The bipartisan Senate budget plan (PDF), announced July 19 as a solution to the debt-ceiling stand-off and promptly embraced by President Barack Obama (NYT) proves that two important cogs in the Washington machinery want to do the right thing for U.S. public finances. The question is: Will the House of Representatives, dominated by Republicans, allow the compromise to go forward? The reaction from Representative Eric Cantor, the second-ranking Republican in the House, at least makes that option possible. "This bipartisan plan does seem to include some constructive ideas to deal with our debt," allowed Cantor, who often speaks for the Republican's Tea Party wing.
The Senate plan, put together by three Republicans and three Democrats (the so-called "Gang of Six"), reportedly commands support in the Senate. Its ideas closely track the bipartisan proposals from the Bowles-Simpson commission (PDF), meaning that it also garners support from budget experts. Just as important, public opinion may be swinging in favor of this sort of deal. According to the latest Wall Street Journal/NBC poll, more Americans now support raising the debt ceiling than those who oppose it--and therefore, presumably, they support striking the sort of balanced compromise necessary to make that possible. A month ago, more Americans supported not raising the debt ceiling.
Implementing the Senate plan would not be straightforward. It aims to reduce the deficit by $3.7 trillion over a decade; roughly three-quarters of those savings would come from spending cuts, with the rest coming from extra revenues. Social Security and the healthcare entitlements would not be spared. While the plan promises to cut personal and corporate rates (which would be popular) it would pay for these reductions by eliminating deductions (unpopular).
The unpopularity of cuts, coupled with the lack of time in which to do a deal before the government runs out of borrowing room on August 2, might seem to make continued pessimism reasonable. But imagine that August 2 arrives without a deal. Imagine that, the very next day, the administration announces that it cannot make the $23 billion payment to Social Security beneficiaries that falls due on August 3. In the face of those stopped checks, it is not hard to imagine political support for a reasonable compromise picking up fast. If the bipartisan center can hang tough, victory may ultimately prove possible.