The Note: From The Frying Pan To The Fire

July 22, 2011 9:02 AM

By MICHAEL FALCONE (@michaelpfalcone) and AMY WALTER (@amyewalter)

Overnight, both sides in the ongoing debt negotiations appeared to inch closer to a deal, but Democratic leaders yesterday were steamed that the contours of the plan did not include immediate tax increases.

When “we heard these reports of these mega-trillion-dollar cuts with no revenues, it was like Mount Vesuvius,” Sen. Barbara Mikulski, D-Md., told the Washington post. “Many of us were volcanic.”

It’s clear that the debt talks have reached a boiling point for all sides just as the broad outlines of an agreement are coming into focus. Our ABC debt brigade (Jake Tapper, Jonathan Karl, Z. Byron Wolf, Sunlen Miller, Mary Bruce and John R. Parkinson) hears that the deal -- which is subject to change -- is likely to include up to $3 trillion in spending cuts over the next 10 years, including some cuts to entitlements, and a commitment to do tax reform further down the road.

What’s unclear is whether that will be enough to satiate the warring parties before the Aug. 2 default deadline. As our debt team notes, “Some of the big issues left to tackle include the scope of the changes and how to enact mechanisms that ensure a deal is balanced. For instance, negotiators must determine how much to raise revenue through tax reform and how to make sure Congress follows through with entitlement cuts.”

President Obama will continue his debt deal messaging at a town hall meeting at the University of Maryland today.

Meanwhile, the 2012 campaign trail heated up yesterday with a staff shakeup on one team and a do-or-die push toward the Ames Straw Poll in another.

Jon Huntsman’s campaign manager, Susie Wiles, resigned yesterday as communications director, Matt David, moved in to take over the top slot. “Now the campaign is moving into phase two which will be more aggressive from a messaging and tactical standpoint and Matt is prepared to take that on," the campaign’s senior strategist Jon Weaver said in a statement. http://abcn.ws/r78Jzx

The Huntsman turnover revives questions about when, if and how this candidate can catch fire. Huntsman was at the bottom of the 2012 pack with 3 percent support among Republicans and Republican-leaning independents in the latest national ABC News-Washington Post poll out this week.

And in Iowa, Tim Pawlenty is burning up the highways in his R.V., which he is using to tour the state ahead of the Aug. 13 Ames Straw Poll, an event that will be a critical milestone for his campaign.

Pawlenty has been making an aggressive push on Iowa television too, but he ran into some potential trouble yesterday by using "Miracle on Ice," footage in one of the ads. Neither ABC or ESPN said they authorized the campaign to use the clip, but campaign spokesman Alex Conant said the commercial “was carefully reviewed for legal compliance and we believe fully complies with the ‘fair use’ doctrine.” http://abcn.ws/njnK6z

UNDERSTANDING THE NEGOTIATIONS. ABC’s Jake Tapper sends this dispatch from sources close to the debt talks. “Think of the negotiations as a sliding scale, with all parties being asked how far they're willing to go. The base level starts off with $1.5-1.7 trillion in cuts over the next decade, largely in domestic spending cuts and also from some mandatory spending programs (such as farm subsidies). These take the form of spending cuts and caps in spending to next year's budget (which the White House would be discussing anyway, since the FY2011 budget ends in a few weeks, at the end of September.) The high end of the scale would be about $3.7 trillion in deficit reduction. It's a complicated process as to how to slide up to that, but it might be easier to think of it as roughly a 1:1 ratio in entitlement reforms (cuts) to tax reform (revenues), details to be determined later.

‪”Will Republicans sign off on a tax reform process with a stated goal of $1 trillion in new revenue? No? How about $500 billion? Will Democrats sign off on an entitlement reform process with a stated goal of $1 trillion in cuts? No? How about $500 billion? Today and this weekend will be about getting to a number.”

ON THE HILL. Speaker John Boehner is expected to update his members on the progress of the debt limit talks at a conference meeting this morning after which GOP leaders will hold a news conference afterward.  The House Democratic leadership (without Nancy Pelosi) will hold their own media availability this afternoon. A day earlier than expected, the Senate will proceed to what is known as a “Motion to Table” the “Cut, Cap and Balance Act” -- the vote will almost certainly kill it. (via ABC’s Sunlen Miller and John R. Parkinson)

A source close to the coalition that has been pushing the “Cut, Cap and Balance” measure tells the Note: "It’s not surprising Harry Reid moved the CCB vote up -- the plan is starting to gain real momentum. With a CNN poll released yesterday that 66 percent of people favored a plan similar to the one that passed the House, it's clear we hit a nerve; unfortunately the President and Majority Leader have sent a message that permanent fiscal reform is DOA for them.”

