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Republicans hold all the cards in the 2012 CR negotiations

Unemployment still above 9%.  The stock market in the tank.  Obama assailed by the media as weak, incompetent, and ineffective.  And now, S & P downgrades U.S. credit rating from AAA to AA+, saying in part: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”

Republican  negotiators now have 4 aces as they prepare to confront Obama and the Dems over a continuing resolution to keep the government going after Oct. 1.  One thing is for sure, the Senate isn’t about to pass a budget that would avoid this next crisis.  So Republicans should finally “get it right” and exact a heavy price.  It’s now Obama who can’t afford to risk a government shut down.

What should the price be:  Let’s start with a freeze on federal hiring, salaries, and non-essential travel, supply, vehicles and equipment purchases.  Bowles-Simpson says this will produce $50 billion immediately and $500 billion over 10 years.  Second, let’s insist on a clear pathway to a balanced budget within 5 years.  We can argue that this is the only measure that will restore the confidence of the markets and the rating agencies.  Finally, let’s insist on making the Bush tax cuts permanent, but agree to allow the Obama tax cuts and credits expire (can you say “ethanol subsidy”)  These three measures should be the bottom line for Republican negotiators:  “Freeze, Balance, and Cut”

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