By Ian Swanson - 07/25/11 05:03 PM EDT
House Republicans and Senate Democrats are preparing to detail their different plans for raising the debt ceiling to their respective caucuses on Monday afternoon.
Speaker John Boehner (R-Ohio) is expected to present a two-step plan for raising the debt limit to his conference during a 2 p.m. meeting.
It is expected to raise the $14.3 trillion debt ceiling by as much as $900 billion and will couple that hike with as much as $1.2 trillion in spending cuts. The plan would create the need to raise the debt limit again before the November 2012 elections.
Boehner’s two-step plan has been rejected by the President Obama, who wants a larger increase to the debt ceiling that would ensure another hike is not required until after the elections.
Senate Majority Leader Harry Reid (D-Nev.) on Monday evening is expected to offer his own one-step proposal to raise the debt ceiling. It is expected to include $2.7 trillion in cuts, including more than a trillion in savings from ending the Iraq and Afghanistan wars.
Reid will find another $400 billion in savings from interest that would not be paid on the debt, according to a Senate aide. His proposal is not expected to include farm subsidies.
Reid is also expected to hold a news conference Monday afternoon to discuss his plan as both sides continue their efforts to win over voters.
The dueling proposals set up a final round of brinksmanship between the two chambers of Congress seven days before the Aug. 2 deadline when the Treasury Department says it will run out of money to pay the nation’s bills.
Wall Street is largely shrugging off the gridlock so far. Stocks opened down, with the Dow Jones Industrial average plummeting 130 points minutes after it opened. But by midday, it had regained much of those losses and was down 50 points.
Obama has warned that the two-step proposal Boehner is preparing would be bad for the economy and could cause harm to markets by setting up another deadline for Congress to raise the debt ceiling.
Republicans counter that Obama’s worry over timing is because of his reelection.
A GOP leadership aide noted in an email to reporters that if Boehner’s proposal raises the debt ceiling by nearly $1 trillion, it would be the second biggest increase to the ceiling in history. The aide also argued that Congress has previously agreed to shorter-term extensions of the ceiling 44 different times.
Democrats backing Obama argued Monday that the GOP is pushing for a shorter-term deal because a larger deal would help the economy – as well as Obama and Senate Democrats.
“A big debate this year puts a cloud over the markets and the economic environment, and another debate next year will do the same thing to our economic recovery,” Rep. Edward Markey (D-Mass.) told reporters. “So it’s a very cynical, regain-the-majority strategy that puts the entire economy at risk.”
Rep. Norm Dicks (D-Wash.), speaking at the same news conference as Markey, however, quickly distanced himself from the remarks.
“I honestly think they believe what they are saying, that cutting spending will grow the economy,” Dicks said.
The moves by Boehner and Reid follow the breakdown in talks last week between Obama and Boehner, who were trying to reach a deal to reduce the deficit by $3 trillion over the next decade.
Senate GOP leader Mitch McConnell (R-Ky.) argued that Reid agreed to a two-stage process for raising the debt ceiling, but Reid’s office says the majority leader only agreed to do cuts in two stages. Reid’s office said the senator always envisioned a single hike to the debt ceiling.