James Pethokoukis

Politics and policy from inside Washington

A brief chat with Rep. Jim Jordan

Jul 22, 2011 21:27 UTC

Any good wrestler will tell you that the key to success is knowing a limited number of moves very well — not trying to mastery every counter or attack in the book. Rep. Jim Jordan, chair of the conservative Republican Study Committee, was a champion college grappler who’s brought that focused approach to the House. I talked with him briefly this afternoon about some of the compromise deals floating around Capitol Hill. For instance, Nancy Pelosi said she’s open to this deal (via Talking Points Memo):

“We’re willing to bite the bullet and make serious cuts in discretionary spending,” Pelosi told a small group of reporters and bloggers. “That could go to a trillion dollars or more. And the interest saved on that can take us to like a trillion and a half dollars saved. .. We could go even further with non-health mandatories, could take us almost to two trillion. We could use the offshore — the Overseas Contingency [the wars in Iraq and Afghanistan] — could take us to two-and-a-half trillion dollars. Which is the dollar-for-dollar for the lifting the debt ceiling. I don’t think we have to have dollar-for-dollar, but for those who think they do, there’s a path to get there.”

Jordan said that sounds to him like more “gimmicks and games” and would be a poor substitute for the GOP’s Cut, Cap and Balance plan. And how about a temporary debt hike to buy time to work out some grand bargain? He was again quite clear: “No, no, no.” To him, these deals are business as usual to avoid fundamental reform. Forget them. Jordan’s focus is on CCB. “And the time is now.”

The beauty part of CCB is that it cuts spending right away, by $111 billion in 2012.  Any cuts beyond that are promises, he says, and promises from Congress are not like “promises from your wife or a trusted friend.” And while Jordan is in favor of tax reform — lower rates, fewer tax breaks — that should be done separately and not distract from the important business of cutting spending.

I also asked him about the possibility of a U.S. credit rating downgrade. He took it quite seriously but also made the point that if Washington doesn’t get its fiscal house in order, a downgrade is coming anyway — and probably a lot worse.

Debt ceiling update: What Wall Street thinks is happening

Jul 22, 2011 16:15 UTC

One reason financial markets have been relatively sanguine about the debt ceiling negotiations is that investors have been almost certain that something gets done by August 2. Here is what one bank lobbyist told me today:

1-1.5T in spending cuts and an equal 1-1.5T on debt ceiling lift (a short term reprieve) — with the next 120 days battling over the Grand spending/revenue Deal (that uses Bowles/Simpson – Gang of 6 as the starting point).

And this is what BankofAmericaMerrillLynch is saying:

We expect a deal to come in two stages: a smaller up-front deal of possibly $50-100bn per year in deficit reductions (relative to the President’s initial budget offered in February 2011) over the next decade, combined with a more comprehensive deal to be passed either at the end of the year or early next year. The comprehensive deal would include both tax and entitlement reform and cuts to discretionary spending. However, our concern is that policymakers struggle to come up with a credible longer-term plan before year-end, particularly since it is an election year. This would mean we could face the risk of another debt ceiling crisis and ultimately rating agency downgrades.

With this plan, we believe the debt ceiling will be raised before August 2nd, but probably by only $500bn to give Congress six months time to write and pass the new legislation. Any agreement to raise the debt ceiling by a much larger amount in the future would likely be conditioned upon passage of the more comprehensive legislation.

We expect the US credit rating to remain on negative outlook and for a downgrade to AA to occur only when the rating agencies believe there will be no serious follow through. This means a downgrade would not likely occur until after the six month period of negotiations which puts us in early next year. Following any federal downgrade, we would expect downgrades of insurance companies, government related enterprises and state governments that depend heavily on federal funding. S&P has taken a more aggressive stance then the others, and may downgrade to AA+ as early as August if there remain significant risks to implementing a $4 trillion longer term fiscal plan.

Also, my pal Phil Klein had this takeaway from his chat with House Speaker Boehner today:

I asked Boehner whether some sort of short-term agreement would be necessary given that they’re closing in on the Aug. 2 deadline, and even if a late deal were struck, it would have to be written, scored by the Congressional Budget Office, and passed by the House and Senate.

“It is not what the goal here is,” Boehner responded. “As I said, there are two challenges here that we have to overcome. We have to raise the debt ceiling, and we have to have a serious down payment on reducing our budget deficit and our debt.”

Saying it isn’t the goal is different than saying it isn’t going to happen. Some sort of short-term extension seems inevitable, if nothing else but to give them time to do all the procedural things if they’re close to a bigger deal. There’s nothing ideologically preventing either side from this, and as I’ve noted, both chambers have already voted for deficit spending through Sept. 30, so there’s an easy argument for extending it at leas through then.

Read more at the Washington Examiner.

 

COMMENT

The British minister was correct in stating that “right-wing nutters” in the House of Representatives are responsible for the position we find ourselves in as tea-party Republicans are trying to implement their far right-wing agenda by holding the American economy, and working American men and women, hostage with actions that could seriously damage the economy and the middle class and poor. To those of you who voted for these nuts, I hope you’re satisfied with what you got because the bottom line is the actions of these fools will hurt you too unless you happen to be part of the 2% that hold most of our country’s wealth. To the rest of you, I ask that you consider the proposition that there needs to be a redistribution of wealth in this country by making the wealthy pay their fair share of taxes. We cannot keep going the way we’re going or we’ll end up an extremely polarized country wherein 98% of the citizens live at a third-world level and 2% live a life of unimaginable luxury. This country will then become completely dysfunctional as we’re close to being right now, and there will be violence as the 98% take wealth from the rich whether they like it or not. Don’t think it can’t happen because it has happened many times throughout history. And, it will soon happen in this country, if Republicans continue their nonsense.

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