What McConnell could cook up with Reid

Well, the rumors are flying thick and fast this Sunday, and this post probably won't be worth the pixels it's printed on. But based on Mitch McConnell's past dealmaking history, his acknowledged relative lack of leverage this time, and the drop-dead taboos against raising spending levels or taxes that a primary challenge imposes on him, I can't resist a bit of speculation as to what he may be cooking up with Reid (Dick Durbin called the talks between them a "breakthrough" today, though Reid himself has sounded far less sanguine).

Recall that the Budget Control Act negotiated by McConnell in the last days of July 2011 created a mechanism whereby the executive branch could raise the debt ceiling and Congress could register a vote of disapproval -- or override the hike with a two-thirds majority in both houses. That deal was end-stopped by the amount required to raise the debt ceiling high enough to get past the 2012 election; it ran out in March of this year.

Recall too that progressive éminence grise Norm Ornstein has floated an acceptable exception to the Dems' current no-concessions-for-debt-limit-hike stance: trade a single concession to end debt ceiling terrorism forever:

Here's how the McConnell Rule would work, according to Orstein: The president raises the debt ceiling; Congress votes a resolution of disapproval; the president vetoes that resolution, which requires a 2/3 vote to overturn and is unlikely to happen.

"If you made that permanent in law, then it seems to me you can really make some concessions whether they are on minor pieces of the Affordable Care Act like the tax on medical devices...or even some things related to the budget," says Ornstein. "Then you could end up with something that becomes a win for the American people looking to the future and not a loss/loss for the political actors."

Keep in mind that while Democrats will not agree to funding at sequester levels for more than two months, McConnell's right flank will not allow him to negotiate a longer term spending bill that breaks the caps without replacement spending cuts-- at least not right now.  Finally, Republicans are demanding entitlement cuts in any long-term deal but continue their longstanding flat-out stonewall against any revenue increases -- except, perhaps, a certain stealth one.

Here then is a potential debt ceiling agreement, albeit one that leaves the spending impasse to one side, or perhaps opens a partial chink in that impasse. The McConnell Rule, as Ornstein suggests, is made permanent. Obama and the Democrats, in their turn, agree to chained-CPI, a method of calculating inflation that (modestly) slows cost-of-living increases for Social Security and other government benefits -- which Obama proposed in his 2014 budget.  According to CBO estimates, chained-CPI (unmoderated by offsets for low income and very elderly beneficiaries that Obama included in his 2014 budget) would save some $216 billion in federal spending over the next ten years, and more thereafter -- and raise about $124 billion in new revenue over the same period, as tax brackets are also adjusted upward more slowly.

McConnell can do this because the deal pulls Obama over the Rubicon of "entitlement cuts" without making any spending concessions (though Republicans would have to look the other way with respect to the implicit tax hike, which does not raise anyone's rates). Obama can do it because 1) chained-CPI is in his 2014 budget, 2) it is in part a tax hike and so does not break his "no-entitlement-cuts-without-new-revenue" rule, and 3) the Ornstein Principle -- make one debt ceiling concession to end all debt ceiling concessions --  creates a permission structure for Obama and team to make this one.

Moreover, chained-CPI is worth about a quarter of the sequester, which opens up at least some space to ease sequester caps.  But funding the government is a different negotiation. Perhaps this debt ceiling deal could be combined with a two-month CR at sequestration levels, as already agreed on by both sides for that time frame -- thus opening the government, with the understanding that budget negotiations will continue with debt ceiling terrorism off the table.