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Can order emerge from chaos on the debt deal?

From NBC's Chief White House Correspondent, Chuck Todd:
Could a deal on the debt ceiling be both within reach and far away? When it comes to the ways of Washington, it’s always possible to see two outcomes at the same time. Just look at the legislative scheme Senate Republican Leader Mitch McConnell came up with Tuesday, which would allow the president to raise the debt ceiling by some $2.4 trillion in three installments through 2012 and require Congress to pass a resolution of disapproval to stop it – an attempt to both appease the markets and put the burden of raising the debt limit solely on the president’s shoulders.

So where are we? As Vin Scully used to say on the Saturday baseball “Game of the Week” on NBC, “pull up a chair” and spend a few minutes digesting what I think I know after conversations with folks on all sides of the talks. 

The president and Speaker John Boehner are rhetorically close, but remain far away on the details. My colleague Luke Russert used an apt analogy with me when it comes to these talks: it’s like the Israelis and the Palestinians. I’d argue it’s like the Israelis and the Palestinians about 10 years ago. What do I mean? Then, the leaders of the two factions, Ariel Sharon and Yasser Arafat, truly wanted a deal, but their rank-and-file (while claiming publicly that they agreed) didn’t truly trust the other side to follow through with the promises the leaders were making to each other. 

To boil this debt ceiling impasse down to the core issue: Neither the president nor the House Republican leadership is truly ready to put  agreement down on paper.  For the president, the hesitancy is about giving a promise of real entitlement reform.  For Republicans it's reistance to make a pledge that part of tax reform could mean the expiration of the Bush tax cuts on the wealthiest Americans (the Republicans).   

In fact, what upsets many Republicans is that the president isn’t ready to make a firm commitment on paper (even behind closed doors) that he would  agree and push for, say, means testing for Medicare or slowly raising the age on Social Security unless he gets a firm promise on those Bush tax cuts (it’s how the White House thinks they might be able to sell this to some Democrats). And the House Republicans, Boehner in particular, aren’t going to make that promise on taxes unless somehow the president gives the GOP conference (which has been battered over the Rep. Paul Ryan's Medicare plan” caucus) some real political cover on entitlements. 

In a session with a small group of reporters, Speaker Boehner compared the president’s entitlement reform offers on Social Security and Medicare to JELL-O;  there are days when it seems like it's been in the freezer and looks solid, and there are times -- like now -- where it’s a tad liquidy and hard to, well, pin down. 

The White House feels plenty burned on taxes so they’d argue that’s why they are being cagey with their best negotiating card. 

The leaders of both parties are frantically trying to figure out how to come up with anything that can get through the House when it comes to the debt ceiling. Right now, they don’t have a path. And while many of the new rank-and-filers are like Illinois freshmen Republican Joe Walsh and don’t believe there’s actual serious consequences to not raising the debt ceiling, Speaker Boehner does understand it. As he said today when asked how he thinks the markets will react if there’s no deal by August 2: “Nobody wants to go there, because nobody knows what’s going to happen. It’s a crapshoot.” 

So what could a deal look like? While Boehner and Obama are, essentially, the lone voices in the room still advocating for the “grand bargain” (both believe it’ll be easier to pass, and they may have a point), the rest of the group meeting daily with the president is busy coming up with a lot of contingency plans. 

  • There’s the somewhat maligned but viable McConnell “Hail Mary punt” which would only deny the president’s request for a debt ceiling raise if veto-proof majorities in both houses of Congress disapprove of the request.
  • There are the remnants of the cuts the members of the so-called Biden group came up with (House Majority Leader Eric Cantor is among the advocates of this route).
  • Senate Majority Leader Harry Reid is pushing the idea of creating a binding Congressional commission to handle either tax reform, Social Security reform, or both (modeled a little after the Social Security reform commission of the ‘80s and a little bit from the military base closing commission in the early ‘90s). The commission recommendations would not be subject to any alterations by either Congressional chamber and instead would only be subject to an up or down vote. 

One Democratic leadership insider sees pieces of all of these contingency plans making up a deal that could be small at first but could turn into the “grand bargain.” For instance, the end game could look something like this. 

  • Some significant group of cuts from the Biden group (think $700-800 billion) in order to get a 6-month raise in the ceiling.
  • Also included would be the binding Reid commissions (or maybe two seperate binding commissions) made up only of members of Congress to tackle tax reform and entitlement reform. They’d have, say, three months to get tax reform done and six months to get the entitlement reform done. Whatever they agreed to, would be subject to the up or down vote and if tax reform got enacted then it would be linked to another large chunk of cuts (the rest of the Biden agreed to cuts and then some).
  • As a failsafe, the McConnell “disapproval” concept on the debt ceiling would also be part of the deal for the next three debt ceiling increases asked for by the president in order to avoid this problem until the summer or even fall of 2013 if both tax reform and entitlement reform failed. 

To be clear, the above plan is not being considered right now. It’s more of an example of how convoluted the eventual roadmap to a deal is going to be.  It’s the “trust-but-verify-a-million-times” approach, to borrow a Reagan phrase from the Cold War. Obama and Boehner do trust each other, and while the path forward right now is unclear, one Republican familiar with the talks said of the president and the GOP: “We’re in a spot where we need to be. It’s not a bad place for us to be.” What does he mean? An uncomfortable spot for both parties. The president painted the GOP into a corner, hence the McConnell plan, but it was a short term political process victory, not one that you can brag about to the American people. 

The president desperately wants the big deal.  How much so? When Boehner informed the president last Saturday night that he had to publicly pull out of the “grand bargain” talks, the conversation took more than 30 minutes to wrap up. While neither side has given reporters the details of that conversation, draw your own conclusions as to why a call like that, initiated by Boehner to essentially “break up” from the grand bargain talks, took more than 30 minutes to conclude. The president needs a real deal as much if not more than congressional Republicans.