narrowed. The trend is unmistakable.

And while a plurality of Republicans and 58% of Tea Party supporters reinforce House Republicans’ resolve by opposing all tax increases as a part of a deal, here are some warning signs for the GOP from the poll:

• Independents clearly track with the public at large, not Republicans, on the revenue side of a deal. That is, 62% of Americans, and 61% of independents, said the GOP should agree on some tax increases as part of a deal. Since last fall's election, independents have sided with the GOP more than Democrats on spending cuts. Republicans risk losing their support by not coming to a deal.

• A plurality of Tea Party supporters, 47%, say that failing to raise the debt ceiling would be a problem. That tracks with the percentage of Republicans who feel the same way. The point is that as the deadline draws near, the public is more worried – probably because they see a political class completely hamstrung in the face of a default.

• People whose economic situation has worsened are especially worried. Nearly two-thirds of those who have taken a turn for the worse are worried that a default will shake the economy. Republicans need to understand that the debt deal and economic anxiety are tied together. It's unclear that the public will hold Obama more responsible for a broken deal's effect on the economy than Republicans.

The GOP is clearly up against a wall: public support for “purity” is dwindling, and it’s unclear how patient the markets will be. In terms of the best way forward, lawmakers need to agree on a deal that includes these points:

• The deal needs to demonstrate that it can get the nation’s debt back to under 70% of GDP in the next decade. For the ten years before Obama was elected, the debt averaged between 60 and 65% of GDP and has skyrocketed since he took office. The deal needs to show markets that this trend is reversible. To get to this goal would mean serious cuts, which the following points address.

• The deal needs to show it pulls savings from entitlement reform. Making Social Security solvent is looking more and more doable in a bipartisan way. But the deal also has to show resolve on Medicare with some real savings, since everyone knows this is our long-term debt driver.

• The deal needs to show that America knows how to cut. It has to find its savings primarily from serious cuts to discretionary spending and entitlements. This will be hard enough for Democrats to swallow. Including some reasonable defense cuts will be hard for Republicans to swallow. Both will have to happen if there is to be a deal.

• Revenue of some kind will need to be in the deal, if there is to be a deal. Tax increases are a non-starter, but eliminating tax breaks and loopholes don’t have to be. A reworking of House Republicans’ taxpayer pledge would allow this to happen, and it would be the best of the worst options.

Without these points, there can’t be much of a deal. And for such a deal, the Coburn deficit plan provides the best outline.

But if we can’t come to a deal, that leaves us with the McConnell plan. So the question will be which of the unappealing options will House Republicans eventually be forced to choose.

Comments

[Ricardo's Ghost]

"Tax increases are a non-starter"

Still not getting it