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Obama, Hill Leaders Debate Debt Ceiling

July 13, 2011

On Sunday, President Barack Obama attempted to reach a budget agreement to reduce the nation’s deficit and repair its perilous finances, but Congressional Republicans have insisted on a more modest deal to avert a default on the national debt. 

House Speaker John Boehner (R-Ohio) pulled back from a far-reaching agreement aimed at saving as much as $4 trillion over 10 years, and instead wants a smaller, $2 trillion deal that is limited to just spending cuts. Obama is determined to pursue the boldest package possible, one that would require new tax revenue as well as cuts in Medicare and other entitlement programs. However, he faces steadfast opposition not only from Republicans but is starting to see some growing qualms among Democrats.

While they agree on the need to raise the debt limit before the U.S. defaults on Aug. 2, both sides have engaged in blaming the other over the failure to advance the deficit reduction package.

Specifically, negotiators are divided over taxes and entitlements. Republicans reject Democrats’ call for more tax revenue and instead are pressing to cut entitlement programs such as Medicare and Social Security. Democrats insist even the Republicans’ proposal for a smaller deficit-cutting plan must include more taxes from higher-income Americans. Obama has said he is willing to cut entitlements in exchange for a Republican agreement to increase taxes.

The president has said he would meet every day and through the weekend until the administration and Congress can reach an agreement. He said there was agreement among the negotiators that the debt ceiling must be increased before Aug. 2, however, he has outlined his refusal to sign a short-term debt ceiling increase, of 30 or 60 days, calling it an irresponsible approach.

Mr. Obama also criticized rank-and-file Republicans for taking the unyielding position that tax hikes may not be considered at all. He noted that none of their discussions about tax increases involved increasing them now. Instead, starting in 2013, he is proposing to get rid of some of the “egregious loopholes” that benefit corporate jet owners and oil and gas companies.

Meanwhile, Republicans, including Majority Leader Eric Cantor (R-Va.), a participant in previous bipartisan debt talks led by Vice President Joe Biden, say that group had identified between $2 trillion and $2.5 trillion in spending cuts that could serve as a framework for an agreement between Obama and congressional leaders.

Since Senate Republicans are doubtful they will be able to reach an agreement on a larger budget deal with the administration, Minority Leader Mitch McConnell (R-Ky.) has said that Republican leadership will try to force action on a “backup plan” to avoid a debt crisis early next month. McConnell is developing legislation that will permit the debt ceiling to be raised, and the bill would require Obama to send to Congress a request to raise the debt ceiling by $700 billion and be accompanied by a list of specific spending cuts equal to that amount. Then, in the fall, the proposal would call for the president to send up another request to raise the debt ceiling by $7000 billion with another round of spending cuts. Finally, McConnell’s plan would require the president to request raising the debt limit by another $900 billion with more spending cuts in the summer of 2012.

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© 2007 National Small Business Association