- David Gergen: Some of best options for debt ceiling talks seem to be failing
- He says GOP won’t go for tax increases; Democrats won’t go for deep spending cuts
- Gergen says the result is a nation hurtling toward a potentially devastating default
- There is a good chance credit agencies will downgrade the credit rating on U.S. debt
(CNN) — If Bill Safire were still with us and writing a column about the debt follies in Washington, he might well begin by asking readers: Which of the following outcomes is most likely in the days ahead?
(a) The president and Congress reach a historic accord that reduces deficits by some $4 trillion over 10 years while also lifting the debt ceiling through the 2012 elections.
(b) They reach a much more modest agreement that lifts the debt ceiling in stages, includes spending cuts of some $1 trillion to $1.5 trillion but once again postpones the really tough decisions.
(c) They are unable to get a bill through Congress before August 2, the U.S. defaults for the first time in history, and in the ensuing mess, they quickly pass a stop-gap measure.
(d) The credit rating agencies can’t stand the mess anymore and downgrade America’s AAA credit rating, something we have had since World War I.
(e) The worst of all worlds: a combination of (c) and (d).
So, brother Safire would ask readers, what do you think?
Obama and ‘Gang of Six’
Let me briefly tell you how I would respond:
For a long while — since the days of the Simpson-Bowles commission — I had hoped that option (a) would be the answer. The country desperately needs to get its fiscal house in order, and Simpson-Bowles provided the best plan anyone has devised. It also had bipartisan support, mostly because it had just about the right ratio of $2 in spending cuts for every $1 in tax increases. Sadly, the White House failed to seize that banner and start a parade.
The president, to his credit, has recently been trying to revive the idea of a grand bargain, working with House Speaker John Boehner, but it has been too little, too late. The excitement over the “Gang of Six” proposal this week — also a commendable try — lasted for less than 24 hours before that plan came under withering assault from labor unions as well as the right. Option (a) is dead, at least for now.
Over in the House, of course, the “Gang of 234” still hasn’t abandoned its hopes for a conservative variation of option (a) but “cut, cap and balance” isn’t going anywhere, either.
Given the shortcomings, I began thinking some days ago that option (b) is the best available answer. It would marry up the Harry Reid/Mitch McConnell plan for raising the debt ceiling with spending cuts that could assuage conservatives. But this week, opposition has been mounting to Reid/McConnell, especially within the GOP.
It is now a serious question whether a majority can be found in the House for option (b). There may never be enough spending cuts to satisfy a bloc of Republicans, and who can say how many House Democrats will go along with a package of cuts that doesn’t include tax increases?
And time is rapidly running out. We now find ourselves on a boat sailing just above Niagara Falls. The closer we get to the edge, the greater the danger that we will be sucked over the precipice.
Several days ago, I would have put the odds on option (b) at better than 50-50; today, sadly, I reckon the odds are less than 50-50. In other words, the prospects point increasingly toward a default. Let us hope that is not the case. No one can be sure of the near-term financial consequences, especially if Congress then acted quickly to reverse itself, as it did over the Bush bailout in 2008. But a default, however short, will definitely fuel a growing perception in the world of America in decline.
We also know that the credit rating agencies such as Standard & Poor’s and Moody’s — both eager to reclaim their manhood — are watching these follies with a gimlet eye. Even if Washington passes a version of Reid/McConnell, averting a default, S&P has made clear that absent some sort of multitrillion plan that goes with it, there is a good chance it will downgrade our credit rating. If we actually default, the credit agencies are practically guaranteeing a downgrade.
So, where does all this come out? I deeply regret — and hope that I am wrong — that as of this eleventh hour, the answer is option (e) — default and downgrade. We have one more hour till midnight.
This is no way to run a country.