The Note — Special ‘Countdown To Crisis’ Sunday Night Edition — Done Deal?

Jul 31, 2011 7:04pm

By MICHAEL FALCONE (@michaelpfalcone) and AMY WALTER (@amyewalter)

Are we closer to a debt-limit deal than we were this morning? Yes — much closer.

Is it a done deal? Not quite.

As our ABC News political team has been reporting, lawmakers from both parties have been negotiating all day to come up with a deal that each side can sell to their members. And this evening, a spokesman for Sen. Harry Reid said that the Majority Leader has signed off on the debt agreement “pending caucus approval.”

So far, Republican leaders have remained silent though they have scheduled a conference call with their members for 8:30 p.m. Eastern tonight. Meanwhile, the devil is in the details. ABC’s Jonathan Karl reports that there is one last bone of contention between the negotiators.

“Republicans are objecting to the amount of defense spending cuts in the first year of the deal. This has nothing to do with the trigger — if further spending cuts are not enacted by Congress next year, the deal would mandate they occur. This disagreement has to do with how much next year’s cuts will apply to defense,” Karl notes. “Reid is trying to put pressure on House Speaker John Boehner to give in on this last point by saying that everybody is now onboard — except for the Speaker.”

And in a sign we’re not there yet, this evening Senate Minority Leader Mitch McConnell’s spokesman told reporters flatly: “Sen. McConnell has not signed off on anything.”

Will we hear from President Obama tonight? "Anything is possible," an administration official tells ABC's Jake Tapper.

WHAT’S NEXT?  THE SALES JOB.  Tapper reports that the White House is now waiting for House Speaker John Boehner to get behind the compromise and waiting for him to tell Minority Leader Nancy Pelosi, D-Calif., how many Republicans he’s going to lose, and therefore, how many Democrats need to support the bill. And from Jon Karl: “The selling of the framework started even before the details were finalized, with at least a few key senators getting calls last night and a frenzy of activity starting this morning.”

More on how leaders in both parties are selling the deal to their members:

BY THE NUMBERS. Tapper and Karl game out what it’s going to take to get the deal passed. There are 240 Republicans in the House. Speaker Boehner doesn’t want to lose more than half of them. The back-of-the-envelope calculation from one House Republican is that 80 to 100 of them could vote "no." The question is whether Leader Pelosi can bring 80-90 Democrats on board. That’s a fairly tall order. Bottom line: When it comes time to vote in the House, we may have one more nail-biter before this is all over. 



LET’S REVIEW: THE FRAMEWORK. ABC’s Jonathan Karl has the details:

– A debt ceiling increase of up to $2.4 trillion — enough to last through the presidential election

– Agreement on up to $1.2 trillion in spending cuts over 10 years

– A new special Congressional committee to recommend additional deficit reduction of up to $1.5 trillion dollars

– Automatic cuts if Congress doesn't act, including to cuts to Medicare and Defense.

The idea is to force Congress to agree to a deficit reduction plan or face deep cuts in programs popular to both parties.


THE SPIN. Jake Tapper’s prediction: “Both sides will declare victory. Last week the biggest difference between the Boehner and Reid proposals was whether or not as GOP demanded there would be another debt ceiling vote before the election. That won’t happen in this deal. But, at the same time, Republicans got almost every single other item that they pushed in this process.”


DOWNGRADE INEVITABLE? ABC’s Bianna Golodryga reported on “World News” Sunday night that even if lawmakers strike a deal before Tuesday’s deadline, credit agencies could still move in the direction of a downgrade. “Of the three major rating agencies, Standard & Poor’s has been the most menacing, warning of a 50 percent chance of a downgrade to AA within the next 3 months if Washington doesn't come up with a significant plan to reduce the deficit by roughly $4 trillion over the next decade. Most believe that a deal of that size is all but impossible at this stage of the game.”

So what would an “AA” nation look like?

Dr. Mohamed El-Erian, CEO of investment management firm PIMCO paints this picture: “It will make us worse off, it is unambiguous in my mind that we have constructed a global system and a national system based on the US being a AAA. If the US loses that AAA status, it will be much more difficult for the US to restore growth.”


Golodryga notes: “First, interest rates will likely rise. Making it more expensive for everyone –the U.S. government, private businesses and you — to take out loans.  The value of the US dollar could drop, making it more expensive to buy any imported goods.  The dollar’s reserve currency status may also be threatened.  All of these scenarios combined could even trigger another recession. Yet while a downgrade would no doubt be a painful blow, there are those who argue that it would not be earth shattering.”

More insights from PIMCO’s Dr. Mohamed El-Erian  from his interview with ABC’s Christiane Amanpour on “This Week.” WATCH:



White House Senior Adviser David Plouffe: “It's hard to get a majority of House Republicans, it seems, to even support their own plan. But here's what I'm convinced of. The shame of it is, if the quote-unquote, ‘grand bargain’ that this president has been working with the speaker on — I'm convinced had that come, it would have been the easiest thing to get the votes for because it would have been deficit reduction on such a grand scale that even though there was component parts in it that are really tough political votes, people would have been willing to accept it.” (ABC’s “This Week”)

In case you missed it, Christiane Amanpour and George Stephanopoulos’ interview with David Plouffe on “This Week”:

Sen. David Vitter, R-La.: “Test I'll use analyzing any McConnell deal — are we put on path to eventually balancing budget, or are we mostly kicking can down the road?”

