With potential default just over a week away, Republicans and Democrats in Congress continue developing their own independent plans for raising the $14.3 trillion U.S. debt ceiling.
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House Speaker John Boehner (R-Ohio) has prepared a two-step debt-limit extension deal that would cut roughly $1 billion in a shorter-term increase than that which President Obama has supported. Despite Obama’s threat of veto, Boehner plans to unveil his proposal in a closed-door meeting with Republicans in the Capitol today, and to quickly push it through to a vote.
Meanwhile, Senate Majority Leader Harry Reid (D-Nev.) continues to prepare his own debt-ceiling proposal that would give Obama the $2.4 trillion in additional borrowing authority that he has requested and includes a $2.7 trillion package of spending cuts that would leave Medicare and Medicaid (NYSE:XLV) wholly intact.
Boehner and Obama were originally working on a “grand bargain” that would have cut nearly $4 trillion from the national debt over the next decade, but discussions collapsed on July 22. Boehner is now working on a shorter-term plan that would allow for an immediate $1 billion ceiling hike while cutting that same amount in spending. However, any plan that only offers a temporary solution and will bring the issue before Congress yet again in the near future, as does Boehner’s, poses a “significant risk of downgrade” according to Christian Cooper, head of U.S. dollar (NYSE:UDN) derivatives trading at Jefferies & Co.
In order for any debt-ceiling increase to be passed by the August 2 deadline, it would have to be introduced as a bill today in order to comply with House rules requiring that any legislation be publicly available for three days before coming to a vote, and to allow it time to make it through the Senate and get Obama’s signature.
While Obama has said he will not agree to any short-term solutions like Boehner is trying to push through the House this week, Republicans are unlikely to accept Boehner’s spending cuts, which are significantly smaller than the party has been pushing. However, Boehner is hoping that the strong party loyalty that has only been solidified by Democratic opposition during debt discussions will ultimately garner support for his plan.
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As lawmakers continue to battle over their opposing strategies, recent polls show that the public supports the president’s position in the debt-limit debate, which would increase taxes on the wealthy, while objecting to Republican spending cuts. A CNN/Opinion Research Poll conducted last week showed that 52% of those polled believe that President Obama has behaved responsibly in debt talks, while 46% believed that he had not. Two-thirds believed that Republicans had not behaved responsibly, and 51% said they will blame Republicans if the debt ceiling is not raised in time, while only 30% said they will blame Obama.