Republican and Democratic leaders, including those in the White House, were mired in budget discussions last weekend. But now the leaders of both the House and the Senate have produced dueling plans. To no one’s surprise, President Obama has indicated his broad support for the one authored by the Democrat Senate leader.
Last week, the House passed the “cut, cap and balance” plan that was tabled by the Senate days later, and the Gang of Six plan began to gain some momentum prior to the weekend budget breakdown. After several hours of finger pointing by both sides on the Sunday talk shows, no one had a clear indication of where the debate would move this week.
House Speaker John Boehner unveiled his two-step plan this morning that would raise the debt ceiling upwards of $2.5 trillion but would require President Obama to accept deeper spending cuts than were proposed last week. The plan rescinds Boehner’s prior offer to allow an $800 billion increase in tax loopholes, but his new spending requests would amount of more than $600 billion over ten years.
Boehner’s approach is to have an initial debt limit increase of between $900 billion to $1 trillion that would be accompanied by strict discretionary spending caps, producing 10-year savings of approximately $1.2 trillion.
The second installment of up to $1.6 trillion would be implemented only if around $1.8 trillion in savings from the “big 3” entitlement programs of Social Security, Medicare and Medicaid were produced.
Boehner’s objective is to tie the debt ceiling increase to entitlement reductions, but Democrats seem determined to avoid cutting entitlements if at all possible.
Senate Majority Leader Harry Reid unveiled his plan today and the most glaring point first seen by Republicans is it contains no cuts to Social Security, Medicare or Medicaid programs. At the same time, Reid’s plan has no revenue increases in hopes to gain support from moderate Republicans.
Reid’s alternative would slash $2.7 trillion over the next decade and raise the nation’s debt ceiling by roughly the same amount through the 2012 election cycle.
However, the plan proposed by Reid would depend on $1 trillion in savings from winding down the wars in Afghanistan and Iraq, making assumptions many believe are dependent upon too many other factors beyond the control of the U.S.
President Obama, hoping to avoid having to raise the debt ceiling more than once between now and his next election in November of 2012, is offering his support to Reid’s plan.
“Faced with the ‘my way or the highway,’ short-term approach of the House Republicans, Senator Reid has put forward a responsible compromise that cuts spending in a way that protects critical investments and does not harm the economic recovery,” White House Press Secretary Jay Carney, wrote in a statement sent to reporters Monday afternoon.
“All the cuts put forward in this approach were previously agreed to by both parties through the process led by the Vice President. Senator Reid’s plan also reduces the deficit more than enough to meet the contrived dollar-for-dollar criteria called for by House Republicans, and most importantly, it removes the cloud of a possible default from our economy through 2012,” Carney wrote in his White House statement.
Sen. Chuck Schumer (D-N.Y.) told Bloomberg, if Republicans “refuse this offer, it simply means they want to default.”
President Obama will address the nation tonight at 9 pm EDT. The Dow Jones closed today down 88 points from its close last Friday.