With another round of negotiations over raising the debt ceiling about to get underway — Vice-President Joe Biden is meeting with congressional leaders today, and President Obama will hold separate meetings with Democratic and Republican senators Wednesday and Thursday — Speaker of the House John Boehner laid out his party's conditions in a speech before the Economic Club of New York last night. Boehner demanded spending cuts greater than the increase in the debt limit, an amount that would be around $2 trillion if the limit is extended enough to get Congress past the 2012 election, as everyone would prefer. These cuts must be "actual cuts and program reforms," he said, "not broad deficit or debt targets that punt the tough questions to the future." And absolutely everything is on the table (except tax increases!).
Are such demands feasible? The Washington Posts Ezra Klein doesn't see why not, since Boehner's aides say that the cuts could take place "on a time frame longer than the life of the debt-limit increase." The three big deficit-reduction plans President Obama's, Paul Ryan's, the Fiscal Commission's would, over a period of ten or twelve years, cut much more than $2 trillion. So, yes, feasible.
That's not the same as saying an agreement would be easy, though. Sure, given enough time, they could work something out eventually. The problem is that they don't have a lot of time. In order to prevent the federal government from defaulting, the ceiling has to be raised by August 2, but preferably a lot sooner than that so the markets don't freak out. That's not a lot of time for Congress to craft a long-term deal that would likely include controversial, inflammatory reforms to Medicare and Medicaid. Consequently, instead of one big increase in the debt ceiling that will last a couple of years, Congress may have to settle for stopgap measures for now. “I can see a circumstance in which there would be some short-term [increase] so that the overall plan can be given the consideration that it deserves,” Democratic senator Kent Conrad said last night before Boehner's speech.
It's the government shutdown debate all over again, except with trillions, instead of billions. That complete lack of confidence and optimism you feel right now? Bankers are feeling it too. According to the Hill, Boehner's "tough talk drew a cool reception from an audience of Wall Street executives," who "sat in silence through his demands on the debt limit" and "offered polite applause" when he was finished.