So we hit the $14.294 trillion debt ceiling today--did anything break? Just some hearts. The Congress has 11 weeks to figure out how to resolve this before the government defaults. The Treasury Department announced today that it will stop issuing and reinvesting government securities in certain government pension plans in order to buy some extra time.
Meanwhile, the new Great Game is on. Ezra Klein at the Washington Post laid it out: "There's not been much evident progress towards a deal in recent days, though there's been an escalation in Republican demands from the Senate side (McConnell wants Medicare cuts but no tax increases) and a plea from the Obama administration for Democrats to stop adding new demands to an already overburdened negotiations process. But the outlines of a deal have been relatively obvious for some time: For better or for worse, the final deal will be heavily tilted towards spending cuts, and accompanied by some sort of procedural mechanism to make future deficit reduction more likely."
The Democrats want Medicare cuts off the table. The Republicans want tax breaks off the table. So what is on the table? The WSJ reports, "People familiar with the negotiations led by Mr. Biden say they are looking at cuts to agriculture subsidies and federal retirement programs, stepped-up antifraud efforts, increased premiums for pension plans backed by the Pension Benefit Guaranty Corporation and the sale of wireless spectrum and government properties."
In other words, not much ("a sliver," the WSJ calls it, "of the $4 trillion goal officials have set for deficit reduction over the next 10 years"). At least one person who could be on the receiving end of a government default is multimillionaire Stanley Druckenmiller, and he says he has no problem with a temporary delay in the interest payments he is owed on Treasury bonds if (and here's the catch) Congress figures out how to rein in entitlement costs. In a WSJ interview:
"'Excuse me? Russia had a real default and two or three years later they had all-time low interest rates,' says Mr. Druckenmiller. In the future, he says, 'People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order.'"
Good luck with that. The Paul Ryan proposal to overhaul Medicare cuts has now been blasted into Campaign 2012 cyberspace (and we are looking at you, former Speaker Gingrich). And tax cuts shouldn't be off the table, either. Maybe both of these are terrific for raising campaign funds, but a nifty election year slogan isn't necessarily the same as responsible governing.