President Obama and lawmakers in both parties latched on to a new strategy for reducing the federal debt Tuesday, saying an emerging plan to save $3.7 trillion over the next decade could help break a political impasse over the debt limit and avert a U.S. default.
The proposal, crafted by a bipartisan group of senators known as the “Gang of Six,” calls for $500 billion in immediate savings and requires lawmakers in the coming months to cut agency spending, overhaul Social Security and Medicare, and rewrite the tax code to generate more than $1 trillion in fresh revenue.
House Republican leaders are giving the tea party what amounts to a symbolic floor vote on a "cut, cap and balance" debt-limit plan, while behind the scenes work continues on a fallback measure that could become the framework for a compromise. (July 19)
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In the works since January, the plan became public Tuesday, just as it was becoming apparent that the leading option for raising the federal debt limit faces bleak prospects in the House. With the Treasury expected to start running out of cash in two weeks, House Republicans are openly hostile to a Senate-led plan that would authorize additional borrowing but kick the hardest decisions — such as whether to raise taxes or cut entitlement programs — to a special legislative panel.
The Gang of Six framework, by contrast, would force lawmakers to make some of those tough decisions now. The urgency of the situation was underscored Tuesday when a major credit-rating company said it could downgrade five states, including Maryland and Virginia, in addition to the federal government if the United States defaults on its obligations.
As many policymakers were turning their attention to the new strategy, the Republican-controlled House forged ahead Tuesday with another approach to the debt crisis, voting to sharply cut spending and tie an increase in the debt limit to the eventual adoption of a balanced-budget amendment. The measure is unlikely to pass the Senate, and Obama has promised to veto the bill if it does.
The new plan emerging from the Senate may have better prospects. House Speaker John A. Boehner (R-Ohio) said through a spokesman that the Gang of Six plan “shares many similarities with” the far-reaching strategy he had been pursuing with Obama this month but abandoned amid GOP opposition to fresh revenue. The president agreed, and he hailed Republican openness to a plan that includes new taxes as “a very significant step.”
“It’s time to get down to the business of actually solving this problem. And I think we now are seeing the potential for a bipartisan consensus around what that would take,” Obama told reporters during a quick appearance in the White House briefing room.
Obama summoned congressional leaders to the White House again Wednesday to “start talking turkey” about the shape of a compromise package that could pass by Aug. 2.
“The problem we have now is we’re in the eleventh hour,” Obama said, “and we don’t have a lot more time left.”
Neither Obama nor Boehner embraced the specific details of the Gang of Six proposal, and it was not immediately clear how the strategy might influence debt-limit negotiations. House Majority Leader Eric Cantor (R-Va.) said in a statement that the plan contains “some constructive ideas for dealing with our debt,” but he objected to the revenue goals, arguing that “a tax increase is the wrong policy to pursue with so many Americans out of work.”