I heart you: RECOVERY @the moment … 310711

Krisis AS Tidak Bakal Buat RI Kolaps

Oleh: Mosi Retnani Fajarwati
Ekonomi – Minggu, 31 Juli 2011 | 16:23 WIB

INILAH.COM, Jakarta – Badan Kebijakan Fiskal (BKF) menilai, kondisi ekonomi AS yang masih belum stabil terkait utang hanya akan ‘menyentil’ Indonesia.

Plt Kepala BKF Bambang Brodjonegoro mengungkapkan, kondisi AS saat ini masih belum bisa dikatakan gagal bayar (default). “Amerika bukan default, cuma mungkin dia kemampuan bayar utangnya tidak seperti biasanya. Otomatis itu bisa berpengaruh ke rating-nya,” ujar Bambang di kantornya, akhir pekan ini.

Menurutnya, apabila rating utang AS terpengaruh maka akan memicu gejolak pada pasar dunia. “Terutama pada negara-negara yang banyak membeli treasury bill mereka, seperti China dan segala macam,” ujarnya.

Namun, ia menilai, kondisi tersebut tidak akan berpengaruh signifikan pada ekonomi Indonesia. “Kalau Indonesia tidak, saya tidak tahu persis tapi saya yakin kalau pun ada kecil sekali, itu harus ditanya ke BI yang mengelola cadangan devisa,” ujarnya.

“Dampak Amerika ke kita itu hanya di ekspor impor, dan itu pun sekarang bukan yang paling utama lagi. Jadi, kalau ada dampak Amerika ekonominya terganggu, dampaknya ada, cuma tidak sampai membuat kita harus collapse,” tegasnya.

Di sisi lain, ia mengatakan, pemerintah tetap waspada pada sektor-sektor yang dinilai akan sedikit tergoyang yaitu ekspor ke AS, aliran investasi sektor riil (Foreign Direct Investment/FDI), dan aliran dana asing (capital inflow).

“Satu, mungkin ekspor kita ke sana bisa terganggu kalau ekonomi mereka terganggu. Kedua, mungkin aliran FDI sedikit terganggu. Ketiga, capital inflow-nya yang mestinya ke Amerika sebagian makin banyak Indonesia. Rupiahnya makin kuat, terus kita ada kekhawatiran sudden reversal. Jadi artinya yang kita harus jaga banget jangan sampai terjadi bubble di kita, bubble dalam bentuk apa pun,” paparnya.

“Dalam ekonomi global yang pergerakannya sangat cepat ya potensi bubble itu yang harus diwaspadai. Jadi, kita jangan sampai cepat puas kalau misalkan sekarang IHSG naik kencang, rupiah makin kuat, capital inflow makin banyak, SUN makin rendah yield-nya,” pungkasnya.

Seperti diketahui, pada tanggal 2 Agustus nanti kongres AS akan memutuskan apakah akan memutuskan kenaikan batas utang negara adidaya tersebut. [mel]
Amid New Talks, Some Optimism on Debt Crisis
WASHINGTON — New budget talks between top Congressional Republicans and President Obama made progress late Saturday, suddenly stirring optimism that a last-minute deal could be reached to avert a potential federal default that threatened significant economic and political consequences.

After a tense day of Congressional floor fights and angry exchanges, Senator Harry Reid, the majority leader, called off a planned showdown vote set for after midnight, but said he would convene the Senate at noon on Sunday for a vote an hour later. He said he wanted to give the new negotiations a chance to produce a plan to raise the federal debt limit in exchange for spending cuts and the creation of a new Congressional committee that would try to assemble a long-range deficit-cutting proposal.

“There are many elements to be finalized and there is still a distance to go before an arrangement can be completed,” said Mr. Reid, who just a few hours earlier had played down talk of any agreement. “But I believe we should give everyone as much room as possible to do their work.”

Mr. Reid’s announcement set off an almost audible sigh of relief on Capitol Hill, where lawmakers and their aides had been bracing for an overnight clash over the debt following a day that had seen a heated House vote and lawmakers trudging from office to office in search of an answer to the impasse.

The first indication off a softening of the hard lines that have marked weeks of partisan wrangling over the debt limit came in the afternoon when the two leading Congressional Republicans announced that they had reopened fiscal talks with the White House and expected their last-ditch drive to produce a compromise.

Following the House’s sharp rejection of a proposal by Mr. Reid to raise the debt limit and cut spending, Senator Mitch McConnell of Kentucky, the Republican leader and a linchpin in efforts to reach a deal, said he and Speaker John A. Boehner were “now fully engaged” in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.

“I’m confident and optimistic that we’re going to get an agreement in the very near future and resolve this crisis in the best interests of the American people,” said Mr. McConnell, who noted he was personally talking to both Mr. Obama and Vice President Joseph R. Biden Jr., a favorite partner in past negotiations.

Mr. Boehner, who would have to steer a compromise through the House, said he based his confidence on the prospect of an agreement on the sense that “we’re dealing with reasonable, responsible people who want this crisis to end as quickly as possible.”

A Democratic official with knowledge of the talks said that Mr. McConnell called Mr. Biden early Saturday afternoon, the first conversation between the two men since Wednesday. The official said they talked at least four more times on Saturday as they tried to work out an agreement.

The deal they were discussing, this person said, resembled the bill that Mr. Boehner won approval for in the House on Friday more than it did the one that Mr. Reid had proposed.

It would immediately raise the debt ceiling by about $1 trillion, accompanied by a similar range of spending cuts, and set up a new bipartisan committee that would work to find deeper cuts in exchange for a second debt limit increase that would extend through the 2012 election.

A failure of the new committee to win enactment of its proposal could then set off automatic spending cuts across the board, including to entitlement programs. Other ideas were swirling around the Capitol as lawmakers searched for a way to avoid default. One of Mr. Reid’s top lieutenants said he saw at least a glimmer of hope.

“We are a long way from any sort of negotiated agreement,” said Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, “but there is certainly a more positive feeling about reaching an agreement than I’ve felt in a long time.”

The flurry of activity came as anxiety built up in many corners, including among Wall Street investors worried about the effects on the markets and active-duty soldiers worried about their paychecks.

After Mr. McConnell sounded a hopeful note, Mr. Reid called members of the Senate to the floor to hear him dispute the claims by his Republican counterpart and accuse Republicans of failing to enter into serious negotiations even as the Treasury risked running out of money to pay all its bills after Tuesday.

