US debt deal down to the wire

With time running out before a deadline that could see the United States default on its borrowing for the first time, there were hints last night of a possible deal.

Sources said congressional leadershad made significant progress on a plan to raise the debt limit in two steps by about US$2.4 trillion ($2.73 trillion). Spending would be cut by a slightly larger amount. The first stage - about US$1 trillion - would take place immediately and the second later in the year.

Congress would be required to vote on a balanced budget amendment to the Constitution, but none of the debt limit increase would be contingent on its approval.

Last night, an official said, the two sides had settled on general concepts, but there were details to be worked out and no assurance of a final agreement.

The Republican-controlled House of Representatives had passed a stop-gap bill by 218-210 on Saturday. Two hours later, the Democratic-controlled Senate voted to kill it by 59-41. Democratic Senate Majority Leader Harry Reid postponed until this morning a test vote on his own debt limit proposal to give negotiators time to work out an agreement.

Although the debt deadline is Wednesday NZT, damage has already been done to America's reputation worldwide. The US stock market has just had its worst week for a year and Obama, in a Gallup poll published on Saturday, saw his approval ratings drop to a new low, down from 45 per cent to 40 per cent.

The crisis is ostensibly about raising America's debt ceiling from US$14.3 trillion.

But in reality the crisis is a direct consequence of the polarisation of US politics that began under President George W. Bush and hardened with the arrival of President Barack Obama and the birth a few months later of the Tea Party movement.

Politics professor Larry Sabato, of the University of Virginia, said: "This is a very unusual place in American history. No one in my field can remember circumstances like this.

"You have people in Congress who will not sit down and compromise. Compromise is a dirty word. But representative government is impossible without compromise. The Republicans and Democrats are voting as separate units, which they have rarely done in the US."

The Tea Party hardcore in the House were prepared to put at risk the US's economic recovery to push the Tea Party ideal of small government, in particular cutting federal spending.

Martin Frost, a former Democratic Congressman from Texas, writing on the Politico website, compared the Tea Party to the Taleban in its drive for ideological purity, lack of respect for tradition and unwillingness to compromise.

"We now have a group of US politicians seeking political purity, who seem to have much in common with the Taleban," he wrote.

"They are Tea Party members; and because of blind adherence to smaller government, they seem intent on risking destroying what American political leaders have constructed in more than two centuries of hard, often painful work."

America, or at least the Democratic-leaning part of it, watched last week's events with horror. Polls and television street interviews reflect higher than usual anger and frustration with Washington.

US political commentator Joe Klein, writing in Time, caught this mood when he suggested: "I have a proposal: the Cut the Crap Act. It will have to be passed by Monday, to avoid default."

The public wants the politicians in Congress focus on what they regard as the real priorities of jobs and tackling poverty.

Normally, raising America's debt ceiling is an arcane and routine matter for Congress, passing through the House of Representatives and Senate barely noticed, as it has about 140 times since World War II. But the Tea Party rose up in 2009 out of anger over the size of the national debt, the scale of federal spending and bailing out the banks and the car industry.

Although much of the blame for the scale of debt rests with Bush's wars in Iraq and Afghanistan and his tax cuts for the wealthy, Obama is blamed for spending billions trying to stimulate the economy.

About 50 Republican members of the House are part of the Tea Party caucus but only about 20 make up the hardcore, many having arrived in Congress for the first time only in January this year. They view themselves as part of a transformational movement, not interested in the old ways of doing things - the bipartisan compromises of old. The hope of mainstream Republicans was that they would be able to tame and absorb the energy of the Tea Party, but it last week dominated the Republican Party.

The tension in the party was highlighted in a clash between Senator John McCain, a veteran who has done deals all his political life with Democrats. He described as "bizarro" the newer members and dismissed them as naive, seeing the world as a Lord of the Rings battle between good and evil. One of the Tea Party senators elected in November, Rand Paul, responded that he was happy to regard himself as a hobbit.

William Kristol, the veteran right-wing commentator, speculated in a blog on the Weekly Standard website, that once the crisis was over Obama might invite the Republican hardcore to the White House to celebrate their role "in weakening the Republican Party in the House and the conservative movement in the country and making it harder to defeat Obama in 2012." Max Pappas, vice-president of FreedomWorks, a Tea Party group, responded by calling on members to ignore Kristol and described him as a "Big Government" conservative who "is offering more of the same bad advice he's given Republicans over the past decade".

Tea Party organisations offered implicit threats on Friday that any member of the House prepared to back compromise could face a deselection challenge in next year's Congressional election.

On Friday, the hardcore of Tea Party Republicans humiliated the House Speaker John Boehner by revolting over his proposed debt bill. Boehner had to abandon the vote after four hours of haggling and rewrite the plan, which was then passed. But it was an embarrassment that has undermined his position as the Republican leader in the House.

Waiting to replace him, should he falter, is his deputy Cantor, a mainstream Republican who has emerged over the past week as one of the Tea Party's new heroes. Cantor a week ago effectively killed off secret negotiations between Boehner and Obama on a compromise.

Cantor has voted in the past for raising the debt limit and for bailouts after the 2008 economic meltdown.

Cantor's conversion may be partly the result of warnings from his local Tea Party movement that it was unhappy with him.

What puzzles many Democrats about the intransigence of the Republican hardcore is that the Republicans have already won the argument. After the collapse of the Boehner-Obama negotiations, the Democrats in Congress dropped demands that the reduction in the national debt had to be secured through not only spending cuts but by taxes too. There were no tax rises in any of the compromise plans being circulated.

The only major division as of yesterday was over timing. The Democrats want the debt ceiling raised until after the 2012 White House election while the Republicans want a return match early next year, as election campaigning gets under way.

The White House was hoping that the older heads in the Senate, the Democratic leader Harrry Reid and his Republican counterpart Mitch McConnell, will do a deal.

The problem is that this then has to go back to the House for a vote, and no one can be sure how the House is going to respond.

- OBSERVER, AP