ABC NEWS’ COUNTDOWN CLOCK: 10 DAYS, 14 HOURS TO DEFAULT:http://abcnews.go.com/politics 

ON TODAY’S “TOP LINE”:  ABC’s Rick Klein and Amy Walter hear from Republican Congressman Kevin Brady of Texas. Brady is the ranking member of the subcommittee on Trade in the Ways and Means Committee. Also on the program, Jon Karl talks with Sen. Richard Shelby, R-Ala., in another episode of ABC’s “Subway Series” (preview below). Watch “Top Line” LIVE at 12:00 p.m. Eastern. http://abcn.ws/toplineliveabc

SUBWAY SERIES: SHELBY DIGS IN. “One day after the new Consumer Financial Protection Bureau opened its doors, Sen. Richard Shelby, R-Ala., doubled down on his resolve to block the appointment of the agency’s first leader,” ABC’s Jonathan Karl reports “‘We fought it last year. We’re going to continue to fight it,’ Shelby, a Republican, told ABC News' Jonathan Karl in the latest installment of the ‘Subway Series.’ ‘This puts so much power, too much power, in one person, and we should never have done that,’ he said of the Dodd-Frank law, which created the agency and its directorship last year. … This week, Obama nominated Ohio Attorney General Richard Cordray to head the new agency, but his appointment must be confirmed by the Senate. Shelby said he doesn't oppose Cordray personally, but opposes any single person to head the agency.” More from Karl’s interview:http://abcn.ws/okk7TY  

THE BUZZ

DEBT UNCERTAINTY TRICKLES DOWN TO STATES. “The federal debt ceiling debate is already complicating life for state and local governments,” The New York Times’ Michael Cooper reports. “Maryland is postponing a bond sale that had been scheduled for Friday, after the state was warned that its credit rating would probably be lowered in the event of a federal downgrade. California, which typically issues short-term bonds at this time of year, is working to arrange bank loans instead, citing the market uncertainty. And state officials across the nation are trying to figure out what will happen to the federal payments they rely on for everything from Medicaid to unemployment to highway construction if a deal is not reached to raise the debt ceiling by the Aug. 2 deadline. States whose economies rely on the federal government -- including Maryland and Virginia, home to many federal employees and contractors -- are at the greatest risk if there is no agreement and Washington has to decide which payments to make and which to skip. They were among the states warned by Moody’s Investors Service this week that their credit ratings were being jeopardized by Washington — which would make it more expensive for them to borrow for costs like construction, through no fault of their own.” http://nyti.ms/oLfMk4

DNC LAUNCHES NEW AD. The Democratic National Committee today released its first television ad of the election cycle. The Spanish-language ad called, “En Quien Confiar” or “Who to Trust” will run in Reno, Las Vegas, Tampa, Orlando, Miami, Denver, Albuquerque and Washington, D.C, ABC’s Sarah Parnass reports. (The Republican National Committee along with independent pro-Republican group American Crossroads released Spanish-language ads earlier this week.) The DNC’s ad pits the Republican agenda against President Obama’s record. “The Republican Party is offering no new solutions to the American people - they simply want to double down on the failed policies that brought our economy to the brink of a depression and hurt millions of American families, including far too many Latinos,” DNC Chair Debbie Wasserman Schultz, D-Fla., said in a statement accompanying the new TV spot. “The American people don’t need more distortions from the secret donors of Crossroads and they certainly don’t want the failed policies of the Republican Party.” WATCH:http://bit.ly/o4NROi

OBAMA’S BRITISH BUNDLER. “President Obama is tapping into a pool of campaign cash from wealthy Americans abroad with help from a single foreign-based bundler who lives in London,” ABC’s Devin Dwyer reports. “Diana Shaw Clark, who records show is a self-employed writer, raised at least $50,000 for Obama and the Democratic National Committee during the second quarter, according to a report of the top volunteer fundraisers provided by the Obama campaign. Two hundred forty-four bundlers together raked in at least $35 million for the Obama Victory Fund in April, May and June.  Clark is the only one living overseas. ‘If you live in London and are part of the large expat community, you can hit up your friends who are U.S. citizens just as you could in New York or Los Angeles,’ said Michael Beckel of the Center for Responsive Politics. … During the 2008 campaign, Obama flew to London for a star-studded fundraiser at the Notting Hill home of Elisabeth Murdoch, the daughter of News Corp. chairman Rupert Murdoch, where he reportedly collected more than $400,000 from expat supporters. Former Massachusetts Gov. Mitt Romney recently made a trip across the pond to raise cash, appealing to supporters at the Dartmouth House in central London.”http://abcn.ws/oKhXDp

STRAW POLL POSTURING: BALLOT BATTLE. “Republican National Committee member Steve Scheffler e-mailed me this morning to say that he’ll be “lobbying hard” to include Texas Gov. Rick Perry and former Alaska Gov. Sarah Palin on the Iowa Republican Straw Poll ballot,” the Des Moines Register’s Kathie Obradovich notes.”He also advocates including declared candidates Mitt Romney, Jon Huntsman and Newt Gingrich on the Aug. 13 straw poll ballot. ‘If we don’t include credible candidates beyond the six that have purchased ground, I believe that it will be very challenging to keep our Straw Poll and maintain our first in the nation caucus status,’ Scheffler wrote. Currently, only six candidates are automatically included by virtue of purchasing space for their campaigns at the Ames fundraiser: Michele Bachmann, Herman Cain, Thaddeus McCotter, Tim Pawlenty, Ron Paul and Rick Santorum. Only those six will be allowed to speak at the event. The Republican Party of Iowa’s state central committee will vote Saturday on the final ballot.”http://bit.ly/qz9dg9