Amid Global Concern, Lawmakers Race to Secure a Budget Deal

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Spurred by a Thursday deadline to avoid risking a federal default, Senate leaders said yesterday that they were finally making progress towards a bipartisan agreement to raise the federal debt limit and end the government shutdown.

Reports this morning, however, said House leaders will pursue their own plan. At mid-day, though, Speaker John Boehner said there had been “no decisions about what exactly we will do.”

Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell offered positive assessments of the work on the Senate plan yesterday. It called for lifting the debt limit through early February and funding the government through mid-January.

The Senate plan would also lead to budget talks that could open the way for more comprehensive, long-term fiscal reforms that are needed to put the federal budget on a more responsible and sustainable path.

The 2-week-old shutdown has wasted taxpayer dollars, caused hardships for millions of Americans and inflicted significant economic damage. A default on some of the government’s financial obligations, however, would be far worse.

The Treasury says that by Thursday it expects to have exhausted its “extraordinary measures” to avoid default, and that a default could occur at any point after that — perhaps with little warning.

The Concord Coalition continues to urge elected officials to set partisanship aside and work together to quickly raise the debt ceiling, end the shutdown and then focus on approving comprehensive fiscal reforms.

“Obama and the Republican leaders should start by reaching a tacit understanding that neither will insist that the other must publicly back down as the price of a deal,” says Robert L. Bixby, Concord’s executive director, in a recent blog. “What’s needed now is less bombast and more breathing room.”

A useful framework for discussions on broad fiscal reforms, he says, is the plan suggested by Alan Simpson and Erskine Bowles in April: “A Bipartisan Path Forward to Securing America’s Future.”

While hard-liners in both parties may object to the results of such discussions, Bixby warns, “trying to satisfy the hard-liners will make any agreement impossible.”

The administration, business leaders, the International Monetary Fund, mainstream economists and other national governments all warn that a U.S. default could have catastrophic financial and economic consequences in this country and around the world.

A report released Monday by the Peter G. Peterson Foundation estimates that persistent uncertainty over fiscal policy since late 2009 has lowered U.S. economic growth by 0.3 percentage points a year. The report says that even a brief, technical default by the U.S. government would trigger a recession through the end of 2014, costing 2.5 million jobs.

External links:
A Bipartisan Path to Securing America’s Future (Latest Simpson-Bowles Plan)
Simpson-Bowles Launch National Ad Campaign to Fix the Debt
The Cost of Crisis-Driven Fiscal Policy (The Peter G. Peterson Foundation)
World Leaders Press U.S. Leaders on Fiscal Crisis (New York Times)
Open Letter from Former Lawmakers to Obama and Congress
As BPC’s X Date Window Narrows, Economic Risks Grow (BPC)

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