Congressional leaders from both, major political parties fanned-out across Capitol Hill Monday night in an effort to secure votes to pass the bipartisan debt bill, as the nation approached the Tuesday 11:59:59 p.m. EDT deadline -- a day away.
And, as of Monday at 4:30 p.m. EDT, House Majority Leader Eric Cantor, R-Va., was predicting passage with a majority of the House GOP conference behind the bill.
"Working closely with [the whip] and the Speaker, I think we are going to get there," Cantor said, the hill.com reported Monday, adding that President Barack Obama was working to secure the necessary Democratic votes for the bill.
The debt deal bill, which raises the U.S. debt ceiling by $2.1 trillion and cuts federal spending by at least $2.4 trillion, is likely to face its strongest opposition in the House, where debate was already underway Monday afternoon. In addition to opposition from the very conservative Tea Party caucus -- which wanted even larger cuts, among other changes, the bill may face substantial opposition from liberal Democrats, who feel President Obama has created a debt reduction bill in which the poor and working class bear the brunt of the cuts, while not asking for $1 in additional revenue from upper income groups.
The bipartisan debt deal includes a two-step process to cut the deficit by about $2.5 trillion over a decade.
Lawmakers have already largely agreed on caps to annual discretionary spending over 10 years. Officials from both parties say that would save $1 trillion.
Another $1.5 trillion would be identified by a special 12-member, committee -- six Democrats, six Republicans -- appointed by Congress and have automatic "trigger cutbacks" -- including cuts to popular Medicare and U.S. Department of Defense programs -- if the committee did not undertake the additional "heavy lifting" to enact the second-stage cuts.
Overall CBO, it is official debt deal estimate, said the bill would reduce the budget deficit by $2.1 trillion to $2.3 trillion from 2012 to 2021.
The rationale for the "trigger cuts" argues that the 12-member committee is much more likely to make the cuts if the alternative is deep cuts to preferred programs: Medicare, in the case of the Democrats; Pentagon defense contracts, in the case of the Republicans.
Further, as of Monday afternoon, the proposed bipartisan debt deal did not contain a tax increase or tax reform that would result in higher federal revenue.
If all goes according to plan, the House is expected to vote on the bill between 7 p.m. and 8 p.m. EDT, with a Senate vote expected to occur between 10 p.m. and 1 a.m. EDT.
Best Laid Plans of Mice and Men
However, as the adage goes, 'the best laid plans of mice and men often go awry,' and as of late Monday afternoon House leaders could not guarantee that the bill had the 216 votes needed to pass the House.
One reason is the candidate-centric nature of today's political parties. Back in the pre-modern era, prior to the 1960s nomination and election reforms, the House Speaker and Majority Leader had much more sway over rank-and-file members, as elected officials who routinely defected on key, party votes could face the wrath of party bosses, who nominated candidates for office.
However, after nomination of candidates switched from party bosses to the public via primaries, rank-and-file members felt less pressure to agree with party leadership on key issues: the public was now their major concern and boss -- not the party's leadership.
Hence, that's why even though party leadership in both chambers and the White House support the bill, its passage is not guaranteed, particularly in the House, where opposition from Tea Party conservatives and liberals is likely to be considerably larger.
Still, if the House members have any second thoughts about the debt deal bill, they can look to the market's response. Moreover, there's an axiom in political science that argues "Congress doesn't react, unless not reacting will result in the wrath of the American voter."
In this case, it may have been "the wrath of the international financial markets" that provided the incentive to avert a U.S. Government default.
U.S. stock markets last week recorded their worst losses of the year, the dollar fell against the yen and Swiss franc, and institutional investors started to move large sums of money into insured bank accounts -- all tell-tale signs that a default would not please institutional investors.
Also, while no one can incontrovertibly say a U.S. default would freeze credit markets the way the Lehman Bros. collapse did, there was near-universal agreement in economics and Wall Street circles that a default would increase interest rates, and tighten credit, among other negative consequences. That's exactly what the barely-growing U.S. economy does not need now, and the default would also slow the global economy.
"If that were to happen [a U.S. default], it has consequences for every family and every business in this country (Britain) and all across the world," British treasury chief secretary Danny Alexander told the BBC.
In other words, more than any other factor, the markets -- and the interdependence of the global economy -- may have been the variables that motivated Congressional Democrats and Republicans to find common ground.
What's more, on the strength of that common ground, the dollar rallied, interest rates started to dip, and U.S. stock markets closed virtually unchanged Monday -- a far better close than last week's fear-induced selling.
Political/Public Policy Analysis: the operative phrase for monday is "fingers crossed." Republican House leaders probably are counting on at least 50-60 Democratic votes to offset Tea Party nay sayers, and even though GOP leadership would not provide a figure as to how many yes votes they had at 4 p.m. EDT, the view from here argues the GOP has more than enough votes (Republican and Democratic) -- over 230 -- to pass the bill.
The Senate should pass the bill with ease, with a vote, as noted, around/near midnight: up to 80 Senators could vote yes.
Based on the positive tone that continues to come out of the U.S. Capitol's corridors of power Monday afternoon, on a scale of 0 to 100 percent, the likelihood of a U.S. Government default has been lowered to 5 percent on Monday afternoon, 5 percentage points lower than Monday at mid-day.
Joseph Lazzaro, U.S. Editor, served as Managing Editor of New York-based financial news web sites WallStreetEurope.com/WallStreetItalia.com, 1999-2004, and as Economics...