Debt Duffers Obama and Boehner Take Deal into Sudden-Death Playoff

Debt Deal Goes to the Back Nine; Economy Clouds POTUS’ Pittsburgh Trip; New Dangers Emerge in Libya; Obama Prolongs Gay Marriage Evolution

Obama, Boehner Both Playing for Bogeys on Debt Hike

“I think that now with what Kyl and Cantor have done, it’s in the hands of the Speaker and the president and sadly, probably me.”

-- A doleful Senate Majority Leader Harry Reid talking to reporters about the end of the bipartisan talks over raising the federal government’s $14.3 trillion debt limit.

While Washington was in an uproar over the end of bipartisan budget negotiations aimed at avoiding a government shutdown, with pundits and Democratic spokesmen warning that the federal government was edging closer to a credit default, investors were flocking to buy U.S. debt.

As is usually the case, the markets are better predictors than the mouthpieces.

The negotiations ended because they had fulfilled their purpose: to sketch out broad areas of agreement and disagreement so that the real talks could begin.

The informal aim of the bipartisan debt negotiations led by Vice President Joe Biden was to obtain a $2 trillion increase to the $14.3 trillion federal borrowing limit by finding $2 trillion in spending cuts over the next five years.

But Democrats in the negotiations could only get a little more than halfway there and demanded tax increases to make up the rest.

Also discussed, according to multiple reports, was a $4 trillion debt reduction package over the next decade – essentially the same kind of go-slow reduction package that President Obama had initially proposed. This was a combination of short-term cuts and long-term limits on spending in the form of triggers for future cuts or caps on future spending.

House Speaker John Boehner and Obama, who have tried to strike up some kind of strained rapport after two very chilly years, will now engage in the final negotiation. Their aim is the same: to come up with a deal that lifts the limit but provides the kind of debt reductions that will reassure markets around the world that the U.S. can obtain fiscal soundness.

If the limit goes up with insufficient debt reductions or doesn’t go up enough, lenders and investors will likely make good on their threats to trash the federal government’s credit rating.

Also included in the negotiations will be Senate Majority Leader Harry Reid, but his job is to act as more of a messenger to a restive Democratic Senate caucus. Every one of the 53 Democratic Senators who balk at Obama’s final deal will have to be offset by a Republican vote. If Democrats stick together, they need only seven Republicans. If they split, Minority Leader Mitch McConnell will roast Reid on a spit.

While the three most moderate Republicans, the Senators from Maine and Massachusetts, will be easy to get, the rest will come at a high price in the form of cuts and concessions.

In the House, the threshold is not whether Boehner can deliver a Republican majority, but whether he can provide enough GOPers to provide a bipartisan bill.

The House Democrats are a very liberal bunch following the defeat of so many moderates in 2010, so their caucus will split quickly when the subject of cuts comes up. But every Democrat who defects from the deal is another Republican who has to sign on.

If the Democrats stood together, Boehner would need to get 23 Republicans on board, but any deal that could survive in the more moderate Senate will not have much liberal support in the House. Boehner is probably looking at a number more like 100 members of his own caucus to do the deal.

While Boehner is still admired in his caucus, there is still considerable heartburn over the last deal he did with Obama in which the cuts promised turned out to be substantially less in the Congressional Budget Office score on the package. Boehner will have to avoid any appearance of fuzzy math if he wants to avoid a revolt.

For Obama, the growing sense of panic about the economy has left his administration eager to get a deal and get a deal quickly the risk and uncertainty posed by a fiscal crackup in Washington could deal another blow to an already reeling economy.

The president will be content to placate his base with winks on gay marriage and administrative orders on the DREAM Act because the most he can deliver in the way of tax hikes might be the closing of a couple of loopholes. He will have to abide by his prior deal to leave tax rates for upper earners unchanged.

With grand bargains seemingly out of the question and the potential areas for debate now outlined it will be up to Obama and Boehner to find the sweet spot.

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White House in Economy Crisis Mode

“The reality is that we are well supplied. The price of oil has risen and dropped so there is not a supply problem in the market. It’s just that the economy is not doing as well as people would like.”

-- Randa Fahmy Hudome a Bush administration representative to the International Energy Agency talking to the Financial Times about the decision by President Obama and other member nations to dump 60 million barrels of oil onto world markets from emergency reserves.

President Obama is on a campaign visit to Pittsburgh today as he tries to shore up his slipping support in the Rust Belt by touting a plan to boost manufacturing jobs.

As he arrives, Republican presidential frontrunner Mitt Romney is reminding Pennsylvania voters of Obama’s visit to the city a year ago when he was sunny about jobs and the economy back in those palmy days of Recovery Summer.

Today is the president’s re-election challenge in miniature. If the economy stalls or keeps slipping, Obama could be quickly boxed out in Pennsylvania and Ohio. With his prospects already diminished in the traditionally red states of North Carolina and Indiana, a Rust Belt blowout would mean almost certain defeat for Obama.

