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Despite Impasse, Experts See Debt Ceiling Backup Plans

Despite Impasse, Experts See Debt Ceiling Backup Plans

By Alexis Simendinger - July 14, 2011

As remote as it seems now, there is at least one compelling fiscal certainty among Washington's top elected leaders: America will raise its $14.3 trillion debt ceiling before default can threaten an already shaky economy. New borrowing authority may be granted until the end of 2012, or for just a month or two while an imminent deficit deal gets inked. Either way, the president and top lawmakers insist the country will not tumble over a cliff.

Even as White House talks appeared Wednesday to test President Obama's famously unflappable demeanor (he ended a fourth consecutive round of talks with testy words for House Majority Leader Eric Cantor of Virginia), the discussions will resume at 4:15 p.m. Thursday.

But the Treasury Department's Aug. 2 deadline already puts the time-consuming mechanics of preparing any bipartisan deficit compromise out of reach. Writing any legislation takes time, and moving it through the House and Senate could take longer. Even if the president and the eight congressional leaders from both chambers suddenly sprinted to the Rose Garden waving a grand bargain sketched on legal pads, congressional enactment before the default-clock tolls is close to impossible, according to budget experts interviewed by RCP.

That's why Senate Minority Leader Mitch McConnell took the first stab on Tuesday at an emergency escape hatch. His proposal would effectively abandon Congress' legislative responsibility to approve the administration's requests to lift the nation's borrowing authority, and instead cede Obama the power -- and presumably the political blame, should voters object.

Putting aside for the moment details of McConnell's fallback idea, which appears unlikely to get serious traction among the House GOP, his search for a short-term fix was a signal that the usually canny Kentucky Republican now believes his colleagues need to identify Plan B.

Cantor apparently agreed Wednesday when he asked Obama if he would consider a series of short-term debt ceiling increases into next year instead of one vote on one deficit plan. Frustrated that Republicans appeared to be moving in circles instead of toward compromise, the president repeated to Cantor what he has said in public -- he will veto any such short-term measures if Republicans try to go that route instead of hammering out a significant deficit-cutting deal.

Meanwhile, Moody's issued a warning late Wednesday that it will review U.S. debt for a possible rating downgrade from triple-A because of the debt limit stalemate. Lower ratings would mean higher costs for Uncle Sam.

With these developments in mind, RCP asked some of Washington's wonkiest and most experienced budget experts to suggest ways the negotiators -- in the end -- might resolve the debt-deficit drama without defaulting. The options are based on freeing borrowing authority through the end of 2012; achieving deficit reduction over a decade; and taking House and Senate Republicans at their word that they do not have the votes to pass legislation that raises taxes.

Among the experts RCP interviewed were Barry Anderson, deputy director of the National Governors Association and a former top official with the Office of Management and Budget and the Congressional Budget Office; G. William Hoagland, a veteran former Senate leadership and budget committee aide, and a member of the Bipartisan Policy Center's Debt Reduction Task Force (known as the Domenici-Rivlin commission) and now a vice president for public policy at Cigna; and Maya MacGuineas, president of the bipartisan Committee for a Responsible Budget. They are advocates for significant deficit reduction, but also realists about the political climate.

"It's going to be castor oil," Anderson predicted.

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Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com. Follow her on Twitter @ASimendinger.

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