Snapshot: Developments in U.S. debt talks

WASHINGTON Sun Jul 24, 2011 1:24pm EDT

WASHINGTON (Reuters) - Here is what is happening on Sunday as lawmakers try to close in on a deal to raise the $14.3 trillion U.S. debt limit by August 2 and avoid a credit default:

* U.S. House of Representatives Speaker John Boehner tells Fox News Sunday that House Republicans are prepared to push through their own deficit reduction package if congressional leaders fail to produce a bipartisan plan by Sunday afternoon. That would be just hours before financial markets open in Asia. With time running out, the Democratic-led Senate might have no choice but to accept what the Republican-led House passes this week.

* White House Chief of Staff Bill Daley tells NBC's "Meet the Press" that any short-term deal to raise the debt limit would harm the economy because financial markets and business leaders would not have the certainty they need to make investment decisions. Democrats want a debt limit extension through the 2012 presidential election year.

* Treasury Secretary Timothy Geithner tells CNN's "State of the Union" that it is important to remove the threat of default for at least the next 18 months.

* Senator Tom Coburn, who has shown a greater willingness to compromise on tax increases than many of his fellow Republicans, tells NBC's "Meet the Press" he sees only a short-term debt extension passing Congress and that President Barack Obama, who objects to a short-term deal, will have no choice but to sign it.

* Congressional leaders are expected to continue negotiations on Sunday. Republicans are pushing a two-step plan that would raise the debt ceiling and cut deficits. The first step would provide a downpayment on spending cuts and provide the government with enough borrowing authority to get through the rest of the year while lawmakers work on additional deficit reduction.

(Reporting by Donna Smith; Editing Christopher Wilson)

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Comments (19)
karlossss wrote:
Well, one thing is for sure: If we fail to raise the debt ceiling and compromise our credit rating, our creditors will force us to both cut spending and raise taxes drastically. So maybe our leaders should just let the free market resolve the issue. This, of course, would accelerate our economic collapse, but any further “negotiations” between intransigent Democrats and Republicans in Washington would only postpone the inevitable. Great Depression II, here we come.

Jul 23, 2011 8:29pm EDT  --  Report as abuse
aota wrote:
There is absolutely no talk of increasing taxes for the rich. Republicans just can’t come to grips with that. You cannot dump this debt ceiling extension at the feet of the middle class and poor.

Jul 23, 2011 8:35pm EDT  --  Report as abuse
Leevane wrote:
I have two issues for voters.

I. A 2006 post at the Phantom Republican, http://thephantomrepublican.blogspot.com/2006/04/did-bill-clinton-really-create-budget.html argues that our surplus under Clinton was not due to controlled federal spending, or programs that contributed to financial growth.

Rather, it’s merely pointed out that under Bill Clinton’s presidency from 1992 to 2000:

- Spending increased by 29.49%.
- Tax revenues increased by 85.58%.

Roughly, Clinton increased spending by 30% and so clearly spending was not reduced. However, by balancing this spending with tax increases, Clinton was able to go from a $290,335,000 deficit to a $236,151,000 surplus! (as shown in the chart below). Keep in mind spending wasn’t cut at all, it was even increased!

[ SEE the diagram on http://thephantomrepublican.blogspot.com/2006/04/did-bill-clinton-really-create-budget.htm ]

ClintonAdministrationSurplus.jpg

While it’s true that we had a deficit from 1992 to 1997, this is from the tax cuts and unregulated business left by George H. W. Bush and the time it took to recover.

According to the Phantom Republican, there are, roughly speaking, two ways to reduce a deficit:
1) Increase taxes
2) Reduce spending

The following is my analysis:

This historical example shows;
-Increasing taxes did not slow down the economy.
-Spending and increasing taxes in a balanced way decreased the deficit and boosted the economy.

It seems that our Republican leaders in Washington have the narrow viewpoint that option 2 is the only way to reduce the deficit.
Actually, the evidence from the Clinton administration would suggest that spending cuts are *not* necessary to reduce a federal deficit.
It suggests that we could gradually reduce the federal deficit by keeping spending the same (or perhaps even a small increase) and balancing the spending by a proportional increase in taxes. Ideally, these taxes could be targeted to very wealthy households and very large corporations. So such taxes would not affect the middle class at all. In fact, I doubt this would have a negative affect on society.
[to be continued]

Jul 23, 2011 8:36pm EDT  --  Report as abuse
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