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$19.6 Trillion Debt Ceiling: Done Deal?

Last week, when reviewing the next steps in the 2015 version of the debt ceiling "drama" we said that "that the only certain outcome from the melodramatic debt ceiling fight over the next several days, is the following: the US is about to have a brand spanking new debt ceiling, one that should last it until March of 2017: $19,600,000,000,000."

Sure enough, with just days left until the November 3rd D-Day when the Treasury runs out of emergency cash and is forced to prioritize debt repayments over government spending, moments ago Politico reported that "congressional leaders and the White House are working toward a two-year agreement. A debt ceiling measure is on a parallel track."

More:

House and Senate leaders are working toward a two-year budget agreement that would boost defense and domestic spending by tens of billions of dollars, according to sources familiar with the talks.

 

Top House and Senate leadership aides are huddling with Obama administration officials to try to hash out a deal. There are parallel talks on a measure to lift the debt ceiling, which needs to happen by Nov. 3 to avoid a default. The debt ceiling legislation would be separate from a budget agreement, however.

As we further expected, the new House speaker, John Ryan will not even get his hands dirty and instead the "negotiator" will be outgoing majority leader John Boehner, who will work alongside Democrats, and for whom at this point it doesn't matter if he concedes one last time: after all, he is out. As we said: "this means another victory for the Demorats who have required a "clean" debt raise. This is precisely what they will get, and why it will have to take place under John Boehner as Paul Ryan would surely tarnish his reputation with the Freedom Caucus if his first act is one seen as submission to the left."

Politico confirms this: "Rep. Paul Ryan (R-Wis.), the presumptive House speaker, is not part of the talks. Speaker John Boehner (R-Ohio), however, has said he would like to clear the legislative decks for the next speaker. Boehner leaves Congress Thursday afternoon."

And with the big picture deal in place, it is just a matter of time before the specifics are also agreed upon:

Democrats are pushing hard to force revisions of a 2011 budget accord. Spending bills have backed up in Congress, and government funding runs out in mid-December. Senate Democrats have bottled up spending bills, and President Barack Obama vetoed a defense authorization bill last week.

 

Negotiators have pegged a deal as costing about $80 billion a year for more defense and discretionary spending. That's a difficult target to meet through spending cuts, fees and other revenue-raisers that do not constitute tax increases.

 

If a deal comes together, it would have to pass the House with overwhelmingly Democratic support, as conservative Republicans are unlikely to support an agreement. It would also be difficult for Senate Majority Leader Mitch McConnell to marshal a majority of GOP senators to support such an accord.

The winner, in addition to Democrats of course who will be assured smooth sailing through Hillary election in November 2016, is also Paul Ryan: "Any deal would be a boon to Ryan as he moves toward the speakership. An accord would remove the threat of a government shutdown through the 2016 election."

And courtesy of Stone McCathy, this is what the final package deal will look like:

We're starting to see more and more reports saying that a big budget agreement between Congressional leaders and the White House could be announced later today. According to several accounts, negotiators are putting together a package that would 1) increase the debt limit, 2) increase discretionary spending levels, 3) extend funding for highways, set to expire at the end of the month, and 4) reauthorize the Export-Import Bank.

 

The deal would reportedly set spending levels for two years, and therefore 1) avert a government shutdown and 2) avoid a repeat of the current stalemate right before the election. Outgoing House Speaker John Boehner would clearly like to get action on the debt limit and some of these other issues out of the way before Paul Ryan assumes the job of Speaker later this week, assuming all goes according to schedule. Boehner will need to rely heavily on Democrats to get the kind of package being described passed. It would be hard for Ryan to do the same, especially in the early days of his job as Speaker. He's reportedly pledged to abide by the so-called "Hastert rule," which says the House leadership doesn't advance legislation without a the  support of the majority of the majority party.

The bottom line: just as we previewed it last week, it is now just a matter of time before the U.S. debt ceiling rises from $18.1 trillion to $19.6 trillion, providing enough capacity to fund the US through March 2017.