House Speaker John Boehner’s reworked deficit-cutting plan was gaining support among Republicans, while Senate Majority Leader Harry Reid said his competing proposal to avert a potential U.S. default is the only “true compromise.”
Less than a week from an Aug. 2 deadline to raise the $14.3 trillion debt limit, Congress’s budget scorekeeper said both measures fall short of their savings goals, prompting leaders to rework their proposals.
“There’s only one bill in Congress that is a true compromise,” Reid told reporters today. “We’re running out of time.” He said his plan can be revised to meet its savings target and Boehner’s plan has no chance of passing the Senate as it stands now.
“We like our bill, we’re going to stick with it until somebody comes up with a better idea,” Reid said. “Magic things can happen here in Congress in a very short period of time under the right circumstances.”
The non-partisan Congressional Budget Office said Reid’s plan would cut $2.2 trillion over 10 years, shy of its $2.7 trillion target. The savings also fall below the $2.4 trillion needed to meet Republican demands that a debt-limit extension be accompanied by an equal amount of savings. President Barack Obama is insisting on a debt-limit increase large enough to last through the 2012 elections.
CBO said Boehner’s plan would save just $850 billion rather than its advertised $3 trillion, forcing him to make revisions and round up backing among fiscal conservatives after Republican leaders postponed a vote scheduled for today.
‘Working Through It’
“We’re working through it,” said House Rules Committee Chairman David Dreier. Among opponents, “some have said they’ve changed their position, some have said they’ll rethink their position, so I’m encouraged.”
Dreier, a California Republican, said he expects a reworked version to come before his panel today, setting up a vote by the full House tomorrow.
Treasuries pared losses today as Pacific Investment Management Co.’s Mohamed A. El-Erian said there will be “massive consequences” if the U.S. loses its AAA credit rating. The benchmark 10-year note yielded 2.96 percent. Stocks fell also, pulling the Standard & Poor’s 500 Index lower for a third day.
The S&P 500 slipped 1.1 percent to 1,316.86 at 11:22 a.m. in New York. The Dow Jones Industrial Average decreased 99.34 points, or 0.8 percent, to 12,401.96.
Adjusting the Bill
At a closed-door meeting of House Republicans today, Boehner told lawmakers he is still adjusting his bill. There was some laughter and clapping coming from the room. As they left, some lawmakers said Boehner is shoring support.
The revisions will result in “more upfront spending cuts,” said Michigan Representative Mike Rogers. “You could see people gelling together.”
At the session -- the third such meeting in 24 hours -- House Budget Committee Chairman Paul Ryan explained that CBO estimated less savings than was promised because it used a different starting point than leaders anticipated, said Representative Scott Garrett of New Jersey.
House Majority Leader Eric Cantor said members understand that Boehner’s plan “puts a check on Obama.”
“It doesn’t allow him the blank check that the Reid bill would allow,” Cantor said. “That’s why members are rallying around this plan.”
Middle of the Night
Representative Tom Reed, a first-term Republican from New York, said he was up through the middle of the night trying to decide how he’ll vote on Boehner’s proposal. He said he decided around 4 a.m. to line up with the speaker after saying yesterday he would oppose it.
“I’m a firm yes,” Reed said. “We’ve been looking at this real hard. This has been a very stressful period of time. It’s not exactly what I’m looking for, it’s not what we came to Washington to do, but it’s a step in the right direction.”
Reed, a member of the self-described fiscally conservative Republican Study Committee, said a controversy arose within the group after some of its staff yesterday contacted outside groups by e-mail and asked them to pressure lawmakers to oppose the Boehner plan. “I would imagine the staffers are not going to have a good day,” Reed said.
Both Reid, a Nevada Democrat, and Boehner, an Ohio Republican, proposed creating a special budget-cutting committee to help find cuts, for which the CBO refused to credit any savings because it couldn’t predict whether or how much the panels would eventually agree to trim.
Talks With Obama
Boehner devised his plan after his debt-reduction negotiations with Obama and congressional Democrats broke down.
Three investment firms -- BlackRock Inc., Loomis Sayles & Co. and Franklin Templeton Investments -- said the U.S. faces losing its AAA credit rating as the debate continues.
“Our guess is, when push comes to shove, the debt ceiling will be raised,” said Bob Doll, chief equity strategist at New York-based BlackRock, which manages $3.66 trillion. “What goes along with that is very difficult to tell, and that’s why the threat of a downgrade still exists,” Doll said in an interview today on Bloomberg Television.
Richard Durbin of Illinois, the Senate’s second-ranking Democrat, said talks continue between Senate Republican leader Mitch McConnell of Kentucky and Reid, and he predicted those would result in a compromise.
“If it follows the script of almost every other crisis in Congress, a lot of it will happen in private meetings where efforts will be made to reach an agreement and a consensus and then bring it to the floor and sell it to the members,” Durbin said.
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