After weeks of private meetings with President Obama, both Democrats and Republicans on Capitol Hill have been unable to broker a deal to raise the $14.3 trillion U.S. debt ceiling.
With the Aug.2 deadline looming, lawmakers are scrambling to cobble together an agreement that can muster bipartisan support in both the House and Senate. However, both parties seem entrenched in their positions, waiting to see which one blinks first.
At press time, numerous “debt plans” have been proposed and more are in the works. One plan crafted by the bipartisan Senate “Gang of Six” would cut the deficit by $4 trillion over 10 years, reduce tax rates, abolish the alternative minimum tax, and pay for a 10-year “doc fix”—the annual delay in scheduled cuts to Medicare reimbursement rates for physicians. The plan does not specifically propose to raise the debt ceiling, but it can be modified quickly to do so.
A Republican plan passed by the House, H.R. 2560, nicknamed “Cut, Cap and Balance,” would cut spending in fiscal year 2012, add spending caps for future years and raise the debt ceiling. That measure, however, is blocked in the Senate—at least for the time being.
Leaders in both chambers have hinted that, if necessary Congress could pass a short-term debt limit increase. But that’s strongly opposed by the President, who has said that course could do more harm to the already fragile economy and to the U.S. debt rating.
As we go to print, Senate Majority Leader Harry Reid (D-NV) and Speaker of the House John Boehner (R-OH), are working on separate plans they hope to move in the next few days. Boehner’s would be a stop-gap measure—probably cut spending by $1 trillion and require a two-step adjustment in the debt ceiling over the short term. Reid’s would trim spending by $2.2 trillion and extend the debt ceiling through 2012—something Democrats and the President want. Neither plan would require tax increases.
It’s clear that whatever “deal” is struck will have to hold bipartisan appeal and satisfy at least some of the goals of each party. But, with less than a week to go until Aug. 2, neither side appears ready to compromise.