(Chip Somodevilla, Getty…)
The Republican leader in the House and Democratic leader of the Senate issued dueling proposals Monday to allow the federal debt ceiling to be raised – both with steep spending cuts, but neither with a clear route to ending the standoff over the government's ability to pay its bills.
This post has been corrected. See note at bottom for details.
Both plans will face key tests on Wednesday, when Speaker John A. Boehner (R-Ohio) and Majority Leader Harry Reid (D-Nev.) each plan to bring their proposals to the floors of their respective chambers.
In the House, the issue will be whether conservative Republicans will remain united behind Boehner even though his plan received mixed reviews from conservatives, with some influential "tea party"-affiliated lawmakers and groups denouncing it as too weak. In the Senate, the question will be whether Reid can attract the seven Republican votes he would need to cut off a threatened filibuster and claim bipartisan backing for his plan.
President Obama was scheduled to address the nation at 6 p.m. Pacific about the importance of quickly resolving the impasse as the threat to the economy was imminent. Boehner will deliver the Republican response shortly after.
Earlier in the day, Obama embraced Reid's plan even though it includes none of the new tax revenue the president repeatedly has pushed for in a larger deficit-reduction deal. The White House said Reid's plan was a "responsible compromise" which would end the debt-ceiling standoff.
By contrast, Obama rejected Boehner's proposal, which would cut more deeply into federal programs and also would require a second congressional debt-ceiling vote early next year -- which Obama has said is a deal-breaker.
Obama has said he does not want to revisit the debt ceiling debate in coming months, when political infighting in the run-up to the 2012 election is expected to be even more intense than now. Democrats say another debt ceiling impasse could jeopardize the economy.
"We should not let these extremists dictate the outcome of this debate," Reid said, declaring Boehner's plan a nonstarter in the Senate. "The time for ideological extremism should end."
Investors in the United States and abroad have been nervously watching the debate in Washington. The U.S. Treasury faces a potentially devastating default if Congress does not raise the $14.3-trillion debt ceiling by early next week, which could send shock waves through the economy. Top rating agencies have warned that a downgrading of the nation's credit rating would result in an interest rate spike for the federal government and ordinary Americans, even if a default is averted. The Dow Jones industrial average closed down slightly Monday, reflecting what analysts said was continued nervousness about the debt debate.
Many Republicans have said they would vote to increase the debt ceiling only if the increase were matched more than dollar-for-dollar with long-term cuts in federal spending. The Boehner plan would achieve that goal. But it falls short on the deeper budget reforms many conservatives who power the House majority have said would be needed for their vote, such as a balanced budget amendment to the Constitution.
Boehner acknowledged Monday that his plan was "less than perfect."
But in a direct appeal to the right flank, GOP leaders impressed on lawmakers the need to support a proposal that could win support in both chambers. Without much Democratic support in the House, Boehner would be forced to hold all but about 20 Republican votes to pass the measure in the House.
"No side gets all that they want," said Rep. Eric Cantor (R-Va.), the majority leader.
The Boehner plan would work in two stages. The first would cut more than $1 trillion from appropriations over the next decade by capping future spending in exchange for a short-term increase of the debt limit until early next year.
In the second stage, a special congressional committee would be set up and told to make recommendations for as much as $1.8 trillion in additional cuts. If those cuts were approved by December, the president could request additional debt of a similar amount, which would cover the nation's debts through the end of 2012. The plan also calls for a vote this year on a balanced budget amendment to be passed by Congress and sent to the states for ratification.
"Tea party" affiliated lawmakers, including Sen. Rand Paul (R-Ky.), quickly dismissed the Boehner plan. But influential conservative activist Grover Norquist, the president of Americans for Tax Reform, called it a "good plan" – a notable nod of support.
The proposal Reid has assembled hews largely to GOP priorities, an appeal to end the standoff. The Reid plan would cut $2.7 trillion over the next decade, largely from domestic accounts and savings from ending the wars in Iraq and Afghanistan. Republicans are wary of counting on the war savings, and Boehner said Reid's plan was "full of gimmicks."
For the record, 5:40 p.m.: An earlier version of this post said President Obama would address the nation at 6:30 Pacific time. He is scheduled to speak at 6 p.m. Pacific.
Staff writer Kathleen Hennessey in Washington contributed to this report.