Has momentum shifted back to the House on a debt-ceiling and deficit reduction package?  After two days of speculation surrounding the Gang of Six plan — which appears to be vaporware — the New York Times reported a few minutes ago that Barack Obama and John Boehner are close to a “grand bargain” again:

The Obama administration has informed Democratic Congressional leaders that President Obama and Speaker John A. Boehner were starting to close in on a major budget deal that would enact substantial spending cuts and seek future revenues through a tax overhaul, Congressional officials said Thursday.

With the government staring at a potential default in less than two weeks, the officials said the administration on Wednesday night notified top members of Congress that an agreement between the president and Mr. Boehner could be imminent. The Congressional leaders, whose help Mr. Obama would need to bring a compromise forward, were told that the new revenue tied to the looming agreement to increase the debt limit by Aug. 2 would be produced in 2012 through a tax code rewrite that would lower individual and corporate rates, close loopholes, end tax breaks and make other adjustments to produce revenue gains.

Officials knowledgeable about the conversations between the administration and Congressional leaders said the details of the potential package remained unknown but they presumed it would include cuts and adjustments in most federal programs, including Medicare.

The leak from Washington prompted all sides to deny that a deal is “imminent.”  However, it appears from the NYT’s reporting that the White House has begun to despair of getting anything done through the Senate.  The McConnell plan has no chance of passing the House, and Obama would need it in place as a stopgap measure while the Go-6 group produces actual legislative language that the House can score, let alone debate and pass.  That can’t be done in twelve days, and it might not be possible in twelve weeks.

From the description in the Times, it looks as though both sides are returning to the imperfect but still valuable Simpson-Bowles approach.  Combining tax reform with real and immediate cuts and entitlement restructuring is the package most likely to garner the bipartisan support needed to pass.  If that becomes the basis of an eventual deal, though, it will be worth pointing out that we could have had it in February and avoided all of the market uncertainty had Obama not completely ignored his own commission on the subject.

Update: Standard and Poor’s warned that it won’t take just any kind of debt-ceiling deal to protect the credit rating of the US.  A deal without “meaningful” deficit reduction will mean downgrading American credit within three months:

If an agreement is reached to raise the debt ceiling but nothing meaningful is done in terms of deficit reduction, the U.S. would likely have its rating cut to the AA category, S&P said.

“While banks and broker-dealers wouldn’t likely suffer any immediate ratings downgrades, we would downgrade the debt of Fannie Mae, Freddie Mac, the ‘AAA’ rated Federal Home Loan Banks, and the ‘AAA’ rated Federal Farm Credit System Banks to correspond with the U.S. sovereign rating,” S&P said in its report.

“We would also lower the ratings on ‘AAA’ rated U.S. insurance groups, as per our criteria that correlates insurers’ and sovereigns’ ratings,” the firm said.

In other words … the Gang of Six deal is pretty much a non-starter with S&P.