“The speaker and Republican leader should know that merely saying you have an agreement in front of television cameras doesn’t make it so,” Mr. Reid said after returning from a visit to the White House with Representative Nancy Pelosi of California, the Democratic leader in the House.

Trying to build momentum for his own proposal, Mr. Reid and fellow Democrats were working to win over Republican senators to support his plan to raise the debt ceiling through 2012 and circumvent Mr. McConnell.

“Americans are watching us and demanding a result that is balanced,” Mr. Reid said.

The Senate Democrats’ efforts were set back Saturday when 43 of the 47 Republican senators signed a letter to Mr. Reid saying they would not back his proposal, which would allow a $2.4 trillion increase in the debt ceiling in two stages while establishing a new Congressional committee to explore deeper spending cuts. The numbers signaled that without changes in the plan, Mr. Reid would not be able to overcome a Republican filibuster, which requires 60 votes.

House Republicans signaled their disapproval of the Reid plan by holding a symbolic vote on Saturday, rejecting it by a 246 to 173 vote, in a move intended to show it had no chance of passing in that chamber. About a dozen Democrats joined Republicans in rejecting the Reid plan.

The pre-emptive vote could strengthen Mr. McConnell’s hand as he seeks to shape any final compromise.

At the White House and in talks in Congressional offices and corridors, most of the attention was focused on finding a way to define the precise conditions under which the president could get a second increase in the debt limit that would be needed early in 2012 under both Republican and Democratic proposals. Officials in both parties said another idea that had surfaced was to require a change in Social Security policy if the new committee deadlocked, providing an incentive for the new committee to act on its own.

Under the proposal that the Congressional Budget Office said could save more than $100 billion over 10 years, a different measure of inflation would be used to calculate the annual cost-of-living adjustment in Social Security benefits. Supporters say the alternative measure of inflation is more accurate because it reflects what happens when prices rise; advocates for the elderly say the proposal is a backdoor way of cutting benefits.

Members of both parties took the floor to push for compromise, noting that the two sides were not far apart on major elements of their deficit-reduction plans.

“Failure should not be an option for us in this case, and it’s time we started finding common ground,” said Senator Johnny Isakson, Republican of Georgia.

The unusual Saturday session came after a week of brinkmanship on Capitol Hill. On Friday, Mr. Boehner managed to pass his own House bill, along party lines, just a day after suspending the vote as the Republican leadership tried frantically to line up enough votes for passage. But the Senate swiftly rejected that plan late Friday.

While some of the back-and-forth between the House and Senate and the party leaders was typical of the late stages of a negotiation, the combative and unyielding tone in both chambers of Congress was creating more pessimism in the rank and file about the prospects that a final agreement could be struck and cleared before Tuesday.

Even if a measure is able to win significant bipartisan endorsement in the Senate, the reception in the House could be different with the Treasury Department’s Tuesday deadline for increasing the debt limit at hand. But how to push a plan by House conservatives remained a major question mark.

At the Treasury Department, Secretary Timothy F. Geithner met with top advisers on Saturday on contingency plans for managing the financial consequences of Congressional inaction. “No one will be pleased,” said one adviser, who spoke on the condition of anonymity.

The Treasury Department calculates that the government will exhaust its ability to borrow money at the end of Tuesday, forcing the government to pay its bills from a dwindling pile of cash. Independent analysts estimate the government has enough money on hand to pay all of its bills for another week, more or less, before it starts missing payments.

Mr. Obama has repeatedly called on Congress to raise the borrowing limit, known as the debt ceiling, by Tuesday to avoid any uncertainty about the government’s ability to meet its obligations. Financial markets are particularly concerned about the payment of interest on the federal debt. A default on those obligations could precipitate a global financial crisis.

The painful negotiations to resolve the crisis have caught the attention of troops in Afghanistan, where Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, was quizzed repeatedly on Saturday by soldiers and Marines worried about their paychecks.

In Kandahar and Helmand Provinces, Admiral Mullen said it remained uncertain where money would be found if the government defaulted. Regardless of budget talks in Washington, the mission for American troops in Afghanistan would not halt, he said.

“We’re going to continue to come to work,” he said.

Reporting was contributed by Jackie Calmes, Helene Cooper, Binyamin Appelbaum and Robert Pear from Washington, and Thom Shanker from Kandahar, Afghanistan.

Fed May Have Options If US Defaults: Lockhart
Published: Friday, 29 Jul 2011 | 4:03 PM ET

By: Margo D. Beller
Special to CNBC.com

Don’t look to the Federal Reserve [cnbc explains] to offset the damage if the debt ceiling isn’t raised by Aug. 2, two regional Fed presidents told CNBC Friday.

The Fed may have options down the road, however, to help the economy after a U.S. debt [cnbc explains] default. (Track the latest debt talk developments in our Live Blog.)

“Failure to raise the debt ceiling would have unpredictable consequences for the U.S. economy,” St. Louis Fed President James Bullard said.

If there was a default, “it’s our job to run monetary policy that influences the conditions in the economy. You never say never when it comes to policy options you may have,” added Atlanta Fed President Dennis Lockhart in the same interview. “I wouldn’t take any policy options off the table to respond to a really bad economy.”

But neither think those options include another round of quantitative easing [cnbc explains] .

“I don’t rule it out, but it’s a very high bar,” Lockhart said. “We have a very accommodative [monetary] policy today…Now we need to wait and see.”

Despite Friday’s weak economic data, both believe the economy is going to be stronger in the second half of the year, with lower inflation.

“This is all confirming what we already knew, which is that the first half has not been as strong as we like. I think we’re in better shape for better growth in the second half of the year,” Bullard said. “Policy is about right where it needs to be at the moment.”

He noted, however, that with a $14 trillion deficit and a deadline looming on raising the debt ceiling, the Fed “can’t do anything to fix this.”

“If the Treasury can’t issue more debt it can’t issue more debt,” he said. “We cannot buy debt directly from the Treasury. We can only buy debt in the open market.”

If the impasse “led to a generalized crisis, we could come in and provide liquidity to the markets as we did in 2008 and 2009. But the Fed doesn’t have the ability to fix this situation. This is up to the Congress and the president,” Bullard said.
Washington Kesal Pasar tak Panik

Oleh: Charles MS
Pasar Modal – Sabtu, 30 Juli 2011 | 14:57 WIB

INILAHCOM, Jakarta – Saya baru saja mendapat telepon dengan sumber di Capitol Hill, yang telah menghabiskan beberapa hari terakhir mencoba untuk meyakinkan Partai Republik untuk memilih meningkatkan plafon utang.

