With eight days to go

The hope was, by this point in the Republican-created debt-ceiling crisis, we would see policymakers start to coalesce around some kind of compromise. That’s not happening.

As of late yesterday, there are two separate tracks, which aren’t at all compatible.

House Speaker John Boehner (R-Ohio) wants a two-step process. In the first phase, which would take place this week, Democrats would agree to roughly $1 trillion in cuts and Congress would in turn raise the debt ceiling by about $1 trillion. In the second, negotiations would continue on “reforming” the tax code and entitlements, seeking trillions more in savings.

The key, however, is Boehner’s demand that Congress hold two separate votes on raising the debt ceiling — one this week and another early next year. Democrats are eager to avoid forcing the nation to go through all of this twice, and late yesterday, told the Speaker this was unacceptable, calling it a “non-starter.” (There’s a possibility Boehner won’t care whether Dems like it or not.)

And then there’s the other track, unveiled yesterday by Senate Majority Leader Harry Reid (D-Nev.), who, up until now, has maintained a relatively low profile in this process.

Reid said he would turn instead to an entirely new approach “that meets Republicans’ two major criteria,” which are spending cuts designed to meet or exceed the amount of the debt-limit increase and no new taxes. Under Boehner’s rules, Reid said, the $2.7 trillion debt-reduction package he plans to unveil Monday should buy the Treasury sufficient borrowing authority to pay the nation’s bills through the end of next year.

“We hope Speaker Boehner will abandon his ‘my way or the highway’ approach, and join us in forging a bipartisan compromise along these lines,” Reid said.

Reid offered no further details about the plan. A Senate Democratic leadership aide, speaking on the condition of anonymity because the plan has not been publicly released, said the package would include cuts of up to $1.2 trillion over the next decade to government agencies, including the Pentagon. Democrats had previously offered to accept those savings, as well as about $200 billion in cuts to non-health direct-payment programs, such as farm subsidies.

By all accounts, at least $1 trillion of Reid’s debt-reduction plan relies on ending the wars in Iraq and Afghanistan. Entitlements would reportedly be excluded altogether.

As we talked about briefly yesterday, Republicans tend to believe that spending cuts only count as real cuts if they force working people or seniors to suffer in some meaningful way, so it’s possible, if not likely, GOP officials will reject this as inadequate.

But the fact remains that Reid appears to meet every Republican demand on the broader ransom note. Debt reduction totaling more than $2 trillion? Check. No new revenue? Check. We’re again left to wonder whether Republicans are capable of taking “yes” for an answer.

Last night, GOP leaders offered muted reactions to Reid’s plan, which I suppose is preferable to reflexive opposition. Likewise, the White House didn’t have much to say about Reid’s approach, probably because the West Wing knows that whatever President Obama likes, Republican won’t pass. Yes, the politics of spite is that strong.

The only bright line the White House appears to be drawing is procedural: there must be one vote that extends the debt limit through the end of next year, not two votes that would tell the world that default is on the table in 2012. “You see how hard this is right now,” one administration official said last night. “Can you imagine going through this again in six months?”

The question then becomes whether House Republicans push their (and our) luck, pursue their two-vote approach despite Democratic opposition, and count on Dems to back down, or whether Reid’s exceedingly generous offer to the GOP becomes the basis for a way out of the mess Republicans have created.

In case this isn’t already obvious, there is no more time for another round of lengthy negotiations. Indeed, given Senate procedure, the process on approving a final agreement should have started over the weekend.

We can expect a flurry of activity today, and if U.S. financial markets start to tank, lawmakers will have an added incentive to wrap things up.