Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

It's about what I predicted. Remember that a lot of people don't really get what's going on -- they know that there is some big debt crisis but they are not following the details of it, and it's confusing.

This was an attempt to make people aware of what is going on and what the stakes are, so that they can in turn influence their legislators (directly or via polls) to make a deal more likely.

But through the morning we've also had repeated reports of overwhelmed congressional phone switchboards and websites. Seemingly email boxes too.

Speaking to a crowd of union workers on Capitol Hill today, House Minority Leader Nancy Pelosi unloaded on Republican plans to lower the deficit through deep cuts to government services in exchange for raising the debt ceiling. Frustrations are running high in Congress with the default deadline rapidly approaching, and Pelosi spoke with a fire that suggested the endless debate over the debt ceiling is taking its toll on her patience.

"This isn't just about them saying we should reduce the deficit," she said, adding: "This is an excuse. The budget deficit is an excuse for the Republicans to undermine government plain and simple. They don't just want to make cuts, they want to destroy. They want to destroy food safety, clean air, clean water, the department of education. They want to destroy your rights."

CBPP Statement: July 25, 2011
Statement: Robert Greenstein, President, on House Speaker Boehner’s New Budget Proposal

House Speaker John Boehner’s new budget proposal would require deep cuts in the years immediately ahead in Social Security and Medicare benefits for current retirees, the repeal of health reform’s coverage expansions, or wholesale evisceration of basic assistance programs for vulnerable Americans.

The plan is, thus, tantamount to a form of “class warfare.” If enacted, it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.

This may sound hyperbolic, but it is not. The mathematics are inexorable.

* The Boehner plan calls for large cuts in discretionary programs of $1.2 trillion over the next ten years, and it then requires additional cuts that are large enough to produce another $1.8 trillion in savings to be enacted by the end of the year as a condition for raising the debt ceiling again at that time.
* The Boehner plan contains no tax increases. The entire $1.8 trillion would come from budget cuts.
* Because the first round of cuts will hit discretionary programs hard — through austere discretionary caps that Congress will struggle to meet — discretionary cuts will largely or entirely be off the table when it comes to achieving the further $1.8 trillion in budget reductions.
* As a result, virtually all of that $1.8 trillion would come from entitlement programs. They would have to be cut more than $1.5 trillion in order to produce sufficient interest savings to achieve $1.8 trillion in total savings.
* To secure $1.5 trillion in entitlement savings over the next ten years would require draconian policy changes. Policymakers would essentially have three choices: 1) cut Social Security and Medicare benefits heavily for current retirees, something that all budget plans from both parties (including House Budget Committee Chairman Paul Ryan’s plan) have ruled out; 2) repeal the Affordable Care Act’s coverage expansions while retaining its measures that cut Medicare payments and raise tax revenues, even though Republicans seek to repeal many of those measures as well; or 3) eviscerate the safety net for low-income children, parents, senior citizens, and people with disabilities. There is no other plausible way to get $1.5 trillion in entitlement cuts in the next ten years.
* The evidence for this conclusion is abundant.
o The “Gang of Six” plan, with its very tough and controversial entitlement cuts, contains total entitlement reductions of $640 to $760 billion over the next ten years not counting Social Security, and $755 billion to $875 billion including Social Security. (That’s before netting out $300 billion in entitlement costs that the plan includes for a permanent fix to the scheduled cuts in Medicare physician payments that Congress regularly cancels; with these costs netted out, the Gang of Six entitlement savings come to $455 to $575 billion.)
o The budget deal between President Obama and Speaker Boehner that fell apart last Friday, which included cuts in Social Security cost-of-living adjustments and Medicare benefits as well as an increase in the Medicare eligibility age, contained total entitlement cuts of $650 billion (under the last Obama offer) to $700 billion (under the last Boehner offer).
o The Ryan budget that the House passed in April contained no savings in Social Security over the next ten years and $279 billion in Medicare cuts.

To be sure, the House-passed Ryan budget included much larger overall entitlement cuts over the next 10 years. But that was largely because it eviscerated the safety net and repealed health reform’s coverage expansions. The Ryan plan included cuts in Medicaid and health reform of a remarkable $2.2 trillion, from severely slashing Medicaid and killing health reform’s coverage expansions. The Ryan plan also included stunning cuts of $127 billion in the SNAP program (formerly known as food stamps) and $126 billion in Pell Grants and other student financial assistance.

That House Republicans would likely seek to reach the Boehner budget’s $1.8 trillion target in substantial part by cutting programs for the poorest and most vulnerable Americans is given strong credence by the “Cut, Cap, and Balance” bill that the House recently approved. That bill would establish global spending caps and enforce them with across-the-board budget cuts —exempting Medicare and Social Security from the across-the-board cuts while subjecting programs for the poor to the across-the-board axe. This would turn a quarter century of bipartisan budget legislation on its head; starting with the 1985 Gramm-Rudman-Hollings law, all federal laws of the last 26 years that have set budget targets enforced by across-the-board cuts have exempted the core assistance programs for the poor from those cuts while including Medicare among programs subject to the cuts. This component of the “Cut, Cap, and Balance” bill strongly suggests that, especially in the face of an approaching election, House Republicans looking for entitlement cuts would heavily target means-tested programs for people of lesser means (and less political power).

