Created by on 07/12/2011

With less than one month until the August 2nd deadline to raise the federal debt limit, congressional leaders and administration officials have intensified their ongoing efforts to reach a compromise on a comprehensive deficit reduction plan. After House Majority Leader Eric Cantor (R-VA) backed out of the negotiations led by Vice-President Joe Biden, the focus shifted to direct conversations between the top Democratic and Republican leaders from the House and Senate and President Obama. In an effort to maintain the momentum of the talks, Majority Leader Harry Reid (D-NV) abruptly cancelled the Senate’s long-planned Independence Day recess and notified Senators that they should remain in Washington for votes throughout the week of July 4th. On July 7th, Obama, House Speaker John Boehner (R-OH), Cantor, House Minority Leader Nancy Pelosi (D-CA), House Minority Whip Steny Hoyer (D-MD), Reid, Senate Majority Whip Richard Durbin (D-IL), Senate Minority Leader Mitch McConnell (R-KY), and Senate Minority Whip Jon Kyl (R-AZ) met at the White House to discuss the outline of a possible deal to reduce the existing $14 trillion deficit by two to four billion dollars over ten years.

As this newsletter went to press, Democrats and Republicans remained at odds on how best to tackle the nation’s fiscal problems. The President urged Congress to reduce the deficit by four trillion over ten years as recommended by the National Commission on Fiscal Reform and advocated for a “balanced approach” that included a combination of cuts in domestic and security spending, changes in entitlement programs, and revisions to the tax code. House and Senate Republican leaders insisted that they do not have the votes for any deal that includes new taxes or tax increases and stated that they want to achieve at least two trillion dollars in deficit reduction, the amount by which the debt ceiling would have to be raised in order to extend the federal government’s borrowing capacity through the 2012 elections. The congressional leadership and President Obama continued the negotiations in a rare Sunday meeting at the White House on July 10th, although they did not reach an agreement. Acknowledging that lawmakers are running up against the August 2nd deadline, Majority Leader Cantor announced on July 8th that he was cancelling the House recess that was scheduled to take place the week of July 18th.
In related news, Senate Budget Committee Chairman Kent Conrad (D-SD) shared details of a draft fiscal year (FY) 2012 ”budget resolution” with the Senate Democratic Caucus at their weekly luncheon on July 5th. Those familiar with Conrad’s proposal said it would reduce the deficit by four trillion over the next decade, cutting spending by two trillion (including minimal cuts to entitlements) and generating an additional two trillion in revenue by ending certain tax breaks. Press reports indicate that the Conrad plan received “positive reviews” from Senate Democrats. However, Chairman Conrad announced on July 7th that public release of the draft “budget resolution” would be postponed until additional progress is made on a deficit deal. Once released, the Conrad proposal is expected to become the legislative vehicle for any deficit reduction plan agreed to by the White House and congressional leaders.

On the other side of the Capitol, the House continued to make progress on the FY 2012 appropriations bills, approving the measure funding the Department of Defense and beginning consideration of the legislation to fund the Department of Energy (HR 2354). Debate on HR 2354 will resume on July 11th, and the House is expected to pass the bill before the end of that week. The Senate has not yet released a schedule of when that chamber will consider the 2012 spending bills and is unlikely to begin working on them until a deal is reached on raising the debt ceiling.