Reid Unveils $2.7 Trillion Debt Plan: ‘We are giving (Republicans) what they want’

By Eliza

Jul 25, 2011 4:50pm

ABC News’ Sunlen Miller (@sunlenmiller) reports:

And the showdown over the dueling deals continues on the Hill today.

While Speaker of the House John Boehner, R-OH., was briefing his caucus on his debt plan, on the other side of Capitol Hill Senate Majority Leader Harry Reid, D-NV., briefed press on the Senate’s competing package, which he will bring to the Senate floor formally tonight.

The undercurrent of every point Reid made, along with Senator Schumer, D-NY by his side, is that each detail of this deal is something that Republicans have already agreed to and thus this is, in their view, the offer that Republicans cannot refuse.

“We are giving them what they want,” Reid spun his plan, “This proposal satisfies Democrats core principles by protecting Medicare, Medicaid and Social Security and providing a long-term extension of the debt ceiling that the markets are looking for. The bill also meets Republicans demands – two major demands: it contains no revenues and the amount of the cuts meets the amount of the debt ceiling increase.”

“If they oppose this – why?” Senator Schumer, D-NY,  said of Republicans, “it’s everything they asked for.”

“This is a very hard decision for many on our side,” Schumer continued, “our side knows that any serious deficit plan must include revenues, but in the interest of preventing a default, you can have the fight on revenues later.”

Schumer said at this point there is “no alternative” other than default.

Put simply: Reid said, that “all Republicans have to do is say yes,” but quipped that the Republicans are being driven by the “radical right-wing in tune with the tea party.”

“We should not let these extremists dictate the outcome of this debate,” Reid said calling on the leaders of the Republican party to “break away from those extremists who seem to be running  the Republican party in Washington.”

Reid’s $2.7 trillion plan would include $1.2 trillion in discretionary spending cuts including both defense and non-defense spending. 

The proposal outlines $100 billion in mandatory savings – none of which would impact Medicare, Medicaid or Social Security.  The savings would come from:

-$40 billion in Program Integrity Savings – reducing and abuse in mandatory programs such as Continuing Disability Reviews and SSI redeterminations, Internal Revenue Serve tax enforcement, health care fraud and abuse control and Unemployment Insurance improper payment reviews.

-30 billion in Fannie Mae/Freddie Mac Reforms

-$15 billion in Spectrum Sales and Universal Service Fund Reforms

-$10-15 Billion in Agricultural Reforms

-Higher education program reforms whose savings go to sustain the Pell Grant Program

In addition there would be $ 1 trillion in “winding down” the war in Iraq and Afghanistan.  Democrats, who know Republicans are critical of this calculation pushed back today— noting that Paul Ryan’s budget in the House also included these savings in the deficit reduction calculation.

There would be $400 billion in interest savings — $220 from the discretionary spending cuts and $180 billion from “winding down” the wars in Iraq and Afghanistan.

The plan also establishes a Joint Congressional Committee to find future savings – made up of 12 members to present options for future reduction. The recommendations would be guarantees an up-or-down vote, without any amendments, by the end of 2011 in the Senate.

The Reid plan contains no tax increases.

Earlier today, Senate Minority Leader Mitch McConnell, R-KY.,  expressed frustration that after a weekend of work in Washington, Americans are still confused and without a solution after President Obama turned down a short-term proposal.

“This weekend, we offered the President a bipartisan proposal to avoid default so we could have the time we need to put together a serious plan for getting our house in order, and he rejected it out of hand,” McConnell said on the Senate floor, “Not for economic reasons. But,” as he put it, “to extend this debt ceiling through the next election.”

McConnell called for consideration of a short-term plan, what Speaker Boehner is offering, – noting that of the 62 times the federal debt limit has been increased, the average length of an increase is just over seven months.

“There is absolutely no economic justification for insisting on a debt-limit increase that brings us through the next election,” McConnell said, “It’s not the beginning of a fiscal year. It’s not the beginning of a calendar year.  Based on his own words, it’s hard to conclude that this request has to do with anything, in fact, other than the President’s re-election”

“I would suggest that the President reconsider their offer rather than veto the country into default,” McConnell said.

Majority Leader Reid said a short-term plan is a “non-starter in the Senate and in the White House,” and noted that the debt ceiling has never been extended in the short-term with conditions on it, as is being suggested by the Republicans now.

“A short-term agreement risks many of the same dire consequences that would be triggered by the default itself,” Reid said, “it appears to be at this stage that Republicans are more interested in trying to embarrass the president than doing what’s right for the country.”

Senator Schumer called a vote on Boehner’s plan in the House is a “dangerous waste of time,” — as it cannot become law with a presidential veto.

“The two-step plan outlined by Speaker Boehner is a dodge, it kicks the can down the road. It resolves the debt ceiling only for the next few months and after that we’d be right back at square one all over again.”

Schumer said the plan would leave a “cloud of default” hanging over the nation’s head, “undermining conference,” in the bonds markets.

“It could even cause a credit rating downgrade,” Schumer said of Boehner’s two –stage plan.

The White House today embraced Reid’s proposal – but Republicans will put up a fight against Reid proposal. Speaker of the House John Boehner today called it a “gimmick.”

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