Republican plan to resolve the U.S. debt crisis faces a vote in Congress
Thursday, with less than a week to go before the nation runs out of
money to pay its bills.
Senator Charles Schumer
Lawmakers in the Republican-controlled House of Representatives are
voting on a measure put forward by House Speaker John Boehner that would
raise the nation's $14.3 trillion borrowing limit in exchange for
billions of dollars in spending cuts.
President Barack Obama has threatened to veto the legislation. It has
also drawn opposition from the president's Democratic allies in the
Senate, as well as Republicans who are part of the ultra-conservative
Tea Party movement.
On Wednesday, Boehner issued a blunt call to action to Republican
lawmakers to get behind the plan.
President Obama supports a competing plan being pushed by the Senate
majority leader, Democrat Harry Reid, that involves a larger increase in
the debt ceiling.
Without legislation in place by the August 2 deadline, the U.S. could
default on some of its obligations.
The U.S. Treasury Department, the central bank and the White House have
all warned that a default would have catastrophic consequences on the
economy. Economists have said a default would also have a very negative
effect on the global economy.
Boehner's proposal is a two-step plan that would immediately raise the
borrowing limit by $900 billion and possibly include a further increase
next year, while cutting spending by more than $900 billion over 10
Reid's plan calls for a $2.7 trillion increase in the debt ceiling. That
would give the government enough money to cover its bills through 2012,
and put off another debt ceiling debate until after the presidential and
congressional elections 16 months from now. Reid called the Republican
plan “a short-term fix” that cannot pass the Democratic-controlled
On Wednesday, some Republican lawmakers tried to rework the Boehner
plan, after non-partisan congressional analysts said it would fall short
on promised spending cuts.
Tea party factor
Some members of the Tea Party faction vowed to vote against the Boehner
plan, or any proposal that would raise the debt ceiling.
Senator Reid's proposal has also faced scrutiny. The non-partisan
Congressional Budget Office says the plan overstates savings by half a
trillion dollars. Some Republicans argue the promised spending cuts in
Reid's proposal are not realistic.
says Republicans should embrace his plan because it is a compromise that
incorporates many spending cuts Republicans have supported, and does not
include tax increases they strongly oppose.
Will US default?
White House Chief of Staff William Daley says he is confident the United
States will not default on its debt. He told television interviewers
there are a lot of debt reduction plans on the table, and everyone is
stressed as the August 2 deadline approaches. But he said, in the end,
Congress will do what is right.
Uncertainty caused by the bitter partisan debate and the lack of
apparent progress toward a compromise have worried investors. That is
why many stock markets have declined, and the value of "safe-haven"
investments like gold and the Swiss Franc have hit record highs against
the U.S. dollar.