Debt Ceiling Talks: Democrats, Republicans Face Make-Or-Break Week

By Andy Sullivan and Alister Bull

WASHINGTON -- U.S. lawmakers working to rein in the country's rising debt said on Monday they will have to make substantial progress this week to ensure the country retains its top-notch credit rating.

Democrats and Republicans said they face a crucial series of talks as they try to find the trillions of dollars in budget savings that will allow Congress to cover the country's borrowing needs through the November 2012 election.

"I'd say if we haven't made enough progress by the end of this week we're really going to have to reassess the situation," Republican Senator Jon Kyl told reporters.

Other Republicans have suggested Congress might have to opt for a short-term fix if the group can't reach a deal soon -- a scenario that recalls the protracted brinkmanship of a budget battle that took the government to the edge of a shutdown earlier this year.

Vice President Joe Biden is set to lead talks on Tuesday, Wednesday, Thursday and possibly Friday. Democratic Representative Chris Van Hollen said the group aimed to get a rough deal in place by the end of the week.

"We've also held open Friday for a number of hours of meetings if we're not able to get some kind of agreement in principle by the end of the week, certainly by the end of this month," Van Hollen said on the MSNBC news network.

The Treasury Department has warned the country could default on its debt if Congress doesn't raise the $14.3 trillion debt limit by August 2, a scenario that could push the country back into recession and upend financial markets.

President Barack Obama and House Speaker John Boehner, the top Republican in Washington, are expected to hammer out the final terms of the deal once the group wraps up its work. The two played golf together on Saturday.

Republicans have said that any debt-limit increase must be paired with a deficit-reduction package of equal size -- at least $2 trillion to ensure Congress does not have to touch the politically toxic issue again before the elections.

STARK DIVIDE ON TAXES

Though the two sides have agreed in principle on a number of spending cuts, they still must overcome a stark divide over some of the biggest-ticket items on the ledger. Republicans have said they will not support any tax increases, while Democrats have resisted cuts to popular health programs.

Kyl outlined other elements Republicans want to see in the deal: a reduction in annual spending programs; slowed growth in healthcare and other benefit costs; and mechanisms to ensure Washington's resolve does not weaken in coming years.

"Unless we do those things I don't think many people on my side of the aisle are going to have an appetite for increasing the debt ceiling," he said in a speech on the Senate floor.

If the Biden group does not reach a deal soon, Congress could opt to pass a smaller package that would cover the country's borrowing needs for a month or two, requiring another painful vote. That's a prospect neither party says it wants.

"I hope we don't have to," Democratic Senator Max Baucus, a participant in the talks, told reporters. "It's far preferable if it's increased to a date past the end of 2012."

The White House is "very focused on the need to move with speed" on raising the debt ceiling, spokesman Jay Carney said.

U.S. budget deficits in recent years have hovered at their highest levels relative to the economy since World War Two. The deficit for the current fiscal year, which ends September 30, is projected to hit $1.4 trillion.

Deficit-reduction efforts have been complicated in recent weeks by signs that economic recovery may be weakening. The White House has floated a payroll tax cut to spur growth, but Republicans have not been enthusiastic about the idea.

Carney said Washington will have to balance stimulus efforts with the need to set the nation's finances on a sustainable course.

"This is about achieving the right mix of decisions within a broader package, both within the deficit reduction talks and broadly going forward from there, that allow for the economy to continue to grow and create jobs," Carney said.

(Additional reporting by Richard Cowan; Editing by Todd Eastham)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[KitchenCabinet]

02:49 PM on 06/22/2011

I hate listening to Carney. He is such a mealy mouth, pusillanimous spokesperson and always looks as if he is hiding something.

[dpooch]

10:44 AM on 06/22/2011

Heck with it the GOP are so smart. Their hostage has died. They killed him with tax cuts. Let them have it their way. They own it.

[drpmindmender]

04:19 AM on 06/22/2011

How about we the people have every member of Congress recalled to Washington, issue them each a chamber pot, lock them up in their respective chambers, feed them only bread and water, and only release them when they pass a measure to raise the debt ceiling, and pass the 2012 budget. Also, since the Treasury is juggling the books to keep the government going until August 2nd, Congress should receive no pay or benefits. If these requirements are not met by August 2nd, then all members of Congress should be arrested and imprisoned for treason.

