Gang of Meddlers

The debate over raising the nation's debt ceiling has strayed into dangerous territory. After talks broke down last Friday between President Barack Obama and House Speaker John Boehner on a "grand bargain" to cut budget deficits by $4 trillion over the next decade, both Republicans and Democrats rushed to blame the opposing side. But as the House Speaker and Senate Majority Leader Harry Reid prepare to release their own proposals -- which, if the leaked details are any indication, are intended to win the political fight without getting past the policy impasse -- another set of politicians is more culpable than anyone: the Gang of Six, the bipartisan group of senators who announced a deficit deal to great fanfare last week.

Before the Gang of Six re-emerged as a force in the debate after the group fell apart earlier this year, Obama and Boehner were working on their long-term deal and, as of last week, were coming close to hammering one out. Meanwhile, Senate Majority Leader Harry Reid and Senator Mitch McConnell were writing a fallback plan in case the talks failed. The McConnell-Reid proposal would have increased the debt ceiling through 2012 and cut deficits by only $1.5 trillion; it would also have created a bipartisan commission to recommend reforms to taxes and entitlements. Reid and McConnell were ready to introduce the bill in the Senate by the end of the week if no long-term agreement emerged between the president and the House majority leader.

Then last Tuesday, the Gang of Six -- led by Senators Mark Warner, a Democrat from Virginia, and Saxby Chambliss, a Republican from Georgia -- presented their own plan to nearly 50 senators. The Gang, which had been meeting for seven months, announced a proposal for $3.7 trillion in deficit reductions that included major spending and entitlement cuts as well as revenue increases (accomplished through broad tax reform that would lower individual and corporate rates while broadening the base). Democratic and Republican senators liked what they heard. Senator Susan Collins, a Republican from Maine, told The Huffington Post, "I believe it should be considered in conjunction with the debt ceiling plan." Even Obama praised it as "broadly consistent with the approach that I've urged."

But the Gang of Six proposal is actually just a five-page outline -- a plan to write a plan. While it closely mirrors the recommendation from the co-chairs of the president's deficit commission, Erskine Bowles and Alan Simpson, it merely sets targets for spending reductions, punting the actual details to the various committees. It puts health-care spending on a "global budget," ensuring no increases beyond the increase in gross domestic production plus 1 percent but offers no specifics for doing so. It includes an elaborate tax overhaul but doesn't fill in the numbers on that, either. No legislative language was attached to the plan, and the Congressional Budget Office said it would take two weeks to score it -- well beyond the August 2 deadline to raise the debt ceiling.

Now Gang of Six fever has overtaken the Senate, and everyone has an opinion on how to incorporate the proposal into the debt-ceiling deal. Senator Richard Burr, a Republican from North Carolina, wants a short-term increase of the debt ceiling to give the Gang of Six time to translate their plan into legislation. Similarly, Gang of Six member Kent Conrad, a Democrat from North Dakota, suggested a six-month debt-ceiling increase. Warner met with Reid to try to work parts of the Gang of Six proposal into the McConnell-Reid backstop plan. Even two House members, Frank Wolf, a Republican from Virginia, and Jim Cooper, a Democrat from Tennessee, called for a House vote. By the end of the week, Warner agreed, describing the endeavor he led as "the only bipartisan effort in this town."

Simply put, the Gang of Six plan, airdropped into the debate with two weeks until default -- after seven months of talks -- adds another layer to the available options and makes the already tumultuous negotiations even more complicated. That was the last thing anyone needed this late in the game. Indeed, it knocked McConnell-Reid off its path because the Gang of Six suggested a bigger deal was possible. In fact, though, it only showed that an unwritten, unformed idea of a deal was possible.

That was enough to derail the talks at the White House, too. The Gang of Six's revenue targets were substantially higher than the ones being discussed in the Obama-Boehner negotiations. For this reason, the White House felt the need to increase its target by $400 billion, asking for $1.2 trillion in added revenue instead of $800 billion. This, says Boehner, blew up the talks.

While the Gang of Six plan includes a more balanced compromise between revenue increases and spending cuts than the Obama-Boehner grand bargain, its tax plan is a mess: The numbers don't pencil out. Under the proposal, Congress would have to lower individual tax rates, eliminate the $1.7 trillion alternative minimum tax, reform but not eliminate major tax expenditures, achieve a revenue-neutral corporate tax reform (so getting rid of of corporate tax breaks would be offset by lowering corporate tax rates), and raise roughly $3.5 trillion in the process. That's nearly impossible from a mathematical standpoint.

So while the Gang of Six may have intended to reach a broad bipartisan agreement on deficit reduction, all it did was blow up the only two working paths to a debt and deficit deal. Ultimately, the Gang of Six increased the possibility of default.

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