Dia mengatakan kepada saya bahwa kendala terbesar yang dia hadapi adalah kepuasan pasar. “Sejujurnya, kepanikan kecil akan sangat membantu sekarang,” kata sumber tersebut kepada CNBC.

Saat ia menjelaskan, banyak orang di Washington, DC memperkirakan minggu ini akan ditandai dengan kepanikan di pasar. Saham akan terjun. Obligasi akan terpukul. Dolar akan terjadi sesuatu yang dramatis. Dan semua ini akan membantu membujuk anggota parlemen untuk mencapai kesepakatan debt ceiling.

“Kami mengikuti script dari 2008 ketika pasar runtuh setelah TARP gagal, sebuah kondisi yang membuat mereka untuk jatuh. Kami berpikir hal yang sama akan terjadi minggu ini,” katanya.

Tapi yang terjadi saat ini malah sebaliknya, pasar terlihat tidak panik dan hanya turun tipis. Penjualan saham hanya turun beberapa persen, tetapi tidak menunjukkan ketakutan yang nyata pada perdagangan. Setiap orang di DC memiliki teori tentang hal ini. Beberapa percaya pasar sedang mengirim pesan bahwa kesepakatan akan selesai. Orang lain berpikir pasar tidak mengerti politik.

Pikirkan tentang hal ini. “Kami hanya mendapat berita buruk tentang pertumbuhan ekonomi yang menakjubkan. Jumlah kuartal pertama direvisi menjadi sebuah ketidaksahan. Tetapi pasar pada dasarnya datar saat itu. “Setiap hari kita bangun dan berpikir bahwa saham akan mengirimkan kejutan ke Capitol Hill Dan setiap hari ada,” kata sumber. Dia masih terus memperkirakan akan terjadi panik jual di pasar saat itu. “Kondisi ini akan membuat seua orang untuk bisa bersama-sama memikirkannya.”

Boehner Finally Gets GOP ‘Asses in Line,’ and Then Marches Them Off the Cliff
John Nichols | July 29, 2011

President Obama says he has held substantial talks [1] with House Speaker John Boehner about raising the debt ceiling, and the Democratic president suggests that he has felt at numerous turns as if he and the Republican Speaker were on the verge doing a deal.

But the deal never quite happens. And Friday afternoon, Boehner abandoned any pretense of trying to reach an agreement with the White House. Instead, he bent to the most extreme fringe of the House Republican Caucus and crafted a bogus bill [2]that passed the House early Friday evening but was rejected within hours by the Senate.

It’s not that Boehner is a bait-and-switch artist, teasing the president along and then substituting a new plan at the last minute. In fact, there’s nothing Boehner would like better than to cut the deal with Obama and get back to the golf course.

Boehner’s fight was never with the president.

It is with his own caucus, and with a Republican base that is prepared to punish anyone who makes nice with Obama. And Friday’s charade in the House confirmed that the extremists have the upper hand.

The trouble, as has become all too evident, is that Boehner has never been fully in charge of the House Republican Caucus [3]. As Obama explains [4]—accurately, if not beneficially for the speaker: “I think Speaker Boehner has been very sincere about trying to do something big. I think he’d like to do something big. His politics within his caucus are very difficult—you’re right. And this is part of the problem with a political process where folks are rewarded for saying irresponsible things to win elections or obtain short-term political gain, when we actually are in a position to try to do something hard we haven’t always laid the groundwork for.”

Yes, yes, of course, House Speakers are supposed to be the bosses of the chamber. But, even by the unusually low standards that are going to apply when it comes to early-twenty-first-century Republican House Speakers—two words: Denny Hastert—Boehner is going to rate as a footnote.

Boehner is a placeholder Speaker. He did not climb the leadership ladder with his style or strength. He did so by hanging around, collecting the checks and maintaining the pay-to-play machine in a manner that generally satisfied Wall Street and rank-and-file members. But no one expected anything more than muddling management from Boehner, and now he is struggling to deliver even that.

Pressured by his caucus to fight with the president—rather than accept the overly generous concessions the White House placed on the table — Boehner struggled to come up with his own plan [5]for making enough cuts to satisfy the Republican base and secure the necessary votes to raise the for debt ceiling by August 2. But the erstwhile Speaker got the math wrong, earning a bad report from the Congressional Budget Office and squandering whatever confidence he might have hoped to inspire.

Then Boehner resorted to bluster, announcing on right-wing talk radio that he was telling Republican House members to “get your asses in line” behind the new plan that he was cobbling together — a plan that had no chance of winning the approval of the Democrats who control the Senate [6]—let alone the president.

After several days of lining up asses, however, Boehner admitted Thursday that “we don’t have the votes [5].”

The Speaker was in trouble. He had no deal with the president and his caucus was in disarray.

Boehner could either do the responsible thing and try and work with the president, the Democrats in the House and more responsible Republicans and Democrats in the Senate — or he could give up on being a meaningful player in the process.

Boehner gave up.

He bent to the extremists in order to wrangle the votes for a plan that has no chance in the Senate and no chance of being signed by the president.

Why? The answer was found in the running “whip list” of GOP House members [7]. With House Democrats holding firm for a real plan, Boehner could afford to lose only twenty-three Republicans. As of Friday morning, the “whip list” counted 25 members who were opposed (firmly or leaning that way) and 32 more who were uncertain about whether they want to follow the Speaker’s lead.

To try and win over wavering members of his own caucus Friday, Boehner promised them the moon — a plan that requires congressional approval of a Balanced Budget Amendment to the U.S. Constitution is order to implement a two-stage increase in the debt ceiling.

That was sufficient to win the support Boehner needed in the House — with a narrow 218-210 vote. But the shifts rendered the measure meaningless, as it will not be seriously considered by the Senate.

“They’ve basically given the right wing even more than what they had before,” observed Senate Majority Leader Harry Reid, D-Nevada,

Boehner’s calculus was based. New York Senator Chuck Schumer explained, on an “absurd proposition.”

“To get his conservatives back on the reservation at this point, he’s adding all kinds of poison pills to his plan,” explained Schumer. “His new plan requiring that each house of Congress not vote on, but pass, a balanced budget amendment before any debt ceiling is raised will guarantee a default.”

Even if Boehner passed his newest new plan, it was going nowhere.

