US Lawmakers to Vote on Republican Debt Plan

July 28, 2011

A 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.

Democratic 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.

Veto threat

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.

Reid 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.

Plan comparison

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 years.

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 Senate.

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.

Reid 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.