Mitch McConnell Debt Ceiling Plan: Senate GOP Leader Offers Alternative To Obama's 'Grand Bargain' [UPDATED]

WASHINGTON -- Senate Minority Leader Mitch McConnell (R-Ky.) floated a novel way out of default Tuesday, suggesting that Congress give up its power to raise the debt ceiling, and instead effectively transfer that authority -- and the political pain that comes with it -- to the White House for the remainder of Obama's current term.

With eight days until the administration-imposed deadline to reach a deal, Senate Majority Leader Harry Reid (D-Nev.) told reporters he had no plans to "trash" McConnell's plan and would give it a close look.

Under current law, Congress raises the debt ceiling, which allows the Treasury Department to issue more bonds to pay off debts and fund projects that Congress has already authorized. Raising the debt ceiling does not authorize or appropriate new spending, but merely settles old bills.

Yet under McConnell's plan, which he called his "last-choice option," the White House would request an increase in the debt ceiling and Congress could only block that request with a veto-proof super majority -- effectively ceding control over the debt limit to the White House. A super majority would likely be difficult to amass, especially when neither party's leadership genuinely wants the nation to default.

McConnell said he believes the votes exist in the Senate to pass a bill that would establish such a debt-ceiling regime. If House Democrats went along, fewer than 25 Republican House votes would be needed to make the bill law. How congressional leadership could marshal those votes, however, remains a mystery.

The novelty of McConnell's plan made those on Capitol Hill more pessimistic, moving genuine fears of default from the fringe to closer to center stage.

"This is not my first choice," McConnell said at a press conference Tuesday."I had hoped all year long that the opportunity presented by his request to raise the debt ceiling would generate a bipartisan agreement that would begin to get our house in order reducing spending."

"That may still happen, I still hope it will," he added, "but we're certainly not going to send a message to the markets and to the American people that default is an option."

The bill would require the president to recommend spending cuts -- without revenue-raisers -- in the same amounts of a debt ceiling increase request, although actually passing the cuts would not be necessary to raise the debt limit.  
"It gives the president 100 percent of the responsibility for increasing the debt limit," Sen. Lamar Alexander (R-Tenn.) told reporters after the press conference.

The debt limit would be increased three times during Obama's term: First, by $700 billion over the next few weeks, then $900 billion in the fall and another $900 billion in the spring, McConnell said.

But the bill doesn't guarantee that spending cuts will happen, McConnell said.

"We have become increasingly pessimistic that we will be able to reach an agreement with the only person in America who can sign something into law, and that's the president," he said.

McConnell said he has "spoken about it with others," but would not comment on whether House Speaker John Boehner (R-Ohio) is open to the idea.

Reid said he had received a call from McConnell about the plan.

"[McConnell] has a proposal that some of you have looked over," Reid said. "He'll explain that to you. I'm not about to trash his proposal. It's something that I will look at."

"It sounds like the ultimate punt," said one senior Senate Democratic aide.

Senate Republicans have been largely uninvolved in the debt limit negotiations so far. It has been expected that the House floor would be the battleground, and a bipartisan coalition of senators loyal to their respective leaderships will push through whatever the House sends across the Capitol.

UPDATE 3:40 p.m.: Michael Steel, spokesman for Boehner, confirmed that the House speaker is aware of McConnell's plan.

"The Speaker shares the Leader's frustration," he said in an email. "Republicans are unified in our commitment to ensuring that the debt limit is not used as leverage to saddle small businesses with increased taxes that destroy jobs."

UPDATE: 4:15 p.m.: A Senate GOP aide weighed in on McConnell's proposal Tuesday afternoon.

"This proposal is not only likely unconstitutional, its the worst possible political strategy for Republicans who promised to fight the debt to now instead give the President unilateral power to borrow to his heart's content," the aide told The Huffington Post. "The McConnell plan is a full surrender, white flag approach."

"Republicans should be fighting for a balanced budget, not running away from the battle to avert bankruptcy," the aide added.

UPDATE 5:10 p.m.: Roll Call reports that McConnell "noted that all 47 members of his Conference support the plan if White House talks break down."

But the Senate GOP Aide countered, "There is nowhere near unanimous support."

The aide said McConnell gave more details of the plan to the press than he gave to GOP senators, saying the proposal's announcement came as a surprise at Tuesday's lunch meeting.

"Reporters had more information on the plan than any senators or staff," the aide said. "McConnell is leading himself and a few other Republicans with this plan; it has no chance of passing the House or passing the smell test with voters."


UPDATE 8:40 p.m.:

Senate Republican sources said McConnell's proposal was motivated by a skepticism that the GOP can get an acceptable deal from negotiations with the Obama White House. White House budget director Jack Lew's admission to McConnell Monday that the deal produced by the Biden working group would cut only $2 billion in discretionary spending next year was a key figure in convincing Republicans that they were in the process of getting rolled.

The fear among Republicans is that just like the deal produced in April to avoid a government shut down, spending cuts that had been discussed were quickly being whittled down so much that they would face a full-scale revolt from the conservative grassroots if Republicans agreed to any such proposal.

The president holds a distinct advantage in a negotiations process in which changes to any deal under discussion happen quickly and the actual nuts and bolts of how a plan would work and how the numbers would be structured is calculated by the White House budget office. Members of Congress have an in-house number-crunching shop -- The Congressional Budget Office -- but the process works far more differently with CBO. It needs more time to process requests for scoring a bill, and can handle only a certain number of requests from lawmakers.

During negotiations, Lew - who works for the president - has been in the room and an active participant. CBO Director Douglas Elmendorf -- who is an impartial actor -- has not been in the meetings.

In light of this built-in disadvantage, Republican sources said the McConnell proposal accomplished two distinct things. It reduced the likelihood that they could be blamed for a default and a subsequent potential fiscal crisis. If no deal is reached by Aug. 2, or just before, Obama would have to go with their option or risk being seen as wanting to cause default.

And, a Senate GOP aide said, if the McConnell plan did pass, Obama would have to go to Congress three times before the 2012 election and request an increase in the debt ceiling each time. Then, his request would be rejected by a bipartisan majority in Congress and he would then have to issue a veto in order to raise the debt ceiling. He would have to work to sustain that veto against an override using Democratic votes.

If that sounds complicated, it's because it is. The process laid out by McConnell would begin with the president requesting a $700 billion increase in the debt limit. As soon as Congress received the request, $100 billion of that $700 billion would be released to give Washington some breathing room to let them get past Aug. 2.

But then, McConnell's proposal would proceed to introduce a resolution of disapproval, rather than approval, putting Congress in the position of taking a popular vote -- against raising the debt ceiling. If Congress approved the resolution of disapproval, Obama would then have to take another step toward owning the debt increase by vetoing the resolution. The resolution would then go back to Congress, where the White House would have to lobby Democratic lawmakers against voting to override the veto. A two-thirds majority in both the House and the Senate is required to override a veto, and so yet another vote on the debt ceiling would be taken, and as many as 66 of 100 senators and 289 of 435 members of the House could vote against raising the debt ceiling, without actually preventing an increase in the debt limit.

Under McConnell's proposal, this process would be repeated this fall and a year from now.

Republicans acknowledged that the proposal was an easy target for some in the conservative movement, but said they thought it might be the best they can do given their perceived lack of leverage over Obama in direct negotiations.

Jon Ward contributed to this report.