President Obama said as much Friday morning, when he essentially wrote Boehner out of the equation, explaining that: “What’s clear now is that any solution to avoid default must be bipartisan. It must have the support of both parties that were sent here to represent the American people -– not just one faction. It will have to have the support of both the House and the Senate. And there are multiple ways to resolve this problem. Senator Reid, a Democrat, has introduced a plan in the Senate that contains cuts agreed upon by both parties. Senator McConnell, a Republican, offered a solution that could get us through this. There are plenty of modifications we can make to either of these plans in order to get them passed through both the House and the Senate and would allow me to sign them into law…”

“Now, keep in mind,” the president added, “this is not a situation where the two parties are miles apart. We’re in rough agreement about how much spending can be cut responsibly as a first step toward reducing our deficit. We agree on a process where the next step is a debate in the coming months on tax reform and entitlement reform –- and I’m ready and willing to have that debate. And if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that too if it’s done in a smart and balanced way. So there are plenty of ways out of this mess. But we are almost out of time. We need to reach a compromise by Tuesday so that our country will have the ability to pay its bills on time, as we always have — bills that include monthly Social Security checks, veterans’ benefits and the government contracts we’ve signed with thousands of businesses. Keep in mind, if we don’t do that, if we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills — we do — but because we didn’t have a AAA political system to match our AAA credit rating.”

With Obama pointing to the Senate as the solution, Boehner was sidelined.

Why did the Speaker of the House become a spectator in the biggest budget fight so far this century?

Unfortunately for Boehner, it is easier to call for asses to “get in line” than to make it happen. As Boehner admits, there are some members of his caucus who prefer “chaos” to compromise—on the theory that if things get bad enough (think spiking mortgage and credit-card rates, to start) they might be able to force the White House to agree to a balanced budget amendment and other schemes to do away with Medicare, Medicaid and Social Security

For all Boehner’s bluster, the most prominent member of the caucus he supposedly leads never budged.

Minnesota Congresswoman Michele Bachmann, who was rejected earlier this year for a low-level leadership position in the caucus, is now a top-tier contender for the 2012 Republican presidential nomination.

Bachmann is the unofficial chair of the GOP’s chaos caucus. She has for weeks promised to vote against any increase in the debt ceiling [8]—even if that increase came as part of an agreement that concedes most major issues to the GOP.

“This Republican will not vote to raise the debt ceiling,” says Bachmann. “My colleagues will have to come to their own conclusion.”

Bachmann may be difficult, but she is not dumb. She knows that the debt ceiling fight is really the first stage of the 2012 Republican presidential contest.

While Boehner was inclined toward compromise on the debt ceiling issue, the Republican base—ginned up by Rush, Limbaugh, Glenn Beck and various and sundry Fox “personalities”—thinks “compromise” is a four-letter word.

Standing with Boehner gets Bachmann nothing—especially when another contender, Texas Congressman Ron Paul, is staking out an absolutist stance.

Standing against Boehner scores points with the base. And, going into the Iowa “Straw Poll”—a key test of sentiments among first-caucus-state Republicans—Bachmann is not about to answer the Speaker’s “get your asses in line” call.

Neither are other Republicans who are thinking about 2012 party primaries for House and Senate seats — especially now that the Tea Party movement is making noises about mounting primary challenges to GOP incumbents who back Boehner’s plan. These days, the GOP is more of a fight club than a Grand Old Party. And any member who gets his or her “ass in line” with Boehner might find it tossed out at the next election.

Even as Boehner was wrangling caucus members in Washington, Bachmann was roaming around Iowa declaring that the Speaker’s “premises are wrong.” The grassroots Republicans that she speaks to were cheering Bachmann on [8].

That was a big problem for Boehner, because undecided Republicans in the House found themselves faced with a choice between the Speaker’s “get your asses in line” call and the sweet sound of the base cheering for Bachmann’s absolutism [9]—and chaos.

And as Boehner bent toward an extreme position in order to secure votes for a House plan that will not go anywhere this weekend, chaos won.
House passes GOP debt bill over objections of Obama, Democrats; Senate votes to table
By Lori Montgomery and Paul Kane, Published: July 29 | Updated: Sunday, July 31, 8:35 AM

House GOP leaders won narrow approval of a plan to raise the federal debt limit Friday after revising the measure to appeal to rebellious conservatives, but it was quickly shot down in the Senate, where Democrats began pushing their own plan to avert a national default.

Heading into the final weekend before the Treasury expects to begin running short of cash to pay the nation’s bills, Senate Majority Leader Harry M. Reid (D-Nev.) introduced a new version of his plan to grant the government additional borrowing authority into 2013, setting up a crucial vote in the Senate shortly after midnight Saturday.

Democrats conceded that they still lack the votes to repel a GOP filibuster. Reid beseeched his Republican counterpart, Minority Leader Mitch McConnell (Ky.), to join him in reworking the measure so the Senate could pass it and send it back to the House before slumping financial markets open Monday morning.

But in a phone call Friday evening, McConnell told Reid he wanted the White House at the table and expressed frustration that President Obama had rejected an emerging compromise between the two Senate leaders last weekend. Aides said McConnell expected to speak with administration officials Friday night and tamped down talk of an impasse. But Senate Democratic leaders reacted with outrage, accusing McConnell of blocking a deal.

“Unless there is a compromise or they accept my bill, we’re headed for economic disaster,” Reid said.

The late-night jousting in the Senate followed a vote on House Speaker John A. Boehner’s debt-limit measure, which would extend the Treasury’s borrowing power until early next year and force another economy-rattling fistfight within a few months.

Drafted largely by aides to Reid and McConnell last weekend, the measure was originally designed to appeal to the more centrist Senate. But Boehner (R-Ohio) could not rally enough support from his tea-party-influenced caucus and had to rewrite it at the 11th hour to add a provision that would compel Congress to adopt a constitutional amendment requiring a balanced federal budget.

The change swayed a handful of holdouts, and the measure passed 218 to 210, with every Democrat and more than 20 Republicans voting no. But the episode was a loss of face for the speaker and his leadership team, demonstrating a lack of clout within their own conference. Even their allies in the Senate were stunned.

“Yes, people can be critical of what we’ve done, but where are the other ideas?” Boehner said on the House floor. “At this point in time, the House is going to act and we’re going to act together.”

Ultimately, it was for naught. Within two hours, the Senate tabled the measure, 59 to 41, with six conservative Republicans joining all 53 senators in the Democratic caucus in voting against the bill.

Throughout the day, senators in both parties held out hope for a bipartisan compromise to resolve the relatively small, but significant, differences between the House and Senate bills.

