Lawmakers Working To Avoid Default as Budget Talks Remain Stalled

Negotiations between President Obama and House Speaker John Boehner (R-Ohio) on a package of fiscal year 2012 budget, deficit-reduction and debt-limit proposals ended on Friday when Boehner announced that he was abandoning the talks, Politico reports.

Details of the Breakdown in Negotiations

Boehner said he had opted to work with congressional leaders instead because of new demands from the White House for new revenue. According to Politico, Boehner and Obama were discussing a $3 trillion-to-$3.5 trillion deficit-reduction package (Rogers, Politico, 7/22).

At a news conference to announce the failed talks, Obama said the package included more than $1 trillion in cuts to domestic and defense discretionary spending, as well as $650 billion in cuts to federal entitlement programs, including Medicaid and Medicare. He added that the deal also would have generated $1.2 trillion in revenue through a tax code overhaul, instead of tax hikes that Republicans oppose. "It's hard to understand why [Boehner] would walk away from this kind of deal," he said.

At a separate news conference minutes later, Boehner said the two leaders previously agreed to just $800 billion in revenue. He said that Obama proposed another $400 billion through tax increases, prompting him to walk away, the Washington Post reports. "The White House moved the goal posts" by demanding "more money at the last minute -- and the only way to get that extra revenue was to raise taxes," Boehner said.

Obama, Congressional Leaders Continue To Seek Resolution

Despite ending their personal negotiations, Boehner and Obama met again at the White House on Saturday morning with three other top congressional leaders -- Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Nancy Pelosi (D-Calif.) -- to discuss new proposals.

Congress has until Aug. 2 to raise the current $14.3 trillion debt ceiling to avoid a federal default on debt obligations (Kane et al., Washington Post, 7/22).

The four lawmakers also met for a private follow-up meeting on Saturday evening. However, the two Democratic leaders indicated after the meeting that they had not reached a deal (Hulse/Calmes, New York Times, 7/23).

Boehner Developing Two-Stage Fallback Proposal

Senate Democrats and House Republicans have begun working to develop backup budget and debt-limit proposals, Politico reports (Sherman et al., Politico, 7/24). Boehner and Reid over the weekend conducted separate conference calls and meetings with their respective caucuses to seek an end to the ongoing stalemate (Steinhauer/Cooper, New York Times, 7/24).

GOP officials familiar with Boehner's plan said he is considering a package with spending cuts of between $3 trillion and $5 trillion, which would raise the debt ceiling in two stages (Schatz, CQ Today, 7/23).

At the first stage, the proposal would enact cuts of just under $1 trillion, which would be enough to allow Congress to raise the debt ceiling through the end of FY 2011. The second stage would be implemented once a newly established commission -- which would be charged with considering a broad package of spending cuts, program overhauls and potential revenue increases -- makes its recommendations (New York Times, 7/24).

Boehner on Sunday said that he hoped to have a framework of the plan -- which would resemble the House-approved, GOP-sponsored budget and debt-limit bill (HR 2560), known widely as the "cut, cap and balance" measure -- by late Sunday.

However, Boehner later revised the timeline, announcing he would likely release a blueprint on Monday, according to Roll Call. In a conference call with House members on Sunday, he said the "cut, cap and balance" measure was no longer under consideration because of Senate opposition, Roll Call reports (Stanton, Roll Call, 7/24).On Friday, the upper chamber voted 51-46, along party lines, to table the measure (California Healthline, 7/22).

Democratic leaders already have indicated their opposition to Boehner's plan. Reid on Saturday said that he would not support any short-term packages and "neither will President Obama nor Leader Pelosi." Reid said that Democrats will continue to "seek an extension of the debt ceiling through at least the end of 2012" (CQ Today, 7/23).

Reid Considering $2.7T Deficit-Reduction Plan

Meanwhile, Reid is preparing a proposal that would reduce the deficit by $2.7 trillion and raise the debt ceiling by $2.4 trillion, the Times reports (New York Times, 7/24). In a statement that described the proposal as a "bipartisan compromise," Reid said the plan would meet the GOP's criteria for approving a debt-ceiling increase (Berman, The Hill, 7/24).

 According to the Times, it would not include any changes to entitlement programs or raise taxes (New York Times, 7/23). Democratic leadership aides said Reid hoped to present his proposal to Republicans after securing the support of Obama and other key Democrats (Shiner, Roll Call, 7/24).

Senators Seek Path Forward for 'Gang of Six' Plan

The bipartisan "Gang of Six" on Friday met with McConnell and Reid to discuss a strategy to move their new budget and debt-limit proposal through Congress.

According to Politico, McConnell and Reid's willingness to discuss the plan is a departure from weeks ago, when they appeared to be non-committal on the plan (Raju, Politico, 7/22).