With less than two weeks to go until the Aug. 2 Treasury deadline for raising the nation’s debt ceiling, President Barack Obama and House Speaker John Boehner (R-Ohio) on Thursday were said to be nearing an agreement on yet another budget deficit-reduction plan, after a previous deal between the two leaders collapsed about a month ago.
The new plan is said to cut the federal budget deficit by $3 trillion over the next 10 years. Specific details of the proposal are murky and fluid, however, as the negotiations are still occurring behind closed doors.
Congressional Democrats objected to the latest plan, claiming that it contains little or no tax and revenue increases despite implementing $3 trillion in spending cuts. The plan was described as being to the right of the bipartisan Gang of Six plan unveiled earlier this week.
In response to such concerns, Press Secretary Jay Carney, speaking during Thursday’s White House press briefing, reaffirmed the president’s commitment to the belief that any “grand bargain” deal should contain both revenue increases and dramatic spending cuts.
“It is absolutely essential that any grand bargain, if you will, any significantly-sized deficit reduction package be balanced, that it address all the drivers of our long-term debt, and our significant deficits,” said Carney.
Carney went on to address the need for reforming entitlements, attacking both defense-related and non-defense discretionary spending, and overhauling the complex federal tax code.
While an agreement on a significant debt-reduction deal may be close, both President Obama and Boehner will still be hampered by the interests of the rank-and-file members within their respective parties: congressional Democrats who are unwilling to reform or implement cuts to the entitlements of Medicare, Medicaid, and Social Security; and Republicans who are unwilling, in any situation, to increase taxes.
Senate Majority and Minority Leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), meanwhile, continued to hammer out there Senate proposal that would allow the president to unilaterally raise the debt ceiling in case a significant deficit-reduction deal isn’t reached by Aug. 2, but also forces the president to concede to up to $1.5 trillion worth of spending cuts.
The plan is likely to meet stiff resistance in the House, however.
Also on Thursday, the Senate took up debating the Cut, Cap, and Balance Act of 2001, which passed the Republican-led House on Tuesday. The bill calls for deep cuts to and caps on federal spending, and requires congressional approval of a balanced-budget amendment to the Constitution to be sent to the states for ratification.
It is very unlikely that the bill will pass the Democratic-controlled Senate, which plans to vote on the bill on Friday.
Treasury Secretary Timothy Geithner has consistently maintained that Aug. 2 is the last day that the Treasury Department can fulfill all of its obligations before the debt ceiling must be raised.
There is a general consensus among experts that there will be severe consequences for both the American financial system and the wider economy if the debt ceiling is not raised by that date.