“We’ve gone through all this acrimony. It’s been painful for everybody to watch, I know,” said Sen. Bob Corker (R-Tenn.) “But I’m very confident that soon we’re going to get to a place where we’ll have a bill that can pass both chambers. And I’m totally confident that the American people have nothing to worry about as it relates to Tuesday.”

Before the House vote, President Obama added to the chorus calling for compromise. He argued that the two parties are not “miles apart” and that he was prepared to work “all weekend long until we find a solution.”

At their core, the House and Senate bills are strikingly similar, having emerged from the same bipartisan talks last weekend. Both call for cutting deeply into agency budgets over the next decade and creating a new 12-member committee of lawmakers tasked with identifying trillions of dollars in additional cuts by the end of this year.

But Reid’s bill would justify a larger increase in the debt limit by counting more than $1 trillion in savings from winding down the wars in Iraq and Afghanistan, savings Republicans dismiss as an accounting gimmick.

Boehner’s bill would give the Treasury a much shorter reprieve and require the committee to come up with $1.8 trillion in additional savings before the government could be granted additional borrowing power.

A new version of the legislation Reid unveiled Friday went a small part of the way to bridging the difference by aligning the size of the debt-limit increase and the spending cuts at $2.4 trillion. He kept the war savings, a sticking point for Republicans, but added a two-stage process for Obama to raise the debt limit without explicit congressional approval.

In brief remarks at the White House, Obama said the two sides are “in rough agreement” about the size of the first round of spending cuts and “the next step” to rein in borrowing. “If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that, too, if it’s done in a smart and balanced way,” Obama said.

Future cuts

Talks have been underway for weeks about how to structure a plan so that both parties are encouraged to engage seriously in negotiations over future debt reduction. Democrats want to require both tax hikes and across-the-board spending cuts — which would be unattractive to many lawmakers — if the committee refuses to come up with recommendations for added savings. But Republicans have rejected any trigger that includes a tax hike.

On Friday, Sen. Richard J. Durbin (D-Ill.), the second-ranking Democrat in the Senate, said the design of that mechanism “is what all the negotiations are about.” He added, “That’s going to part of the endgame.”

Without such an agreement, Obama warned that the United States stands to lose its sterling AAA credit rating — “not because we didn’t have the capacity to pay our bills. We do. But because we didn’t have a triple-A political system to match our triple-A credit rating.”

Obama again urged Americans to contact their representatives, clogging Capitol Hill switchboards for a second time this week. The White House also tweeted a number of Twitter handles for Republican lawmakers so voters could press them to “get past this.”

The president’s lobbying campaign appeared to have little effect in the House, where attempts by Boehner to move toward the center were forcefully rebuffed.

GOP divisions

Boehner, House Majority Leader Eric Cantor (R-Va.) and House Majority Whip Kevin McCarthy (R-Calif.) had staked their personal reputations on the ability to deliver an all-Republican majority for the legislation.

They explained to their rank and file that despite broad Republican support in the House for a balanced-budget amendment, an earlier bill including the proposal could not pass the Senate. And the leaders pleaded with GOP lawmakers to support Boehner’s legislation, arguing that a majority for the bill would give McConnell leverage to push it through the Senate — or at least to force concessions from Reid.

Aides described the vote on the bill as nothing short of a vote of confidence in the leadership. All three leaders predicted victory.

But Thursday night, they were still short by as many as a dozen votes. So they pulled the bill and rewrote it to meet the demands of the conservative rebels. The balanced-budget amendment was put back into the bill.

For 23 hours, neither Boehner nor any other Republican leader issued a formal statement or paused in the Capitol hallways to explain to reporters what had happened. On Friday, a chastened Boehner spoke in favor of the rewrite and defended his earlier effort to cut a far-reaching debt-reduction deal with Obama.

“I stuck my neck out a mile to try to get an agreement with the president of the United States. I stuck my neck out a mile,” Boehner said. “But a lot of people in this town can never say yes.”

Democrats openly mocked Boehner’s inability to lead his caucus.

“He didn’t have a plan. By Tuesday, they announced they couldn’t call a vote. Well, maybe Wednesday. No, on Wednesday, they couldn’t call a vote. And then on Thursday, again, they failed to have the majority to call a vote. And so we waited,” Durbin told reporters.

Even some Senate Republicans were perplexed by the disarray in the House.

Sen. John McCain (R-Ariz.) re-affirmed his criticism of the balanced-budget amendment as “bizarro.”

And Sen. Roy Blunt (R-Mo.), who served under Boehner in House leadership until his election to the Senate last year, said the rewritten House bill “may be more of a repeat” of the failed “cut, cap, balance” approach championed by conservatives “instead of a movement to being part of the solution.”

Boehner was “upbeat” during a luncheon with Senate Republicans, participants said, but senators exiting the meeting readily conceded that the House bill would not survive in the Senate. Blunt said talks were focused on finding a compromise that could pass the Democratic Senate and win support from a majority of Boehner’s Republicans.

“Not all of his members, but a majority,” Blunt said.

Boehner is likely to suffer defections if he brings up a Senate-passed compromise, and he would need House Democrats to fill in the gaps — a difficult position for him politically. But GOP senators said they believe Boehner stands ready to do what it takes to avoid a default.

“I think things are moving better than they appear to be moving,” said Sen. Johnny Isakson (R-Ga.). “There’s agreement on cuts. And there’s almost unanimous knowledge that default is not in the cards. That’s the heart of the issue. The rest of it’s details.”

It’s Up to the Senate
Published: July 29, 2011

It was hard to imagine that the House bill to raise the debt limit, and slash and burn the economy, could get any worse. But on Friday it did.

The bill, which narrowly passed the House with 218 Republican votes and none from Democrats, would allow the government to keep borrowing only until November or December and then require both the Senate and the House to pass a balanced budget amendment to the Constitution before the limit could be raised again.

That’s right, in a bid to win over his recalcitrant caucus, Speaker John Boehner agreed to go through all of this again in just a few months — and then hold the country hostage to passing an amendment that will never get the two-thirds of each chamber that it would need. The bill was, as it should have been, promptly dismissed by the Senate.

Now the only hope left for avoiding default on Tuesday is for the Senate to piece together a compromise that can pass with bipartisan majorities in both chambers. It will undoubtedly cut far too much, at a time when the economy can’t afford it. It will contain no needed revenue increases and could still trigger a downgrade. But it would eliminate the imminent threat of financial chaos.

