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One week before a possible, first-time default on our national debt, President Obama used his bully pulpit to address the nation. Last night, in his nationally-televised speech, he attempted to educate the American public on how we got to this point—a decade of “trillions of dollars in new tax cuts while two wars and expensive prescription drug program were simply added to the nation’s credit card.” The president argued for a “balanced approach,” once again choosing reason over histrionics. (Many were expecting the intensity he displayed at Friday’s press conference.) He said: “Defaulting on our obligation is a reckless and irresponsible outcome to this debate.”
In his rebuttal, House Speaker Boehner argued in his folksy, somewhat condescending manner for the GOP stance—largely driven by the House Tea Party Caucus—related to smaller government and no new tax hikes. In his characterization of boosting the $14.3 trillion debt limit by the Aug. 2 deadline, he maintained that “the sad truth is the president wanted a blank check six months ago, and wants a blank check today. This is not going to happen.”
At this point, Obama’s “grand bargain” calling for $3 trillion in savings over 10 years as well as $800 billion in revenues after 2013 by overhauling the tax code and significant restructuring of entitlement programs Medicare, Medicaid and Social Security is off the table. Much to the chagrin of democrats, the president and Boehner had negotiated the package and came close to a deal until the Speaker walked away after bowing to pressure from Tea Party members. Last week, the Senate killed the GOP plan, the Cut, Cap and Balance Act that was passed in the GOP-controlled House, pushing a $6 trillion federal spending reduction over the next decade by cutting $111 billion in expenditures in fiscal year 2012, capping future spending and establishing a balanced budget amendment.
Now under consideration: Senate Majority Leader Sen. Harry Reid‘s plan, currently backed by the president, to slash the budget deficit by $2.7 trillion and raise the debt limit until after the 2012 election. The Boehner proposal, a variation of Cut. Cap and Balance, calls for $1.2 trillion in cuts and creation of a bipartisan committee to identify another $1.8 trillion. The debt ceiling would be increased by $2.6 trillion in two phases—$1 trillion immediately and then $1.6 trillion before the 2012 election. Of course, the Republicans rejected Reid’s proposal, maintaining $1 trillion of savings from winding down combat operations in Iraq and Afghaniztan as “gimmicks.” The president and Dems oppose Boehner’s measure citing that it “kicks the can down the road” and may not avert a ratings downgrade of government debt and resulting interest rate hike for consumers. Both proposals offer the GOP exactly it wants: No new taxes.