Stalemate on Debt Ceiling Remains

July 27, 2011

On Monday night, in prime-time speeches, both President Barack Obama and House Speaker John Boehner (R-Ohio) attempted to sell the country on dueling proposals to raise the debt limit.

Obama warned viewers that unless Congress agrees quickly to a long-term increase in the federal debt ceiling, “we would risk sparking a deep economic crisis.” The president emphasized the dangers and insisted that a standoff could seriously slow job creation, raise interest rates and shake global faith in the U.S. economy. He also said he would not agree to a short-term increase, as proposed by Speaker Boehner.

Immediately after the president addressed the nation, Boehner responded by saying he intends to continue pushing a short-term increase in the federal debt ceiling, despite Obama’s objection that such a move does not solve the problem.

One week before the Aug. 2 deadline to act, the two sides continue to pursue competing budget plans that appear to have little chance of winning broad congressional approval.

Senate Majority Leader Harry Reid (D-Nev.) announced a plan that calls for $2.7 trillion in spending cuts over the next 10 years, by cutting $1.2 trillion from discretionary spending and includes $100 billion in mandatory savings that will not impact Medicare, Medicaid, or Social Security. Reid is making procedural moves to bring a vote on the measure very soon, but his package would require the support of seven Republicans to reach the Senate’s 60-vote threshold, and it is not clear if he has those votes.

Meanwhile, Speaker Boehner has offered a two-stage plan to raise the debt ceiling by upwards of $2.5 trillion but it would require the White House to accept much deeper spending cuts than he was negotiating only last week with President Obama.

The first debt limit increase of between $900 billion to $1 trillion would be accompanied by strict discretionary spending caps designed to achieve 10 year savings of $1.2 trillion from annual appropriations bills. His plan also creates a committee of 12 lawmakers who would work to identify further spending reductions to raise the debt ceiling again next year by up to $1.6 trillion. This would be contingent on first achieving $1.8 trillion more in savings primarily from government benefit programs and entitlements such as Medicare and Medicaid. His proposal would also require the House and Senate to vote on a balanced budge amendment to the constitution after Oct. 1 but before the end of the year.

Although several House Republicans said it would be an uphill battle for Boehner to secure the needed votes from his own conference for the plan to raise the debt ceiling by $2.5 trillion, the House plan will be voted on by lawmakers on Wednesday. However, the White House already has threatened to veto the House legislation. Majority Leader Reid also said the measure stood no chance of passing the Senate even if it cleared the House. He pronounced it “dead on arrival.”