[MiHi1964]

11:58 PM on 06/21/2011

Enough of these little band-aid stalls! Tell the GOP to go F themselves and if they want to be gutted like a fish then just TRY to toss the US into default.

CALL

THEIR

BLUFF!!!

[Seedomang]

11:20 PM on 06/21/2011

Tax everyone equally

[KitchenCabinet]

02:39 PM on 06/22/2011

What does that mean? By percentage?

[kamact]

10:02 PM on 06/21/2011

Seize the funds from the top 400 families ,...and the millions of the rest of us are then okay

[AyeChart]

09:14 PM on 06/21/2011

It's said that a vampire cannot enter a house unless the inhabitant invites him over the threshold.  Raising the debt ceiling is inviting the Defit-Spending Vampire into the national house.  I note that Rush Limbaugh is now using my vampire analogy (first put forth in February 2009 regarding Obama).  I don't mind.  Imitation is the sincerest form of flattery, and I am not filing a plagiarism lawsuit.

http://www.thelandofthefree.net/conservativeopinion/2009/02/26/the-vampire-obama/

I have pieces out re "The Vampire Keynes" and his disciples, also.  Krugman, Reich, Goolsbee, Summers, et al, are just junior vampires helping suck the blood out of the economy and biting the necks of innocent students in college classrooms, creating more Keynesian vampires.

[itzfatcat]

08:57 PM on 06/21/2011

I keep seeing dam the rich. Destroy this base and what do you have? Well no business no industry, no jobs. I too would like to see a balance between government, business, and unions. Right now all three groups are working against each other. When that stops, things will get better. Time to give a little, take a little, and get well. Right now government is trying to completely take over and business is holding back in a wait and see mode. The problem is corporate interests have the upper hand (they have the money) and will keep it - have to accept this, meet in the middle somewhere and move on, otherwise we are lost. The alternative is nationalization of industry - well we all know where that will take us.

[KitchenCabinet]

02:42 PM on 06/22/2011

Same tired old argument. If the business interests and industry could not make a go of America with a budget surplus and Bush tax cuts and removal of restraints on business, then they never will. How can you tell America to keep doing what has pulled us down the drain for the past ten years? It is, be definition, madness.

[itzfatcat]

08:43 PM on 06/21/2011

Well liberals read this. Republicans want to see in the deal: a reduction in annual spending programs; slowed growth in healthcare and other benefit costs; AND MECHANISMS TO ENSURE WASHINGTON'S RESOLVE DOES NOT WEAKEN IN COMING YEARS. What is unreasonable about this statement? Sounds like the hard line is beginning to soften. Time for politicians, from both sides, to get real and make the hard decisions that will bring us out of this mess – take politics, ideology, and special interest groups out of the equation. At this point I don’t care whose fault it is/was or who gets credit – start the fix. No watered down legislation or sleight of hand gimmicks should see the light of day. And yes the good congressmen/women from both parties should read and understand what is in the legislation. Get control of your staffers. Also put it on the web for all to read and listen to feedback.

[dlaroche]

09:46 AM on 06/22/2011

Here' the real issue... It's those that need the help that are getting hurt! BTW, I hate the word special interests groups... Let's give them a real name like elderly and poor on Medicare/Medicaid, poor who need food stamps. Special interest groups = rich taxpayers... Keep them in the equation because they do not want to pay their fair share of taxes! They are paying the lowest taxes in generations. They are not paying their fair share. DUMP the Bush tax breaks for the rich and maybe then we can negotiate fairly!!

[itzfatcat]

05:29 PM on 06/22/2011

You know I do see your side of the argument and somewhat agree. The problem all arguments in the press and politics are onesided, with no consideration for the valid points of the other side. And yes there is another side with very valid points just like the valid points in your post. Most of the time I take the other side because I feel it is not being presented. Also I don't claim to be always right - But my opinion is as good as anyone elses. I also see many more special interest groups than in your post represents. When I say special interest, I mean all of them.