In short, the Boehner plan would force policymakers to choose among cutting the incomes and health benefits of ordinary retirees, repealing the guts of health reform and leaving an estimated 34 million more Americans uninsured, and savaging the safety net for the poor. It would do so even as it shielded all tax breaks, including the many lucrative tax breaks for the wealthiest and most powerful individuals and corporations.

President Obama has said that, while we must reduce looming deficits, we must take a balanced approach. The Boehner proposal badly fails this test of basic decency. The President should veto the bill if it reaches his desk. Congress should find a fairer, more decent way to avoid a default.

Posted at 12:42 PM ET, 07/26/2011
Dems plot the endgame in debt limit fight
By Greg Sargent

So now what? Now that Dems and Republicans have unveiled competing plans for the way forward — and now that both sides have dug in — what happens next?

Here’s the game plan, as seen by Senate Dem aides: The next move is to sit tight and wait for the House to vote on Boehner's proposal. The idea is that with mounting conservative opposition, it could very well be defeated. If the Boehner plan goes down in the House, that would represent a serious blow to Boehner’s leadership, weakening his hand in negotiations.

“The Senate will wait to act until we see if Speaker Boehner is able to pass a bill in the House,” a senior Senate Democratic aide says. “At the moment that’s an open question.”

It’s unclear as of yet where most Tea Partyers will come down on the Boehner proposal, but House conservatives are privately expressing serious reservation about the plan, arguing that it doesn’t cut spending enough, and the Republican Study Committee is dismissing Boehner’s plan as not “a real solution.” Dems hope that if conservatives do sink Boehner’s plan, it will reveal clearly that Boehner does need Democratic votes to get anything passed.

At that point, the Senate would then pass Harry Reid’s proposal, and then kick it over to the House, which would increase pressure on Boehner to try to get it passed, since he was unable to pass his own plan.

The second alternative possibility being gamed out by Senate Dems would take place if the Boehner plan does manage to sneak through the House. Aides say Dems would then vote it down in the Senate. And here’s where it gets even more interesting.

Senate Dem aides say they would then use Boehner’s bill — which passed the House but died in the Senate — to expedidate their own proposal. Here’s how. They would use the “shell” of the Boehner bill as a vehicle to pass Harry Reid’s proposal, because for various procedural reasons House messages get expedited consideration. Senate Dems would vote to “amend” Boehner’s bill by replacing it completely with Reid’s proposal — which the Senate could then pass more quickly than they otherwise could.

After that, Reid’s proposal — having passed the Senate — would then get kicked back to the House. Having proved that Boehner’s plan can’t pass the Senate, Democrats would in effect be giving House Republicans a choice: Either pass the Reid proposal, or take the blame for default and the economic calamity that ensues.

That’s the current Dem game plan, at any rate. And while the best laid plans often go astray — particularly in the alternate universe known as the United States Congress — the brinkmanship is only going to get even more intense over the next few days.

UPDATE: One other key point. The idea is that if the Boehner plan fails in the House, the pressure will increase on a few Senate Republicans to support Reid’s plan, making it possible to pass the Senate, because the alternative is default and Republicans will want to avoid blame for economic calamity. Keep in mind that Mitch McConnell has long said the debt ceiling must be raised, and has suggested the GOP must find a way for avoiding blame for failure to hike it.

By Greg Sargent | 12:42 PM ET, 07/26/2011

It is all very fluid, Cyclo, but I think the flaw in the article you cited is that the Reid bill will need 60 votes to be approved in the Senate. The Dems control that chamber 53-47 but there could be a couple of defections from their side. In any event, 7-10 Repubs would be needed. I can't see that happening.

In related news,

Obama's admin released a note today saying that he would veto Boehner's bill if it came to his desk.

Now the high-stakes gambles REALLY begin.... I wonder if the prez would invoke the 14th amendment after all if things get to that point.

Cycloptichorn

WASHINGTON/LONDON (Reuters) - The United States will lose its top-notch AAA credit rating from at least one major rating agency, according to a Reuters poll that also found wrangling over the debt ceiling has already damaged the economy.

A small majority of economists -- 30 out of 53 -- surveyed over the past two days said the United States will lose its AAA credit rating from one of the three big ratings agencies -- Standard & Poor's, Moody's or Fitch.

Respondents saw a 20 percent chance of a new recession over the next year, a prospect that some economists say has been compounded by the acrimonious political fight over what is normally a procedural legislative vote on the debt.

Lawmakers have one week left to hash out a deficit-cutting plan without which Republicans in Congress have said they will not raise the legal $14.3 trillion debt limit, risking a potentially devastating government debt default in August.

"We believe that Congress will act with an 11th hour deal to raise the debt ceiling. However, the risk of that deal failing increases with each passing day," said Guy LeBas, director at Janney Capital Markets.

"I would say that the chance of a U.S. ratings downgrade is now more likely than not."

Economists still see the probability of an outright default on U.S. Treasury bonds as remote -- 5 percent on median. http://link.reuters.com/nyc82s