Unnerving to world economies is the prospect of the United States defaulting on its financial obligations on Thursday if Congress fails to raise the borrowing authority above the $16.7 trillion debt limit.
Christine Lagarde, the International Monetary Fund’s managing director, spoke fearfully about the disruption and uncertainty, warning of a “risk of tipping, yet again, into recession” after the fitful recovery from 2008. The reaction of world financial markets and the Dow Jones on Monday will influence any congressional talks.
Congress is racing the clock to get a deal done, faced with time-consuming Senate procedures that could slow legislation, likely opposition from tea partyers and certain resistance in the Republican-led House before a bill gets to Obama.
McConnell and Republicans want to continue current spending at $986.7 billion and leave untouched the new round of cuts in January, commonly known as sequester, that would reduce the amount to $967 billion. Democrats want to figure out a way to undo the reductions, plus a long-term extension of the debt limit increase and a short-term spending bill to reopen the government.
“Republicans want to do it with entitlement cuts,” said Sen. Chuck Schumer, D-N.Y. “Democrats want to do it with a mix of mandatory cuts, some entitlements and revenues. And so how do you overcome that dilemma?”
We’re not going to overcome it in the next day or two.”
He suggested keeping the government running through mid-January.
Sen. Dick Durbin of Illinois, the No. 2 Democrat in the Senate, told reporters the two sides are roughly $70 billion apart, the difference between the $1.058 trillion Senate budget amount and the $988 billion envisioned by House Budget Committee Chairman Paul Ryan, R-Wis.
“We haven’t picked a number, but clearly we need to negotiate between those two,” Durbin said.
Republicans dismiss the latest request as Reid moving the goalposts in negotiations as they were getting closer to resolving the stalemate that has paralyzed Washington. They also argue that it is disingenuous for Democrats to resist any changes in the 3-year-old health care law while trying to undo the 2011 budget law that put the cuts on track.