[stageplay]

06:19 PM on 06/21/2011

Until the Republicans put corporate welfare, defense, and tax hikes for the rich on the table, the Democrats should stand firm. If the Republicans actually vote against raising the debt ceiling, thereby putting the USA's credit and economy in serious danger, they will pay dearly for it, not only from the votes of the American people giving them the boot, but also from the wrath of their corporate masters. Democrats, call their bluff. Jobs are the real issue here, not the debt or deficit. Until we create jobs our economy will not take off. Cutting spending in this kind of a recession is a job killer...and that is exactly what the Republicans want. They think the more jobs they can kill and the more they can make this economy and the American people suffer, the more likely they will gain more power. I think it will backfire on them. They have been showing their true colors, and the majority of Americans do not like what the see.

[gconners]

05:22 PM on 06/21/2011

Food for thought:
Many people compare the federal government to a family, or a business, budget.
Okay.
We, as a nation, have a $14.3 trillion debt.
We, as a nation, have a total net wealth of $54.9 trillion.
If a family had $54,900 and were $14,300 in debt. Would you consider them broke?
If a business had $54.9 million and were $14.3 million in debt. Would you consider it broke?
Just think about it, okay? Thanks.

[pecosdog]

06:39 PM on 06/21/2011

The problem isn't that we don't have enough money, but the rich elite has finagled most of the wealth since Reagan and they aren't letting go of it without a fight. I say we give them a fight to the death, since that is what they seem to want.

[solvseus]

05:05 PM on 06/21/2011

If they were smart, the Dems would call their bluff. Maybe some of the Tea Party don't realize how dire this is, but the establishment sure does. Their corporate masters won't let them, or the Blue Dogs, allow us to go into default. All the while going out there reminding people who are responsible for most of the debt (hint: Reagan and the Bushes), and how many times they raised the ceiling. Then when elections roll around, remind people that the tax cuts are still in place, and haven't been doing anything for anyone.

But they aren't, and they won't. They'll cave, call it a compromise, the right will get everything they wanted while still defining the debate, and the recession will continue because it has nothing at all to do with the debt. And then shake their heads once again, wondering why they're still losing. Probably taking another tack right, while the GOP will do the same.

[gconners]

05:46 PM on 06/21/2011

Just a quick note:
Under George Bush, after inheriting a budget in SURPLUS and a SHRINKING debt, the debt ceiling was raised SEVEN times!!!
There is nothing to "negotiate." Raise the debt ceiling and "negotiate" on the budget.
President Obama and Sen. Reid, please tell the Republicans to "take it or leave it!"

[forestnfama]

03:36 PM on 06/21/2011

We will remember those who would be responsible for the crash of the dollar.....

[GuyCybershy]

03:51 PM on 06/21/2011

If you had to put it down to one person you would have to say Alan Greenspan

[realpolitic]

03:36 PM on 06/21/2011

Yes, the Republicans jump on every opportunity to hijack government and balance the debt on the backs of the poor. What have the Republicans done to produce any jobs?  Absolutely nothing.   Tax cuts for the wealthy will not produce jobs, as Bush showed very well.  Republicans are too concerned with making abortion more difficult, cutting back on voting rights, and eliminating collective bargaining for state workers to produce any jobs.  Austerity programs will not do it.  President Obama should take control of the national dialogue from his bully pulpit and tell the country we need a jobs program and more stimulus.  Right now the states and municipalities are laying off almost as many people as the private sector is hiring.  It is a perfect storm for Republicans.  They have backed us into a corner with their fiscal irresponsibility and now say it is our fault so we must cut the programs the middle class depends on like social security and Medicare.  I say Hell No!

[Ryan Raba]

03:01 PM on 06/21/2011

I take exception to the second paragraph:

"Democrats and Republicans said they face a crucial series of talks as they try to find the trillions of dollars in budget savings that will allow Congress to cover the country's borrowing needs through the November 2012 election."

Congress doesn't need to find trillions in savings to raise the debt limit. That condition was put in place by the Republicans in an attempt to force ideological changes through that would never have stood a chance otherwise (i.e. blackmail).

It's sad to see that everyone has capitulated to those demands for budget savings being tied to paying the bills on money already spent by previous budgets.