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First Thoughts: Always darkest before the deal

It’s always darkest before the deal… Yesterday’s Obama vs. Cantor clash… Cantor’s isolation (and how he’s become the person to watch in this whole debate)… Despite yesterday’s theatrics, there are still three ways to resolve the impasse… And those three paths could combine to form a grand bargain of sorts… How campaigning in the early states helps the out-of-power party… Summer of Speculation: Rudy is in New Hampshire, Christie to raise money for Steve King, and Perry calls Grassley… And on the 2012 trail: Romney’s in New Hampshire, while Cain visits Tennessee. 

*** Always the darkest before the deal: With the clock ticking on debt ceiling, the news appears grim. Moody’s says it’s reviewing a possible downgrade of the government’s AAA bond rating. Fed Chairman Ben Bernanke warned of financial calamity if the debt ceiling isn’t increased. And at yesterday’s White House meeting to find a resolution to the legislative impasse, President Obama clashed with House Minority Leader Eric Cantor (more on that below). But as we said during the looming possibility of a government shutdown in the spring, it’s always darkest before the deal. 

*** Obama vs. Cantor: As for yesterday’s Obama vs. Cantor clash, it ISN’T striking that it happened; after all, these players have to be plenty frustrated by now. But what IS striking is that Cantor went directly to the press to tell his version of the story. After yesterday's meeting, Cantor recounted telling the participants that there would have to be multiple debt-ceiling increases to get through Nov. 2012. “Well that's when [Obama] got very agitated seemingly and said that had sat there long enough and no other president, Ronald Reagan wouldn't sit here like this, and that he's reached the point that something's gotta give,” Cantor said, per NBC’s Frank Thorp. “And he said to me, ‘Eric, don't call my bluff.’ He said, ‘I'm going to the American people with this.’” After that, Cantor says Obama got up and said, “I’ll see you tomorrow.” (And they meet again today at 4:15 pm ET.) There are a LOT of folks on all sides of these talks who believe the group is too big and that too much leaks out or simply gets read out, which is why there is speculation the president asks them all to come to Camp David (keep them from cameras). 

*** Dems push back: Democrats dispute Cantor’s version of events. One Democratic aide said Cantor’s story was overblown. “For someone who knows how to walk out of a meeting, you'd think he know it when he saw it. Cantor rudely interrupted the president three times to advocate for short-term debt ceiling increases while the president was wrapping the meeting.”  

*** Cantor’s isolation: What has become increasingly clear is that Cantor has become the person to watch in this entire debate. He’s either the Tea Party hero or scapegoat. Or both. He also has become isolated -- even within his party. There’s Senate Minority Leader Mitch McConnell, who told conservative talk-radio host Laura Ingraham yesterday that Republicans are at risk if there’s a default. "You know, it's an argument he has a good chance of winning, and all of a sudden we [Republicans] have co-ownership of a bad economy," McConnell said. "That is a very bad positioning going into an election." And GOP Sen. Lindsey Graham said that Republicans should be open to increasing revenues. As Politico writes, “Cantor has a lot riding on the outcome of the debt-limit negotiations. He’ll share in the public blame if they fall apart and the economy tanks, and he’ll face recriminations from his conservative base in the House if he cuts too soft a deal with the president.”

*** The three options to a resolution: Despite yesterday’s conflict, you can still see the making of a deal. And there are essentially three paths to a resolution. One is 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. Two is the cuts the members of the so-called Biden group came up with (Cantor is among the advocates of this route). And three, 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 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 Congress and instead would only be subject to an up-or-down vote.

*** How you still get to the grand bargain: Per one Democratic leadership insider, pieces of all three contingency plans could turn into the "grand bargain." For instance: You get a significant amount of cuts from the Biden group (think $700 to $800 billion) to get a six-month raise in the debt ceiling. Also included would be the binding Reid commissions 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 cuts, plus maybe more). And as a failsafe, the McConnell concept on the debt ceiling would also be part of the deal 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.

*** How campaigning in the early states helps the out-of-power party: Although it’s still early, a new Mason-Dixon poll showing Obama trailing Romney in Iowa -- after another poll showing a similar spread in New Hampshire -- suggests how the early primary states are helpful to the opposition party. In 2008, Obama’s constant primary campaigning in Iowa and New Hampshire allowed him to win those states in the general election. And remember that John Kerry flipped New Hampshire in the ’04 general election, though he fell short in Iowa. 

*** Summer of speculation: Rudy Giuliani today embarks on a two-day swing through New Hampshire, the AP reports. “Giuliani says he's not convinced any of the Republican presidential contenders can defeat President Obama. Until he is, Giuliani says he won't rule out a run at the White House himself… The 67-year-old Republican tells The Associated Press that a decision about his political future won't come until late August or early September.” Meanwhile, the Washington Post says that New Jersey Gov. Chris Christie will headline a fundraiser for conservative Iowa Congressman Steve King when Christie visits the Hawkeye State later this month. That Christie is doing this for King – and not someone like Tom Latham – certainly raises eyebrows…    

*** Perry calls Grassley: And speaking of the summer of speculation, the Des Moines Register notes that Texas Gov. Rick Perry yesterday called Iowa Sen. Chuck Grassley (R). “Grassley, in a conference call with reporters, didn't disclose what Perry had to say, but he wasn't shy about repeating the advice he offered: ‘I gave him the advice that if he's going to run, he'd better run in Iowa, and he'd better cover a lot of territory.’” 

*** On the 2012 trail: Mitt Romney spends his day in New Hampshire, hitting Portsmouth, Rochester, and Derry… And in Cain is in Tennessee.

*** Thursday's "The Daily Rundown" lineup: Reps. Jason Chaffetz (R-UT) and Xavier Becerra (D-CA) on the debt talks... Former State Department spokesman Jamie Rubin on the Mumbai attacks, Syria, and more... MSNBC’s Jonathan Alter, Politico's Maggie Haberman and National Review's Reihan Salam on 2012...

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