For six months, House leaders catered to their Tea Party members, perhaps hoping that they could turn them to a reasonable path, or at least count on their votes in a clinch. That wish crumbled on Thursday night. At least two dozen Republicans, mostly freshmen, adamantly refused Mr. Boehner’s pleas to support his bill — his last shot at keeping the House’s positions relevant.

Instead of worsening the bill, Mr. Boehner could have negotiated with Democrats to construct one with a chance of resolving the standoff and passing in the Senate. But concerned largely with preserving his position, he gave in to the very lawmakers who have been insisting for weeks that the Obama administration is lying about the coming default. That argument alone should have given him pause about giving in to their demands.

The Senate quickly tabled the revised House bill. The legislation being prepared by Harry Reid, the majority leader, would raise the debt ceiling through March 2013. That avoids another showdown, and potential meltdown, in the middle of the crucial retail shopping period and at the start of the presidential campaign cycle, when Washington will be even less open to rational compromise.

The bill would cut the deficit by about $2.4 trillion over the next decade. Unlike the House bill, it spares Medicare, Medicaid and Social Security from benefit cuts, and counts the drawdown of troops from Iraq and Afghanistan as part of its savings, easing the burden on domestic programs. Unfortunately, it surrenders to the unrealistic Republican demand of no new revenues, cutting too much spending at a time when the economy is still in serious need of government help.

Mr. Reid is negotiating with Republicans on their demands for an enforcement mechanism to make sure the deficit cuts take place in the later years of the deal. Both parties envision a bipartisan panel that could recommend cuts; if those are not adopted, some kind of automatic cuts would go into effect. This automatic knife can be dangerous, arbitrarily cutting without regard to economic circumstances. Democrats should insist that taxes and revenues are not ruled out as a way to lower the deficit.

The House planned a deliberately obstructionist vote on Saturday against the Reid bill, but some Senate Republicans are signaling they are willing to agree to this more reasonable framework. If enough of them can join the Democrats and ignore the bleats of the Tea Party, it may still be possible to avert calamity.
AS Default, IHSG Jalan Terus?

Oleh: Ahmad Munjin
Pasar Modal – Sabtu, 30 Juli 2011 | 13:00 WIB

INILAH.COM, Jakarta – Capitol Hill dan Washington DC diprediksi tidak mencapai kata sepakat soal pagu utang hingga 2 Agustus 2011. Default AS pun jadi ancaman bagi pasar finansial. Cukup tahankah IHSG?

Indeks Harga Saham Gabungan (IHSG ^JKSE) pada perdagangan Jumat (29/7) ditutup melemah 15,03 poin (0,36%) ke level 4.130,80, dengan intraday terendah di 4.102,82 dan tertinggi di 4.160,49. Demikian pula indeks saham unggulan LQ45 yang turun 3,22 poin (0,44%) ke level 729, 83.

Pengamat pasar modal Irwan Ariston Napitupulu mengatakan, berbagai analis sudah memperkirakan, AS tidak akan mencapai kesepakatan mengenai kenaikan batas atas utang AS yang deadline hingga 2 Agustus 2011. Kesepakatan itu menurutnya baru akan dicapai setelah 2 Agustus. Sebab, bargaining anggota Kongres AS sangat kuat.

Setelah itu, lanjutnya, peringkat utang AS bakal di-downgrade dan pada akhirnya negara adidaya itu potensial gagal bayar (default). “Ekonomi AS pun akan goyang dan baru dua pekan kemudian ada deal antara pemerintah Obama dengan Kongres,” katanya kepada INILAH.COM.

Kondisi itu, lanjutnya, bisa memicu kerontokan bursa Dow Jones 400-500 poin dalam satu hari. Jika itu yang terjadi, bisa saja support kuat IHSG di level 3.940-3.950 bakal dites dan mungkin saja jebol. “Bila support IHSG tersebut jebol, terbuka kemungkinan IHSG akan kembali mencoba level 3.700-3.800,” ungkap Irwan.

Hanya saja, lanjut Irwan, koreksi IHSG tidak berarti kemungkinan AS gagal menaikkan debt ceiling yang bisa memicu Dow Jones rontok 500 poin sama dengan IHSG akan rontok 500 poin. “Ini dua kondisi yang berbeda. Saya hanya mengatakan bahwa support kuat IHSG ada di 3.940-3.950 yang bila dipecahkan ada kemungkinan IHSG mencoba lagi daerah 3.700-an,” paparnya.

Mengenai angapan bahwa saat bursa AS terpukul investor kemudian justru beralih ke Indonesia, Ariston melihat ada benarnya. Buktinya, rupiah terus menguat ke bawah 8.500 dan kenaikan IHSG juga jauh lebih pesat dibandingkan bursa Asia lainnya dari level 3.700 pada pekan ketiga Juni ke level 4.177 pada Rabu (27/7).

Apalagi, lanjutnya, saham-saham yang selama ini menjadi penggerak indeks juga melaporkan kinerja keuangan yang meningkat. Apalagi, dengan valuasi yang meski tidak undervalue tapi masih di bawah valuasi wajarnya. “Karena itu, kenaikan indeks ditopang oleh underlying-nya yakni positifnya kinerja emiten,” ujarnya.

Karena itu, Irwan menilai, kenaikan tajam IHSG ke level tertingginya 4.177,74 tidak bubble. Menurutnya, bubble akan terjadi jika Price to Earnings Ratio (PER)-nya sudah mencapai 30-40 kali. Untuk saat ini, PER indeks domestik masih di bawah 20 kali antara 17-18 kali.

Apalagi, PER IHSG akan lebih rendah lagi jika menggunakan PER yang baru setelah semua laporan keuangan emiten kuartal II/2011 dirilis yang rata-rata mencatatkan peningkatan Earnings Per Share (EPS). Ini membuktikan, perekonomian Indonesia sangat maju. “Karena itu, kalaupun AS gagal bayar, masyarakat tak perlu panik selama krisis tersebut tidak memicu krisis di Indonesia,” tandas Irwan.

Dalam situasi ini, Irwan merekomendasikan positif saham-saham yang tidak berorientasi ekspor. PT Indofood Sukses Makmur (INDF) yang sudah tembus alltime high-nya di level 6.500 dan rumornya laba emiten ini naik 100% walaupun baru akan diumumkan akhir Agustus 2011.

PT Adaro Energy (ADRO) juga sudah mulai bergerak dan menyentuh level Rp2.700 sesuai target sehingga masih ada tenaga ke level Rp2.800-2.900 pada pekan pertama Agustus 2011. PT Bank Bukopin (BPKP) karena laba yang meningkat 50% dibandingkan tahun lalu dengan target Rp1.300 untuk 12 bulan ke depan.

