Here's how it works, via Ezra Klein. Essentially, the President can submit proposals to increase the debt ceiling three times, in chunks of $700, $900 and $900 billion, totaling $2.5 trillion between now and the middle of 2012. Each request is paired with, apparently, a non-binding proposal for spending cuts, meaning of course there will be no cuts unless they are actually wanted. Then, both houses of Congress can approve or disapprove the debt ceiling increase, but the President can (somehow) veto Congress's decision and push the increase through anyway.
Rep. Jim McDermott (D-WA) on Hardball today said this means McConnell has blinked and this will lead to a deal. Klein agrees, but also notes that it is essentially an admission that, "the debt ceiling is used to embarrass the party in power, but it’s not allowed to threaten the American economy." The Atlantic's Derek Thompson sees it as a very canny political calculation by McConnell, as it removes responsibility from Republicans for the actual raising of the ceiling, while ensuring that a default does not happen. He adds that, "I can't believe the McConnell Plan actually exists. It's so devious, convoluted, cynical, and soulless, it's like Kafka on the Potomac." The consensus seems to be two things: the plan is deeply cynical, but may be the best way forward given the inability to compromise elsewhere. Of course, "devious, convoluted, cynical and soulless" applies to McConnell too, but that's not important right now. What is important is that he did a thing, he actually did a thing, and that could lead to a clean end to the debt ceiling issue.
It's not that simple, though, as first enough Republicans have to support it to allow it to get through both houses of Congress. Klein quotes Newt Gingrich as saying that the plan is “an irresponsible surrender to big government, big deficits and continued overspending.” TPM has Rep. Mike Lee (R-UT) as saying the plan destroys the Republicans' bargaining posture. Rep. Eric Cantor (R-VA) predictably slammed the plan as well, in keeping with his ongoing "whiny baby" strategy, and proving perhaps that he is a bigger deal than Rep. Boehner, who is, you know, the actual Speaker of the House.
That last point seems to be the big deal, the Mount Everest in a sea of molehills for this utterly absurd debate. McConnell, and to a lesser extent Boehner, have blinked. They missed their big chances to get massive, recovery-destroying spending cuts because of their fear of the Tea Party Caucus and Rep. Cantor's insistence on refusing any and all tax rate hikes, tax loophole closings, or anything that involves the government being allowed to have money. And now, of course, it is obvious to everyone that the Republican party is terribly fractured regarding the correct course forward. How can they possibly hold out for massive spending cuts now, with their leader in the Senate in favor of a de facto blank check ceiling hike?
Ultimately, the Republican party's meltdown is a significant (and very welcome) victory for the Democratic caucus, and for President Obama. It is a way for them to salvage victory from the jaws of the potential defeat they could have inflicted on themselves had they caved and slashed Medicare, Social Security, and other vital elements of America's social safety net. It is a way, also, to split the Wall Street and Tea Party wings of the Republican Party, which could pay big dividends in 2012.
In less than 48 hours, the debt ceiling debate got flipped on its head. And all it took was the Senate Minority Leader producing a proposal so toxic to the Tea Party that it might as well be a Captain Planet villain. It's really almost amazing how quickly the whole thing turned around. The President ought to send Sen. McConnell a thank-you note.