Last Friday the President said:

So here’s what we’re going to do. We have now run out of time. I told Speaker Boehner, I’ve told Democratic Leader Nancy Pelosi, I’ve told Harry Reid, and I’ve told Mitch McConnell I want them here at 11:00 a.m. tomorrow. We have run out of time. And they are going to have to explain to me how it is that we are going to avoid default. And they can come up with any plans that they want and bring them up here and we will work on them. The only bottom line that I have is that we have to extend this debt ceiling through the next election, into 2013.

Yesterday there was a tentative agreement among Speaker Boehner, Senate Majority Leader Reid, and Senate Minority Leader McConnell on the outline of a bill to increase the debt limit and cut spending.

This tentative agreement would increase the debt limit by about $900 B to $1 T, enough to make it into the first quarter of next year, packaged with a bit more than $1 trillion of spending cuts, discretionary caps, and no tax increases. There would be a second debt limit extension next year that would go into 2013, upon action of a joint committee of Congress that would make recommendations for further deficit reduction.

While this is inconsistent with the President’s Election Day demand, a debt limit increase that lasted into next year would be routine based on historic practice.

Senate Majority Leader Reid took this to the White House yesterday and the President rejected it. Leader Reid left that meeting and said publicly that Senate Democrats would instead pursue a different plan that would increase the debt limit by $2.7 trillion, enough to get into 2013. Leader Reid says his plan would cut spending by at least $2.7 trillion (I am skeptical).

It appears the three key Congressional leaders on both sides of the aisle reached a tentative agreement yesterday and the President blew it up.

The President and his advisors have said two things that are consistent but separable:

  1. the President opposes an extension that would not go past Election Day; and
  2. such an extension could not pass the Senate because of Democratic opposition.

Assuming that Leader Reid did not bring to the President yesterday a proposal that he opposed, the second no longer appears to be true.

Administration officials from the President on down continue to warn us of the grave consequences if Congress does not act before an August 2nd deadline. Last week the President increased his demands of Speaker Boehner on taxes, knowing that doing so would cause negotiations on a big deal to collapse. Yesterday the three key Congressional leaders tried to act on a bipartisan basis and the President stopped them.

I expect House Republican Leaders to turn the tentative Boehner-Reid-McConnell outline into a bill and try to pass it on the floor in the next couple of days. That’s exactly what they should do.

Update: The House implementation of this would, I expect, also result in House and Senate votes on a Balanced Budget Amendment in the fourth quarter of this year. They’ll have 10 years of discretionary caps with a sequester to enforce them. You can see the outlines of “cut, cap, and balance” without looking too hard. It looks like they’ll also get at least a dollar of spending cuts for each dollar of debt limit increase. I never thought they’d get that.

(photo credit: White House Photo by Lawrence Jackson)