The House of Representatives passed a Republican proposal to raise the debt ceiling. The measure, called the "Cut, Cap and Balance Act," would raise the debt limit by $2.4 trillion but would be accompanied by mandatory spending cuts and a balanced budget amendment. The vote was 234-190.
The President sounded optimistic about a plan released by a bipartisan group of Senators that would cut $3.7 trillion from the deficit over the next decade. The plan was offered by the “Gang of Six,” a group of Senators who have been working on deficit reduction for several months. President Obama called the plan “good news” and a “very significant step.” He said he will call Congressional leaders back to the White House to determine a way to move the “Gang of Six” plan – or something similar – through both houses of Congress.
But in statements to the press after their parties’ met, neither Senate leader would endorse the plan. Republican Leader Mitch McConnell (R-KY) said, “I don’t have an opinion yet.” While Senate Majority Leader Harry Reid said, he wants to be “all encompassing” of the plan, but said he is realistic of the challenges of passing it through two legislative bodies in 13 days, by August 2nd.
The “Cut, Cap and Balance” measure in the House, authored by Representative Jason Chaffetz (R-UT), would require up to $2 trillion of cuts to discretionary spending over the next ten years. It would also cap spending at under 20% of gross domestic product in a decade (spending is currently more than 23% GDP). Finally, it would start the process to add an amendment to the Constitution to balance the budget.
The White House released a statement saying it "strongly opposes" the Republican measure and said the President would veto it. "Neither setting arbitrary spending levels nor amending the Constitution is necessary to restore fiscal responsibility," a statement by the Office of Management and Budget read.
Realizing that the House bill is unlikely to pass the Senate, Senate leadership is drafting what is considered a “fall-back” or “last-ditch” option, which could become the leading option in coming days as the August 2nd deadline to lift the debt ceiling nears and negotiations with the President to reach a “grand bargain” are elusive.
Senate Majority Leader Harry Reid (D-NV) and his Republican counterpart, Senator Mitch McConnell (KY), continue work on a complicated multi-step plan initiated by Sen. McConnell that allow the President to raise the debt ceiling without the Republicans having to vote in favor of it. McConnell’s plan would enable the President to lift the debt ceiling by up to $900 billion three times through 2012, but he must propose spending cuts of the same amount. Those cuts do not need to be enacted, though.
Media reports say that Reid and McConnell are considering pairing his plan with up to $1.5 trillion in spending cuts to make it more palatable for members of the Republican-led House to support it. At a news conference this afternoon, President Obama called the plan the “bare minimum that has to be achieved.”
Speaker Boehner said if "Cut, Cap and Balance" does not pass the Senate, he is working on a "plan b" but would not divulge details.
Senator Reid announced that the Senate will work weekends and will stay in session beyond its scheduled August 5th summer recess until the debt ceiling is lifted.