NBC News: Debt negotiators 'very close' to deal

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NBC News: Debt negotiators 'very close' to deal

Post by Shirley on Sun Jul 31, 2011 12:29 pm

NBC News: Debt negotiators 'very close' to deal

The move would raise the debt ceiling by up to $2.8 trillion

NBC, msnbc.com and news services
updated 1 hour 19 minutes ago 2011-07-31T15:05:03

WASHINGTON — Lawmakers were "very close" on Sunday to reaching a last-minute deal that could raise the U.S. debt ceiling by up to $2.8 trillion and avoid possible downgrade of Treasury bonds or potential default, according to NBC News.

Senate Republican leader Mitch McConnell said Sunday that negotiators are "very close" to an agreement.

McConnell told CNN's "State of the Union" that lawmakers are looking at a package that would raise the debt ceiling in two stages through the elections next year. He also said, "there are no tax increases in this proposal.”

McConnell said the deal being worked on, while raising the debt ceiling in two stages, would satisfy Obama's demand that there not be another debate on the issue before next year's election. The scenario being discussed would raise the debt ceiling unless a two-thirds majority in both houses of Congress voted to block that move.

The way this deal is shaped, Congress can avoid BOTH the tax and entitlement fights until 2013," NBC News' Chuck Todd said in a tweet.

Obama adviser: Sunday 'a critical day'

“We don’t have a deal” said Obama adviser David Plouffe on NBC's Meet the Press, adding that, “Today is obviously a critical day….. In the coming hours, I think it’s incumbent on congressional leaders to compromise that last bit so we can have a deal.”

Plouffe outlined the structure of an agreement between Obama and congressional leaders.

It would require an initial round of $1 trillion in deficit reduction, mostly or entirely coming from spending cuts, followed by work by a special congressional committee to recommend even deeper deficit reduction which would be achieved, said Plouffe, through “entitlement reform and tax reform.”

He said the committee would be mandated to recommend specific spending cuts, but it “is not going to be charged with just doing spending cuts only. The committee is going to be charged looking at our entire deficit reduction problem and look at things like tax reform and revenue.”

Future cuts in entitlements?
It was not clear from his remarks by how much the three major entitlement programs, Social Security, Medicaid, and Medicare, might be reduced.

That new congressional committee would be under the pressure of what Plouffe called “an enforcement mechanism”— “you want something to compel this committee to act.”

Plouffe indicated that Obama was sticking to his insistence that any agreement raise the debt limit through the end of 2012. Plouffe said, “This debt ceiling cloud has harmed our economy. Why on earth would we want to go through this again a few short months from now?”

Sen. Chuck Schumer, D-N.Y., cautioned Sunday morning that "there is no final agreement" and that much remains to be discussed. He said an enforcement mechanism for future deficit reduction remains an unresolved issue in the negotiations.

Schumer told CNN that future deficit reductions should not cut Medicare or Medicaid benefits but provide defense cuts of "equal sharpness and magnitude" to cuts in nonmilitary discretionary spending.

Prospects that a significant package was within grasp brightened after Republican and Democratic leaders reopened stalled talks with the White House, and McConnell said he was confident and optimistic.

Earlier Saturday McConnell told reporters that, “We all know that if the president decides to reach an agreement with us, the Democrats, most of them, will fall in line. He is the leader of the Democratic Party; he is the president of the United States. He needs to indicate what he will sign. And we are in those discussions now.”

Senate Majority Leader Harry Reid pushed back a key procedural vote on his own debt limit plan by 12 hours to 1 p.m. EDT on Sunday, buying additional time for both sides to hammer out details before Asia markets open.

“There are many elements to be finalized and there is still a distance to go before any arrangement can be completed, but I believe we should give everyone as much room as possible to do their work,” Reid said Saturday night

“I’m glad to see this move toward cooperation and compromise. I hope it bears fruit.”

If the borrowing limit is reached, Treasury Secretary Tim Geithner has said, the government will be forced to make a 40 percent cut in outlays.

Geithner has been unwilling to discuss in public how the Treasury would manage its cash if it exhausts its borrowing ability.

But Bloomberg News reported Friday that the Treasury would give priority to making interest payments to holders of Treasury bonds if lawmakers fail to reach an agreement to raise the debt ceiling.

The prolonged standoff over raising the $14.3 trillion debt limit comes at a time when data are pointing to persistent economic weakness and when business leaders are voicing worry that a disruption of bond markets would only make matters worse.

Vulnerable to a shock
The government reported Friday that in the first quarter of the year the economy grew by only 0.4 percent.

The government also revised its previous output figures for 2008 and 2009, revealing that the recession was worse than previously thought, with the economy shrinking by 0.3 percent in 2009 and by 3.5 percent in 2008.

With more than 14 million people still officially categorized as unemployed, and with millions more having given up looking for jobs, the economy remains in a fragile state.

David Beers, the global head of sovereign ratings at the bond rating firm Standard & Poor’s, said last week that reaching the debt limit “would not be default so long as the government is continuing to pay its debt as it matures and its interest payments.”

But the government being unable to borrow, and the resulting cut in outlays, would be, Beers said, “a very sudden fiscal shock that, the longer it lasted, would filter powerfully through the system… Potentially that would be deeply disruptive to the economy.”

The Associated Press, NBC News, and Reuters contributed to this report.

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