If the government's authority to borrow money isn't renewed by Aug. 2 -- its current $14.3 trillion limit has been reached -- it won't have cash to pay all its bills.
Senate Majority Leader Harry Reid, D-Nev., whispers to House Speaker John Boehner, R-Ohio, during a photo opportunity in the House Speaker's office before a meeting on the debt limit increase on Capitol Hill in Washington on Saturday, July 23, 2011.WASHINGTON (AP) — Democratic and Republican congressional leaders shopped competing debt-crisis solutions and President Barack Obama canceled fundraising appearances Monday, as a politically gridlocked capital lurched into a climactic last full week before the Aug. 2 default deadline.
Even amid acknowledgments by U.S. leaders of the need to reassure jittery investors, world markets fell and both the Dow and Standrd & Poor's 500 futures headed for poor starts at Wall Street's opening bell the Aug. 2 borrowing deadline fast approaching.
Efforts to break the impasse intensified Monday as Republican Speaker John Boehner and Senate Democratic Leader Harry Reid planned to lobby their deficit reduction plans with their respective House and Senate caucuses after the Obama White House and Congress made little apparent headway in private talks over a long, steamy weekend.
Boehner was set to meet with his chamber's Republicans to discuss the GOP's clash with Obama over extending the government's borrowing authority. The Ohio Republican planned to unveil a new debt ceiling plan at the GOP meeting and post it online later in the day, a spokesman said.
Aides said Boehner's plan was a two-step process, with an immediate $1.2 trillion in cuts and spending caps coupled with a $900 billion debt ceiling increase, followed by creation of a congressional committee charged with producing nearly $2 trillion in additional cuts. The debt ceiling needs to be increased by about $2.4 trillion to last until 2013, the time frame that Obama and Democrats are insisting on, but which would not be immediately permitted under Boehner's plan.
Boehner's plan also requires both the House and the Senate to vote on a balanced budget amendment, a goal of conservatives. But the increase in the debt limit is not directly tied to the balanced budget amendment issue.
Reid called Boehner's proposal "a nonstarter in the Senate and with the president" because it would permit only a short-term increase of the sort that has already been rejected by Democrats. Boehner's office rejected that description.
Reid, D-Nev., said Sunday that Boehner's proposal "would not provide the certainty the markets are looking for and risks many of the same dire economic consequences that would be triggered by default itself."
After meeting at the White House Sunday evening with Obama and House Democratic Leader Nancy Pelosi, D-Calif., Reid said he was crafting his own new $2.7 trillion package of spending cuts that would also push the government's borrowing authority through next year, a timeline that Obama and top Democrats are demanding. It would do so without any new revenues, Reid said, thus meeting GOP demands for no new taxes.
But Reid's plan was already being privately rejected by Republicans concerned that the cuts it contains would prove illusory.
Sen. Chuck Schumer, the No. 3 Democrat in the Senate leadership, said Monday one difficult reality is that no debt-crisis solution can be successful unless it has the support of five top players: Obama, Boehner, Reid, Senate Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi. But Schumer also said he thought Reid's proposal had the best chance of succeeding.
The competing plans were emerging after debt talks between Obama and Boehner on an ambitious $4 trillion package of spending cuts and revenue increases — the so-called "grand bargain" — collapsed spectacularly when Boehner walked out Friday. The speaker at the time accused Obama of moving the goalposts with demands for more taxes. The White House disputed that, but the focus of the talks has now largely moved from the White House to Capitol Hill.
The drama seemed certain to play out in nail-biting fashion, and it consumed Washington, as Obama canceled two Democratic fundraisers he had planned to attend Monday night. He has barely ventured from the White House all month.
If the government's authority to borrow money isn't renewed by Aug. 2 — its current $14.3 trillion limit having been reached — it won't have cash to pay all its bills. The administration and many others say that scenario would risk a first-ever federal default, with higher interest rates and other devastating effects cascading through the entire economy.
Both Boehner and Reid were hoping that by presenting their competing plans, they would demonstrate a seriousness that could prevent the world's financial markets from panicking and punishing the U.S. by demanding higher interest rates for the huge amounts of cash it must constantly borrow. Speaking to the U.S. Chamber of Commerce in Hong Kong early Monday, Secretary of State Hillary Rodham Clinton tried to reassure financial markets that America's economy is sound and that a deal on the debt limit would be reached.
In a conference call with his colleagues on Sunday, Boehner said that his new plan "is gonna require some of you to make some sacrifices."
"If we stand together as a team, our leverage is maximized, and they have to deal with us. If we're divided, our leverage gets minimized," Boehner said, according to excerpts the speaker's office distributed to Republican offices.
"I would prefer to have a bipartisan approach to solve this problem," Boehner said on Fox News Sunday. "If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."
Top congressional aides labored to try producing a compromise Sunday that the House and Senate could quickly approve, and Obama and Boehner spoke by phone, aides said.
Administration officials took to the airwaves on Sunday to make their case, with White House chief of staff William Daley saying Obama would veto a bill that didn't extend the borrowing limit into 2013.
"The president believes that we must get this uncertainty in order, to help the American economy and help the American people," Daley said on NBC's "Meet the Press."
Treasury Secretary Timothy Geithner also underscored administration opposition to a short-term extension of the debt ceiling. Reaching out to investors, he said on CNN's "State of the Union" that a U.S. default was unthinkable, saying, "We never do that. It's not going to happen."
Schumer was interviewed Monday on MSBNC.