Two sides craft debt plans before deadline
With no debt deal done and both sides racing an Aug. 2 deadline, Democrats and Republicans on Sunday readied separate backup plans to try to raise the government’s borrowing limit and cut spending.
House Speaker John A. Boehner, Ohio Republican, pitched his colleagues on a plan to raise the borrowing limit by about $1 trillion and match that with similar sized spending cuts — enough to last through the rest of the year, and leaving for later the heavy lifting on taxes and bigger spending items.
Meanwhile, 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.
That date has become a critical marker for Democrats — so much so that President Obama’s advisers said he would veto any bill that doesn’t last that long.
“It must be extended in a way that gives certainty to economy through ‘13 and not some short-term gimmick, where we’re right back in this fix in six or eight months,” White House Chief of Staff Bill Daley said on NBC’s “Meet the Press” program Sunday.
“I understand why they’re saying they won’t sign a short-term. But I think they won’t have any choice, and I think that’s the only answer right now,” he said.
Leaders on both sides were testing their ideas with fellow party members Sunday.
Mr. Boehner held a conference call with House Republicans in the afternoon, while Mr. Reid and House Minority Leader Nancy Pelosi, California Democrat, went to meet with Mr. Obama at the White House on Sunday evening.
The backup plans by Mr. Boehner and Senate Democrats reflect just how much the negotiations have shifted over the past two days, after Mr. Boehner announced he was walking away from talks with Mr. Obama.
“After over six months [of] conversations with the president about doing the ‘big deal,’ about taking a big step in the right direction, it is pretty clear to me that they are just not willing to do it — that the next election matters more than doing what is right for the country,” Mr. Boehner told “Fox News Sunday.”
Mr. Boehner said he would instead try to work out a deal with Mr. Reid and, barring that, write his own backup plan to raise the debt limit by about $1 trillion, which would likely last through the rest of this year, and combine that with a promise the government spends about $1 trillion less over the next decade than otherwise projected.
The Associated Press reported that Republicans would release their plan Monday.
The Treasury Department says the government will bump up against its $14.29 trillion borrowing limit Aug. 2, and unless that ceiling is raised, many government payments will have to be suspended and the U.S. government’s top credit rating likely will be downgraded.
The White House has been reluctant to talk about which of the 80 million monthly checks the government issues would be at risk, though Mr. Obama has specifically said he can’t guarantee Social Security benefit checks will be issued.
But even before the Aug. 2 deadline, both the White House and members of Congress said international financial markets could begin to punish the U.S. by not buying U.S. Treasury bonds, by downgrading the U.S. government’s top-credit rating, or both.
In early trading Monday morning, Asian markets were down slightly, while gold was fetching record prices.
With no deal in sight, both sides have tried to insulate themselves from blame.
Democrats said that while they think Mr. Boehner is negotiating in good faith, some of his fellow House Republicans would prefer to see the government fail to raise the debt ceiling at all rather than have any taxes raised.
The GOP, though, repeatedly points to the plan the House passed last week to tie a debt-ceiling increase to deep spending reductions and a promise that a balanced budget amendment to the Constitution be proposed to the states for ratification.
Democrats in the Senate voted to table that plan Friday, but they have yet to produce a budget or a debt plan of their own.
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