WASHINGTON -- With the United States government set to begin defaulting on its loans on Aug. 2, the administration is working with lawmakers on a deal to raise its borrowing limit in exchange for major spending cuts and, potentially, revenue increases to shrink the debt.
The Treasury hit its debt limit -- most recently set by Congress at $14.29 trillion -- on May 16, but is using "extraordinary measures" to avoid a U.S. default for now. Treasury Secretary Timothy Geithner warnedthat failing to raise the debt ceiling would be disastrous to the economy, telling Sen. Michael Bennet (D-Colo.) in a May 13 letter that rapidly reducing federal outlays in the event of default "would likely push us into a double dip recession."
Although lawmakers could vote to raise the debt ceiling without preconditions, many members of Congress have said they will not approve an increase to the federal borrowing limit unless there is a plan to deal with the debt over the long term.
In addition to major spending cuts, the House GOP also has pushed for major changes to Medicare -- including those laid out in Rep. Paul Ryan's (R-Wis.) 2012 budget proposal -- to be as part of a final debt ceiling deal. Although Senate Majority Leader Harry Reid (D-Nev.) said in June that Medicare cuts are off the table, Democrats have since signaled they would allow for some changes to the retirement insurance program, provided they be on the delivery-side as opposed to the beneficiary side.
House Speaker John Boehner (R-Ohio) has said the lower chamber will not approve a bill that includes tax increases, a component that Democrats have insisted should be on the table.Democratic leadership is pushing for an end to subsidies and tax preferences for major oil and gas companies and individuals that make more than $500,000 per year.
On June 23, House Majority Leader Eric Cantor (R-Va.) and Senate Minority Whip Jon Kyl (R-Ariz.), who were representing Republicans in debt deal negotiations with Vice President Joe Biden, pulled out of the bipartisan talks, leaving them, ostensibly, to the president and Boehner.
The Treasury hit its debt limit -- most recently set by Congress at $14.29 trillion -- on May 16, but is using "extraordinary measures" to avoid a U.S. default for now. Treasury Secretary Timothy Geithner warnedthat failing to raise the debt ceiling would be disastrous to the economy, telling Sen. Michael Bennet (D-Colo.) in a May 13 letter that rapidly reducing federal outlays in the event of default "would likely push us into a double dip recession."
Although lawmakers could vote to raise the debt ceiling without preconditions, many members of Congress have said they will not approve an increase to the federal borrowing limit unless there is a plan to deal with the debt over the long term.
In addition to major spending cuts, the House GOP also has pushed for major changes to Medicare -- including those laid out in Rep. Paul Ryan's (R-Wis.) 2012 budget proposal -- to be as part of a final debt ceiling deal. Although Senate Majority Leader Harry Reid (D-Nev.) said in June that Medicare cuts are off the table, Democrats have since signaled they would allow for some changes to the retirement insurance program, provided they be on the delivery-side as opposed to the beneficiary side.
House Speaker John Boehner (R-Ohio) has said the lower chamber will not approve a bill that includes tax increases, a component that Democrats have insisted should be on the table.Democratic leadership is pushing for an end to subsidies and tax preferences for major oil and gas companies and individuals that make more than $500,000 per year.
On June 23, House Majority Leader Eric Cantor (R-Va.) and Senate Minority Whip Jon Kyl (R-Ariz.), who were representing Republicans in debt deal negotiations with Vice President Joe Biden, pulled out of the bipartisan talks, leaving them, ostensibly, to the president and Boehner.
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