Because the markets are getting spooked:
Stocks were set for a lower open on Monday as political brinkmanship in Washington over the debt ceiling sparked fears of a U.S. rating downgrade, sending world equities lower and pushing gold to a record high.
A divided Congress pursued rival budget plans that appeared unlikely to win broad support, pushing the country closer to a debt default.
While analysts expected a deal to raise the debt ceiling by August 2, the United States moved one step closer to losing its coveted triple-A credit rating as Democrats and Republicans seemed unlikely to reach a deal.
Meanwhile, the outlines of a new deal are developing:
. . . Senate Majority Leader Harry Reid said he is working on a plan to raise the debt limit by $2.7 trillion, coupled with an equal reduction in projected future spending. In a concession to Republicans, he said that plan would not include tax increases, but that the new debt level would last through the 2012 elections.
If this is the deal that is being offered, Republicans ought to take it. It would constitute a massive victory for the GOP; the downside that it would last beyond the 2012 elections is not much of a downside, when one thinks about the need to ensure financial stability via a long term debt ceiling fix, and while it would not cut as much as would the various grand bargain packages that have been discussed over the past several weeks, the cuts would be significant. And with no tax increases, Republicans would have no reason to reject the deal.
Indeed, if Republicans accept the deal, and assuming that Reid can bring along enough of his caucus, then President Obama would be forced to sign on. Once Republicans confirm that this is indeed the agreement Reid wants to push, they should grab at it with both hands.