“At a closed-door meeting Friday morning, GOP leaders turned to their most trusted budget expert, Rep. Paul D. Ryan of Wisconsin, to explain to rank-and-file members what many others have come to understand: A fiscal meltdown could occur if Congress fails to raise the debt ceiling…
“‘He said if we pass Aug. 2, it would be like ‘Star Wars,” said Rep. Scott DesJarlais, a freshman from Tennessee. ‘I don’t think the people who are railing against raising the debt ceiling fully understand that.’
“The warnings appeared to have softened the views of at least some House members who, until now, were inclined to dismiss statements by administration officials, business leaders and outside economists that the economic impact would be dire if the federal government were suddenly unable to pay its bills.
“Freshman Rep. Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was ‘sobering.'”
“In a presentation to the House Republican Conference on Friday, Jay Powell, a former Under Secretary at the Treasury Department under George H.W. Bush and a visiting scholar at the Bipartisan Policy Center, laid out just what would happen if a deal isn’t reached.
“On August 3, according to Powell’s presentation, the federal government would be on the hook for $32 billion in committed spending, including $23 billion in Social Security checks, $500 million in federal worker salaries, $1.4 billion owed to Defense Department vendors and $100 million in refunds the IRS owes to businesses. On the same day, the government will take in only $12 billion in revenue, giving the government a $20 billion cash deficit. By August 15, when the federal government is on the hook for a $29 billion interest payment, the cash shortfall will have grown to $74 billion—and possibly more, if interest rates on U.S. debt rises…
“‘There are serious repercussions for the country if the debt limit is not raised and it’s important that members have information on what we may be facing. The aim is not to scare anyone but the facts are frightening,’ said a top Senate Republican aide.”
“A fall-back plan to avert a national default is under negotiation by Senate leaders and is on track to be unveiled by Wednesday or Thursday of next week, according to a Senate Democratic aide.
“Senate leaders estimate they will have to have the contingency plan ready to go by Thursday to have enough time to get it passed through both chambers by Aug. 2.
“A Democratic aide said it would likely take nearly two weeks to pass it because of expected filibusters…
“McConnell is negotiating with Senate Majority Leader Harry Reid (D-Nev.) to modify the plan to make it more likely to pass the Senate.”
“Fiscal hard-liners in early voting states say the issue is a major test for any would-be challenger to President Barack Obama, a Democrat. They’re refusing to consider backing someone who leaves open the door to raising the debt ceiling.
“As Len Gosselink, an Iowa Republican, put it after listening to former U.S. House Speaker Newt Gingrich last week: ‘It’s unthinkable in my mind to support a candidate who would allow it.’…
“‘I hope and pray they don’t do it,’ Pawlenty said. He then said if they do raise it, they should ‘at a minimum’ also get a constitutional amendment to balance the budget ‘to make sure we don’t have to rely on the good will and false promises of politicians to get the budget balanced in the future.'”
“Taken together, these findings have important consequences for both the ongoing debate over raising the debt ceiling and the upcoming 2012 campaign.
“First, the Tea Party wing of the Republican primary is the most attentive and thus most likely to turn out in next year’s caucuses and primaries. These data imply that Tea Party-first Republicans will have a disproportionate impact in 2012.
“Second, as McInturff observed in November, the strongest Tea Party-first Republicans are in no mood for compromise. They are the no retreat, no surrender wing of the Republican party. Their willingness to identify more with the Tea Party than with Republicans as a whole speaks to their desire to take stronger stands than they perceive the Republican party establishment as willing to take.
“Third, and perhaps most important, the Tea Party-first Republicans are not some minor faction within the Republican party. They are the heart and soul of its base, the most active and committed Republican voters…
“The Republican leadership in Washington is currently stuck between the rock of their activist base and the hard place of their allies and benefactors in the business community who fear the consequences of a government default. These polling data tell us that their dilemma will not easily resolve.”
“Now, some of these things don’t make folks in my party too happy. And I wouldn’t agree to some of these cuts if we were in a better fiscal situation, but we’re not. That’s why I’m willing to compromise. I’m willing to do what it takes to solve this problem, even if it’s not politically popular. And I expect leaders in Congress to show that same willingness to compromise.
“The truth is, you can’t solve our deficit without cutting spending. But you also can’t solve it without asking the wealthiest Americans to pay their fair share – or without taking on loopholes that give special interests and big corporations tax breaks that middle-class Americans don’t get.
“It’s pretty simple. I don’t think oil companies should keep getting special tax breaks when they’re making tens of billions in profits. I don’t think hedge fund managers should pay taxes at a lower rate than their secretaries. I don’t think it’s fair to ask nothing of someone like me when the average family has seen their income decline over the past decade – and when many of you are just trying to stretch every dollar as far it it’ll go.”