July 31, 2011 / 4:45 AM / in 8 years

FACTBOX-Key elements of possible U.S. debt deal

July 31 (Reuters) - U.S. lawmakers were working furiously on Sunday to hammer out details of a deal to raise the U.S. borrowing limit and put in place a deficit-reduction plan to help avert a potentially catastrophic debt default.

Lawmakers, administration officials and aides have made clear that they have yet to agree on the final deal. But they did provide the following details of how the deal is taking shape:

* Republican Senate leader Mitch McConnell said lawmakers were closing in on $3 trillion in spending cuts with spending caps imposed over the next 10 years.

* White House adviser David Plouffe described the deal as a two-stage process with a first set of spending cuts of about $1 trillion. Those cuts would come by capping annual discretionary spending, which covers everything from the military to food inspection, over the next 10 years. A special congressional panel would be established to recommend further deficit reduction.

* McConnell said the panel would consist of members of the House of Representatives and the Senate, evenly divided between Republicans and Democrats.

* The committee is to consider cuts to the Medicare and Medicaid health programs for the elderly and poor, tax law changes and cuts in other areas as well. The committee’s recommendations would be presented to Congress, which could accept them or reject them. No amendments would be allowed, McConnell said.

* The panel would aim to make its recommendations by the Thanksgiving holiday in late November. Across-the-board spending cuts would be triggered if the panel fails to make its recommendations or Congress fails to act on them, affecting programs beloved by Democrats and Republicans alike, aides said. The two sides are still working out exactly how this would work, Democratic Senator Charles Schumer said.

* Automatic tax increases, which Democrats had wanted as a trigger, appear not to be part of the agreement, Democratic Senator Kent Conrad said.

* Republicans want another enforcement option: automatic passage of an amendment to the Constitution that would require a balanced budget each year. Some 38 of the 50 states would have to sign off as well before this balanced budget amendment became law. A Democratic aide said that provision was still up in the air.

* Schumer and Senate Democratic Leader Harry Reid said the debt limit would be raised by enough to cover the nation’s borrowing needs into 2013, past the November 2012 elections.

* President Barack Obama would be allowed to raise the debt ceiling to meet obligations into 2013 on his own in three stages through a complex process first proposed by McConnell, according to a Republican aide. Congress would be able to register its disapproval on two of these stages, but would not be able to block an increase unless it mustered a two-thirds vote in both the House and the Senate — an unlikely prospect. (Reporting by Donna Smith, Andy Sullivan and Kim Dixon; Editing by Vicki Allen and Jackie Frank)

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