Menurutnya, aksi beli di saham ini pun sangat kuat di level Rp750-760. “Saya rasa, investor institusi kuat masuk di saham ini. Karena itu, setiap profit taking, jadi momentum tepat untuk masuk kembali,” tanas Irwan.

PT Mayora Indah (MYOR) juga menarik tapi volume transaksinya terbatas sehingga peluangnya tipis. PT Ramayana Lestari Sentosa (RALS) juga mulai dimainkan pasar saat ini karena faktor puasa dan lebaran.

Begitu juga PT Japfa Comfeed Indonesia (JPFA) yang sudah mulai diakumulasi investor sehingga support bertahan di level Rp5.250 dengan resistance Rp5.550. Meskipun JPFA saat ini cooling down setelah terjadi kenaikan cukup banyak. Tapi, pada bulan puasa, saham ini selalu jadi incaran.

Saham-saham Crude Palm Oil (CPO) pun perlu diperhatikan. PT Astra Agro Lestari (AALI) yang mencatatkan kinerja positif. Begitu juga dengan PT Tunas Baru Lampung (TBLA) yang juga sudah diekspektasikan positif. “Karena saham-saham tersebut sudah menguat banyak, saya rekomendasikan buy on weakness,” imbuhnya.

House Passes Boehner’s New Debt Plan

WASHINGTON — House Republicans muscled through a revised debt limit plan without a single Democratic vote on Friday night and headed toward a confrontation with the Senate, where Democrats were anxiously awaiting the newly passed measure so they could reject it. President Obama has also threatened to veto it.

About 24 hours after the first Republican proposal backed by Speaker John A. Boehner stalled, the House voted 218 to 210 to approve a plan that would increase the federal debt ceiling in two stages, with the second installment of $1.6 trillion contingent on Congressional approval of a Constitutional amendment requiring a balanced federal budget. The Constitutional amendment provision was added to attract conservatives who balked Thursday.

“To the American people, I would say we tried our level best,” Mr. Boehner said as he concluded a debate that had been abruptly halted Thursday evening. “We tried to do our best for our country, but some people still say no.”

Although 22 Republicans opposed the bill, it cleared the House after it had appeared for a time on Thursday night that the Republican leadership had been thwarted in its efforts to send a take-it-or-leave-it offer to the Senate.

After a caucus meeting to round up the votes needed for House passage, Mr. Boehner agreed to modify his plan, which raises the debt ceiling only enough to last a few months. Senate Democrats have taken up a measure of their own, which would raise the debt ceiling until after the election, and prepared for debate and possibly votes on it over the weekend.

The changes by Mr. Boehner won enough votes to allow him to pass his bill with only Republican votes, including those of many, but not all, from the Tea Party faction. Urging its passage, an emotional Mr. Boehner angrily accused Mr. Obama and his Democratic allies of negotiating in bad faith for weeks and called the bill the only way to “end this crisis now.”

“All they would do was criticize what I put out there,” Mr. Boehner said, his voice rising during a rare appearance on the floor. “I stuck my neck out a mile to get an agreement with the president of the United States. I stuck my neck out a mile. I put revenues on the table.”

He added: “A lot of people in this town can never say yes.”

The vote brushed aside Mr. Obama’s plea earlier in the day for quick passage of a compromise bill that could attract support from both parties.

Democrats said the changes the House approved only made the House bill more unpalatable. “This is the most outrageous suggestion I have heard,” said Senator Richard J. Durbin, the assistant Democratic leader.

Mr. Obama said: “Any solution to avoid default must be bipartisan. I urge Democrats and Republicans in the Senate to find common ground on a plan that can get support from both parties in the House, a plan that I can sign by Tuesday.”

He urged Republicans in the House and Senate to abandon a bill that “does not solve the problem” and has no chance of passage in the Senate.

“There are a lot of crises in the world that we can’t always predict or avoid,” he said. “This isn’t one of those crises.”

In an effort to break the logjam, Senator Harry Reid, the majority leader, had called on Senator Mitch McConnell, the Republican leader, to meet with him on Friday to try to resolve to the stalemate.

“My door is open,” Mr. Reid said as the Senate convened. “I will listen to any idea to get this done in a way that prevents a default and a dangerous downgrade to America’s credit rating. Time is short, and too much is at stake, to waste even one more minute.

“The last train is leaving the station,” he said. “This is our last chance to avert default.”

It appeared that the Senate would be in session around the clock this weekend.

The Democrats said they would file a motion on Friday that would start the Senate debate, running down the procedural clock while Republicans, presumably, filibustered against the Reid proposal. The first vote on breaking the filibuster would come after midnight Saturday. Unless the Democrats can win over enough Republicans to cut off debate and move to approving the Reid bill or some variant, the Republicans would be forced to hold the floor continuously, awaiting some kind of deal.

Mr. McConnell, who had been working with Mr. Reid on a fallback plan, abandoned that attempt and has been supporting the effort by Mr. Boehner to push through a proposal that would raise the debt limit in two stages — an approach flatly rejected by Senate Democrats and the White House even before it was toughened with the latest demand for a constitutional amendment.

Mr. McConnell, too, came to the Senate floor on Friday and offered little indication that he was ready to deal, accusing Democrats of devoting recent days to undermining the House plan. “Our Democratic friends in the Senate have offered no solutions to the crisis that can pass either chamber,” he said.

Mr. Reid said he would be making changes to his measure to attract more support but made clear that he considered the Senate plan the final effort to avert a default next week.

“There will be no time left to vote on another bill or consider another option here in the Senate,” he said. “None.”

Mr. Reid said he had also had a “sobering” conversation on Friday with Treasury Secretary Timothy F. Geithner about the consequences of a default.

“It is really precarious for our country,” he said.

Until now, the White House and Senate Democratic leaders had been waiting for the House to act before making their next move with an eye on the Tuesday deadline set by the Treasury Department for raising the debt ceiling or facing the possibility that the government would not be able to meet all its financial obligations.

Failure to pass his proposal would have represented a significant defeat for Mr. Boehner, the first-year speaker who has invested significant political capital in trying to get his fractious majority behind the legislation, which had the strong support of the entire leadership team.

Facing that prospect, he adjusted his proposal to the right, and his opposition within the caucus evaporated.
House Votes to Increase Debt Ceiling, Bill Goes to Senate to Die
By James Rowley and Catherine Dodge – Jul 29, 2011

The House passed Speaker John Boehner’s plan to raise the U.S. debt limit and cut spending, a bill Senate Democrats say they will kill as they press for an alternative approaching an Aug. 2 deadline to avoid default.