Democratic Minority Leader Nancy Pelosi, D-Calif.: “We all might not be able to support it — or none of us may be able to support it.”

Sen. Bernie Sanders, I-Vt.: “I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country.  That is not only grotesquely immoral, it is bad economic policy.”

Rep. Raul Grijalva, D-Ariz.: “This deal trades peoples’ livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it. Progressives have been organizing for months to oppose any scheme that cuts Medicare, Medicaid or Social Security, and it now seems clear that even these bedrock pillars of the American success story are on the chopping block. Even if this deal were not as bad as it is, this would be enough for me to fight against its passage. … This deal is a cure as bad as the disease. I reject it, and the American people reject it. The only thing left to do now is repair the damage as soon as possible.”

Sen. Mitch McConnell, R-Ky.: “That the trigger issue has been the one that has locked us in the extensive discussions. I thought we were very close to an agreement a week ago today, and then went off to our separate corners and in my view kind of wasted a week firing volleys back and forth across the Capitol.” (CNN’s “State of the Union”)

Progressive Change Campaign Committee Co-Founder Stephanie Taylor: "Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare, and Medicaid benefit cuts is like entering a bizarre parallel universe — one with horrific consequences for middle-class families. This deal is the exact opposite of what the majority of Americans support, and all Democrats in Congress should oppose it."


FROM THE RIGHT: TEA PARTY TAKE. “The founding members of the Senate Tea Party Caucus said Sunday that they won’t seek to delay Senate action on a compromise debt-ceiling plan being negotiated by congressional leaders and the White House,” the Washington Post’s Felicia Sonmez reports. “Sen. Rand Paul, a Republican freshman from Kentucky who has previously sparred with leadership on other measures, said in a brief interview that while he will likely oppose the debt-limit plan outlined by Senate Minority Leader Mitch McConnell (R-Ky.) Sunday morning, he will not seek to push a Senate vote on the measure past the deadline by which Congress must act or else the country will default. ‘I’ve sort of said all along that I can’t vote for any plan that doesn’t balance at some finite time, and this, to my understanding, never balances,’ Paul said.”

FROM THE LEFT: LIBERALS VENTING. “Liberals began tearing into President Obama and Democrats on Sunday, accusing them of caving to Republican demands even before final details of a debt ceiling agreement have been announced,” according to The New York Times’ Michael Shear. “In a scathing statement based on early reports, said the ‘debt deal has gone from bad to worse’ and they called it ‘extremely troubling that it now appears that some Democrats are willing to give in to Republican demands to make this already disastrous plan worse for working families.’ … Several Democrats said they worry in particular about automatic cuts to Medicare that could be triggered if a congressional committee deadlocks later this year and cannot agree to a deficit-reduction package of nearly $2 trillion.”


ABC NEWS SPECIAL COVERAGE. The ABC News powerhouse political team continues to report for all broadcasts and platforms during the closing hours of the debt-limit negotiations. ABC News Chief Political Correspondent George Stephanopoulos anchored "World News" from Washington tonight and will co-anchor “Good Morning America” from the nation's capitol tomorrow morning.

On Monday, August 1, Diane Sawyer will anchor “ABC World News” from Washington, DC. With just hours left before the deadline to avoid default, Sawyer will bring viewers the latest on the debate from Capitol Hill. She will reconvene a panel of Tea Party lawmakers to get their take on the debt deal.

ABC’s Senior White House Correspondent Jake Tapper and Senior Political Correspondent Jonathan Karl continue to bring you inside the negotiations occurring between lawmakers on Capitol Hill and in the White House.

Up to the minute reporting from the political unit will always be available at on "The Note" and "Political Punch" blogs.

ABC News Radio is providing comprehensive coverage with reporting from ABC News Radio White House correspondent Ann Compton and ABC News Radio Correspondent Vic Ratner on Capitol Hill.

TOMORROW’S “TOP LINE”: ABC’s Amy Walter talks to two House Republicans about this weekend’s debt-limit negotiations and the way forward. Rep. Jason Chaffetz, R-Utah, and Rep. Jeff Duncan, R-S.C., join tomorrow’s “Top Line” conversation.



@j_strong: Freedom Works and Heritage Action both NO on deal … progressives angry … is the center big enough for passage?

@donnabrazile: Remember, this political drama is self inflicted.The U.S. Debt Ceiling: A Historical Look – The Atlantic:

@David_Gergen: Reports keep changing on what is in #debt deal. Don't American people deserve to know what's in it before #Congress votes???

@AndrewStilesNRO: Rep Chaffetz on his way to Sen Lee's office, says won't support deal w/out BBA passage, seemed pretty pessimistic re House whip count

@fivethirtyeight: Don't get why Pelosi waiting until tomorrow to meet with Dem caucus. Their leverage likely goes down as we get closer to deadline.

@McCainBlogette: SHARK WEEK!!!!!



(all times local)

* Rick Santorum visits Washington, Muscatine, Davenport, Clinton and Tipton as part of his Santorum Family Tour.

* Jon Huntsman tours FIRST, a non-profit that encourages young people to hone math and science skills, with inventor Dean Kamen at 12:30 p.m. in Manchester, N.H. At 6:30 p.m., he speaks at a house party in Rochester.

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