The administration’s economic panic manifested itself Thursday in a release from the Strategic Oil Reserve. Coming as prices were actually dropping and the global situation remains mostly unchanged, the release looks mostly like an effort at economic manipulation – a petro stimulus designed to boost consumer spending and business profits by artificially depressing energy costs.

Gas prices could eventually drop by a dime because of the release. But OPEC, which is increasingly influenced by Iran, may opt to punish developed nations for their price manipulation by squeezing production. The ongoing unrest in the Middle East has left Saudi Arabia less able to block Iran’s drives to punish the West.

Since it’s strictly a short-term fix and possibly a long-term risk, the administration will have to find something else to do to reverse a trend that shows a politically disastrous situation for the president.

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NATO Faces Catastrophic Victory in Libya

"If it ends in chaos, if it is a state collapse and all the institutions of the government fall apart, you will potentially need a sizable force on the ground to secure critical infrastructure and maintain law and order.”

-- Gen. Carter Ham, head of the U.S. Africa Command, talking to the Wall Street Journal about the need for an international peacekeeping force in Libya.

Time is running out on the NATO effort to kill Col. Muammar el-Qaddafi – Europe is out of bombs and President Obama’s decision to circumvent Congress has left him unable to deliver the necessary force.

While the Obama administration now says that Qaddafi is preparing to flee bombed-out Tripoli for some desert hidey hole, there is little suggestion that the kind of swift regime change the president once promised will materialize.

Obama and his European counterparts, awash in enthusiasm for what they called “the Arab Spring,” believed that the rebel forces would sweep Qaddafi from power and replace his tyrannical regime with a desert bloom of democracy.

Two things have since become clear:

First, the Arab Spring itself was not as advertised. American friends are in trouble and foes are surging.

Second, the Libya conflict was just a tribal conflict/civil war looking for a way to happen not some social media outburst of Jeffersonian idealism.

The divisions between the two sides, the tribes in the west and the tribes in the east, are more than a millennium old and persisted through every foreign occupation and a pair of absolute rulers – a king from the east following World War II and Qaddafi from the west for the past 40 years.

The easterners can’t now govern the west and their allies in the civil war – Islamists, who burn with hate for Qaddafi because of his brutal repression of their theocratic aims, and NATO – make their acceptance even harder.

There’s little chance that Congress will actually defund the war effort there, but there’s also no chance that it would ever authorize any involvement beyond the current bombing and supply mission. Since Obama refuses to admit any legitimate role for Congress, the hawks can’t help him win over a majority there.

If Qaddafi were killed or forced from power, though, the future seems dire. Without a consensus government and with deep hatreds only stoked by the nearly six-month war, Libya could quickly become a failed state. And that would have Libya going from terrorist killer under Qaddafi to terrorist hideout.

While the head of the U.S. African command says that someone else other than the U.S. needs to quickly assemble a peacekeeping force to stave off chaos, the question of whom hangs heavily in the air.

The U.N. is no good at real wars (and pretty terrible at peacekeeping according to its record in Africa) and the rest of NATO doesn’t even have the juice to knock off Qaddafi let alone pacify and rebuild a large nation.

One irony here: the U.S. got involved, in part, to help keep the Europeans in rear-guard roles in Afghanistan. If Libya goes down the drain, Obama may lose his NATO support there anyway as the Euros try to manage a meltdown right next door.

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Obama Tantalizes Gay Supporters

"I believe that gay couples deserve the same legal rights as everybody else in this country… Slowly but surely we find the way forward. That's how we will achieve change that is lasting."

-- President Obama nearly completing a protracted flip-flop on same-sex marriage at a campaign fundraiser held for members of New York’s lesbian, gay, bisexual and transgender community.

Power Play knows that politicians flip flop and say things just to get elected, but this political note wonders why President Obama takes so long to do so.

Obama all but came out as a supporter of same-sex marriage at a big-money fundraiser for gay, lesbian, transgender and bisexual supporters in New York.

He spoke out about the need to repeal the Defense of Marriage Act and praised New York’s governor for his efforts to have the Empire State recognize gay marriage. Obama even quoted Lady Gaga.

And yet the president still hung on to his “evolving” position on gay marriage.

It would now be pretty hard for Obama to return to the “one-man-one-woman” posture he adopted for the 2008 campaign, so why not give your base what it wants?

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***Today on “Power Play w/ Chris Stirewalt”: Rep. Hansen Clarke, R-Mich.and Fred Barnes. Tune in at 11:30 am Eastern at http://live.foxnews.com/ ***

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And Now, A Word From Charles

“The problem is, I think, the president thinks that time is on his side. As you approach the August 2 date, we know the Treasury won't stop repaying creditors. We're not going to default. He has to stop paying out something. You will get letters late in July to Social Security recipients and families overseas warning them that the money will stop. Who do you think will be the fall guys if that happens? The Republicans.

"The president and the Treasury secretary are in charge of this. They decide if the money is withheld if you have a debt problem is Social Security or ethanol and White House limos, and you know where they will exert the power: to embarrass and hurt Republicans. That is why the Republicans have to rethink where they are now.”

-- Charles Krauthammer on “Special Report with Bret Baier.”