There is a Reality Gap in the negotiations over the debt limit. The gap is between what Republicans think will happen if the debt ceiling isn't raised and what Democrats and the Treasury think will happen. Republicans simply don't believe that default needs to happen; Treasury and Democrats say it will if the limit isn't raised.
After meeting with Senate Democrats and Treasury Secretary Timothy Geithner, Senate Majority Leader Harry Reid went after Republicans on the Reality Gap.
"August 2 is the deadline," said Reid. "We're already seeing consequences. Credit rating agencies have already warned us they're thinking about downgrading us from our AAA status. Yesterday Moody's announced that they're already examining the possibility that they'll downgrade it. If we don't reach an agreement, we'll have less than 2/3 of the funds we need to pay our obligations." Later: "There is no wiggle room."
Geithner spoke next, delivering a short statement and leaving before questions. "We looked at all available options and we have no way to give Congress more time to solve this problem," he said. "We're running out of time. The eyes of the country are on us. The eyes of the world are on us. We need to make sure we stand together and send a definitive signal, to avoid default and to also take advantage of this opportunity to make some progress in dealing with our long-term fiscal problems."
As luck would have it, right after this wrapped up, Senate conservatives were talking about the letter they were sending to the president, chastizing him for saying Social Security checks might not go out if the debt limit is hit. Now: Even getting to this argument is a rhetorical coup for Republicans. Even getting Harry Reid to talk about the government pulling in revenue after Aug. 2 is something. Because their argument remains: We can pay the bills that matter without raising the limit.
"I frankly think the president should apologize," said Sen. Rand Paul. "The president should apologize for politicizing Social Security. There's plenty of revenue to pay for sending out all of the Social Security checks. In fact, there's plenty of revenue to pay all of the soldiers' salaries."
This is not the most straightforward argument ever made by a senator. As Benjy Sarlin points out, Republicans are fairly cagey when asked what they'd cut, because "paying soldiers" sounds good, but "selling off parks and stiffing the FBI" doesn't. So I also asked Sen. Ron Johnson why Republican plans to prioritize spending -- even if that was workable -- made sense, because rating agencies don't seem to take the plan very seriously. Johnson pointed right back to Obama.
"A responsible leader wouldn't be scaring the markets, scaring the American people," said Johnson. "A responsible leader would have rolled up his sleeves months ago. In terms of this August 2 deadline, do we have something to worry about? Probably, because it will be a self fulfilling prophecy. Because the administration has been scaring the markets, they've been roiling the markets for so long, yeah, the markets will probably be a little upset if some things didn't occur. But I put that squarely on the back of the president for failing to lead by scaring the markets."