Senate Majority Leader Harry Reid and Senate Republican Leader Mitch McConnell continue to work on a plan that would let President Obama raise the federal debt limit in increments while allowing congressional Republicans to repeatedly vote against the increases.
Recent reports indicate the plan also envisions spending cuts and a special congressional commission charged with making recommendations for further deficit reduction.
In the next few days, however, Republicans also plan to focus attention on a “cut, cap and balance” proposal. It calls for spending cuts, a cap on future spending, and congressional approval of a balanced budget amendment to the Constitution. The Democratically controlled Senate, though, is unlikely to approve that plan.
The Treasury has warned that unless the debt limit is raised by Aug. 2, the government could default on its financial obligations. Last week credit rating agencies reiterated their warnings that the U.S. government could lose its top credit rating.
Even if the debt ceiling is raised, Standard & Poor’s said, the government’s credit rating could still be downgraded if Washington fails to agree on $4 trillion in deficit reduction over the next decade.
If a large, comprehensive fiscal reform package cannot be reached before Aug. 2, Concord Coalition Executive Director Robert L. Bixby has suggested a short-term compromise that would raise the debt limit by $1.9 trillion and establish fiscal targets and automatic triggers to ensure those targets are met.External links:Treasury to Employ Final Extraordinary Measure to Extend U.S. Borrowing Authority Until August 2Moody's Places US Aaa Government Bond Rating and Related Ratings on Review for Possible DowngradeConcord Issue Brief: Understanding the Federal Debt LimitBipartisan Policy Committee: Debt Limit AnalysisWhite House Policy Statement on Cut, Cap and Balance Act of 2011Republican Study Committee Summary of Cut, Cap and Balance Act