Recess canceled; Senate to work next week on debt

By Jim Kuhnhenn

Associated Press

Published: Thursday, June 30 2011 4:15 p.m. MDT

Having insisted there is too much to do for lawmakers to spend a week away from the Capitol, Senate Majority Leader Harry Reid of Nev., center, walks with Senate Majority Whip Richard Durbin of Ill., left, and Sen. Charles Schumer, D-N.Y., after a news conference on Capitol Hill in Washington, Thursday, June 30, 2011.

J. Scott Applewhite, Associated Press

Enlarge photo»

WASHINGTON — The Senate canceled its planned July Fourth recess on Thursday, but partisan divisions remained razor sharp as the clock ticked on efforts to strike a deal to avoid a government default and trim huge federal deficits.

A day after President Barack Obama accused congressional leaders of procrastinating over the impasse, Senate Majority Leader Harry Reid, D-Nev., announced that the chamber would meet beginning next Tuesday. The Republican-run House is not in session this week but had already been scheduled to be at work next week.

Despite the Senates schedule change, there was no indication the two sides had progressed in resolving their chief disagreement. Democrats insist that a deficit-cutting package of deep spending cuts also include higher taxes for the wealthiest Americans and fewer tax breaks for oil companies. Republicans say any such agreement would be defeated in Congress, a point Senate Minority Leader Mitch McConnell, R-Ky., made anew when he invited Obama to meet with GOP lawmakers at the Capitol on Thursday afternoon.

"That way he can hear directly from Republicans why what hes proposing wont pass," McConnell said on the Senate floor. "And we can start talking about whats actually possible."

McConnells invitation seemed almost like a taunt, since well before McConnell spoke the White House had announced that Obama was heading to Philadelphia to attend Democratic fundraising events.

White House spokesman Jay Carney defended Obamas decision to attend the fundraisers, saying, "We can walk and chew gum at the same time." He also said McConnell had merely "invited the president to hear what would not pass. Thats not a conversation worth having."

The Obama administration has warned that if the governments $14.3 trillion borrowing limit is not raised by Aug. 2, the U.S. will face its first default ever, potentially throwing world financial markets into turmoil, raising interest rates and threatening the economic recovery. Many congressional Republicans indicate theyre unconvinced that such scenarios would occur, and some administration officials worry that it could take a financial calamity before Congress acts.

One Democratic official familiar with the debt talks said the real deadline for reaching an bipartisan agreement on the debt and deficit reduction is mid-July, in order to give congressional leaders time to win votes and put final details of a deal into shape. The official spoke on condition of anonymity to reveal details of private negotiations.

Obama has said that in talks, Republican and Democratic negotiators have found more than $1 trillion in potential spending cuts over the coming decade, including reductions favored by both sides.

The Democratic official said Thursday that of those cuts, roughly $200 billion would come mainly from savings from Medicaid and Medicare, the federal health insurance programs for the poor and elderly.

Another $200 billion would come from cuts in other automatically paid benefit programs, including farm subsidies. Another large chunk would come from cuts in discretionary spending that Congress approves every year — presumably over $1 trillion, which is more than the White House but less than Republicans have proposed.

Both sides would then also count whatever interest savings they achieve through those deficit cuts.

The White House is also proposing about $400 billion in higher tax revenues. Republicans want no tax increases and deeper spending cuts than Democrats have proposed.

The overall goal would be to cut at least $2 trillion over 10 years.

Increasing the current borrowing limit by about $2.4 trillion would carry the government until the end of 2012 — thereby avoiding another congressional vote on the issue until after the next presidential and congressional elections. Republicans have insisted on coupling any extension with at least an equal amount of budget savings.

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