“We’ve done everything we can to find a common-sense solution,” said Boehner of Ohio, who pressed reluctant members of his own party to support a measure that Senate Democratic leaders plan to table and President Barack Obama has pledged to veto. “This House has acted,” the speaker said, and it’s time for Democrats and Obama “to put something on the table.”

The measure was approved 218-210, with no Democrats voting for it. Joining the Democrats in voting “no” were 22 Republicans, of whom 11 are freshmen.

House Democratic leader Nancy Pelosi of California said Republicans, with deep spending cuts tied to their debt-ceiling increase, are trying to dismantle decades of bipartisan legislative progress designed to help middle-class Americans.

The Republicans’ goal “is to reduce the public role in the lives of the American people,” Pelosi said on the House floor before the vote. “This bill is going nowhere; it is a total waste of time,” she said.
Senate Action

Senate Majority Leader Harry Reid said his chamber would move immediately to kill Boehner’s plan. Reid, a Nevada Democrat, planned to proceed to a vote on his competing measure while holding out hope for a compromise with Republican leaders as they near an Aug. 2 deadline set by the Treasury Department for action on the debt limit.

Terming the House legislation “dead on arrival in the Senate,” Obama’s spokesman urged congressional leaders to focus on a compromise. White House press secretary Jay Carney said in a statement after the House vote that Reid’s plan should form the basis of a bill to avoid a default by the government and begin reducing the deficit.

As the negotiations in Washington continued, Treasuries rallied, sending yields on 10-year notes to their lowest level since November. Yields on 10-year Treasury notes declined 15 basis points, or 0.15 percentage point, to 2.8 percent at 5:22 p.m. in New York, according to Bloomberg Bond Trader prices. Stocks fell as economic growth trailed forecasts.

The S&P 500 fell 0.7 percent to 1,292.28 at 4 p.m. in New York. The benchmark for U.S. equities extended declines for a third straight month, the longest slide since 2008. The Dow Jones Industrial Average lost 96.87 points, or 0.8 percent, to 12,143.24 after slumping as much as 157 points.

In Washington, lawmakers plan to work through the weekend. Senate procedures would allow an initial vote on Reid’s plan at about 1 a.m. on July 31, and the measure could be altered any time before that vote. A Senate vote then could be held at about 7 a.m. on Aug. 1, allowing the measure to return to the House before the Aug. 2 deadline.

Obama may invite congressional leaders back to the White House for more talks, according to a Democratic official. No decision has been made about further discussions between Obama and Democratic and Republican congressional leaders, said the official, who wasn’t authorized to speak publicly about the administration’s strategy.
AAA Rating

While Obama and Vice President Joe Biden have been in contact with lawmakers, the president hasn’t talked with Boehner in recent days, the official said.

“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills — we do — but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said earlier today at the White House.

Obama said with Democrats and Republicans in “rough agreement” on plans to raise the nation’s debt limit within days of a threatened default, the time for compromise is “now.”

The Treasury Department has said the U.S. will breach its borrowing limit and run out of options for avoiding default if the $14.3 trillion debt ceiling isn’t raised by Aug. 2.

Senate Budget Committee Chairman Kent Conrad expressed confidence that lawmakers will head off a default.
Averting Disaster

“Work expands to fill the time. We certainly know that’s true here,” Conrad, a North Dakota Democrat, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Leaders on both sides are sufficiently responsible that they understand if there were a default, it would be a disaster for this country.”

The Treasury is preparing contingency plans to pay the government’s obligations should Congress fail to raise the borrowing limit in time. Carney said Treasury officials may reveal the plans this weekend.

Federal Reserve Bank of St. Louis President James Bullard said a resolution of the debt-ceiling impasse may remove a key unknown that has restrained economic growth in the U.S. “Once this last uncertainty is resolved, the path to faster growth may be open,” Bullard said, according to prepared remarks for a speech today in Jackson Hole, Wyoming.
Short-Term Fix

Carney reiterated that Obama would accept a short-term debt ceiling extension of a few days only if needed to finish work on legislation lifting the limit for a longer period.

House Republican leaders revised their bill after failing to win enough support for a vote last night. It would allow a debt-limit increase now and require Congress to work out a second increase agreement within months. The second debt-limit increase would occur only if a balanced-budget constitutional amendment is passed by Congress and sent to the states.

Representative Mo Brooks, an Alabama Republican, said the decision to include the balanced-budget amendment turned 10 to 20 Republican votes in favor of the measure.

Democrats who control the Senate oppose the balanced budget agreement, and Reid said today he asked Republican leader Mitch McConnell of Kentucky to meet with him and “negotiate in good faith knowing the clock is running down.”

Senate Democrats, working to break the impasse, are trying to devise a strict enforcement mechanism to guarantee future deficit savings, according to Democratic officials.
Future Cuts

Behind the scenes, officials said, talks on a potential deal centered on how to force future deficit-cutting by Congress, by setting up consequences — such as automatic spending cuts or tax increases, or some combination of the two – – if the savings aren’t achieved.

“If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that, too, if it’s done in a smart and balanced way,” Obama said.

Boehner’s measure would provide an immediate $900 billion debt-ceiling increase while cutting spending by $915 billion. It would allow Obama to seek a second, $1.6 trillion installment of borrowing authority if Congress enacted a law by Christmas to slash deficits by $1.8 trillion. That would set up yet another debt-limit showdown early next year if lawmakers were unable to agree to such a plan.

Obama has called such an approach unacceptable, saying it could lead to a downgrade of U.S. credit and continued economic uncertainty.

Overlap exists between Boehner’s plan and Reid’s. Reid dropped Democrats’ insistence on tax increases. Both proposals take as their starting points a cut of close to $1 trillion in discretionary spending over 10 years, and both establish bipartisan congressional committees to recommend future savings leading to a guaranteed up-or-down vote by year’s end.

Senator Scott Brown, a Massachusetts Republican, said his staff has been working with Reid’s staff to put “more teeth” in the joint committee plan.

Senator Lisa Murkowski, an Alaska Republican, said “absolutist” lawmakers aligned with the Tea Party have put the U.S. “on the brink.”

“I am really worried about where we are standing, and I think part of that has come about because you have individuals that say, ‘It is my way or the highway,’” Murkowski said today in an interview at Bloomberg’s Washington office. “That is not how you govern.”


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