Harry Reid proposed slashing $2.7 trillion in spending and raising the debt ceiling through 2012 to avoid a market meltdown. Reid said in his statement that the proposal “meets Republicans’ two major criteria.”
It includes enough spending cuts to meet or exceed the amount of a debt ceiling raise through the end of 2012, and it doesn’t includes any of the new revenues Democrats have been pushing for.
“We hope Speaker Boehner will abandon his ‘my way or the highway’ approach, and join us in forging a bipartisan compromise along these lines,” Reid said.
The move comes as House Republican leaders said they are working on crafting a plan that would increase the nation’s debt limit by $1 trillion, allowing for a second vote later this year on additional spending cuts.
House Speaker John Boehner told his Republican members it is time to make “some sacrifices” to avert a debt crisis.
Boehner had promised to unveil his “new measure” to avoid a debt crisis this afternoon in an effort to calm the Asian financial markets. But he did not. The outlines suggest there is still work to do.
The speaker would increase the debt ceiling by a trillion dollars and cut spending by a trillion dollars. That is a short-term fix that would allow the country to borrow money and pay its bills through January.
Boehner had said he planned to reveal his plan to send a message to calm financial markets. “The markets may panic on Monday simply because the speaker has set a deadline,” University of Maryland Professor Peter Morici told ABC News.
“In the near term the value of stocks will fall. It’s like any stock market panic. However, this is something that can be answered. The Federal reserve can buy bonds and this could calm markets,” he said.
But it is still unclear whether Congress would be forced to vote to raise the debt ceiling again.
“We can’t adopt an approach that leaves the threat of default hanging over the country for another six months or so,” Treasury Secretary Tim Geithner said today on ABC’s “This Week.”
He said: “That would be deeply irresponsible to do, and we do not think that’s an acceptable burden to put on the American economy.”
Harry Reid and House Minority Leader Nancy Pelosi met with Obama for just over an hour this evening behind closed doors. But the White House had little to say about what went on in the talks.
“In the meeting the president received an update on the state of negotiations on the Hill from Leader Pelosi and Leader Reid, and the leaders and the president reiterated our opposition to a short-term debt limit increase,” a White House official said.
Pelosi embraced Reid’s proposal in a statement after their meeting. “I applaud Senator Reid for putting forward an approach to reduce the deficit that protects Social Security, Medicare and Medicaid beneficiaries,” she said.
President Obama has repeatedly said he will veto a short-term increase in the debt ceiling, warning lawmakers to enact a long-term plan.
“The president would veto a measure to raise the debt ceiling if it doesn’t extend the limit into 2013, White House Chief of Staff Bill Daley said Sunday in an interview on NBC’s “Meet the Press.”
Treasury Secretary Timothy Geithner encouraged Capitol Hill lawmakers to reach a deal. “They need to get this process moving in the House by Monday night,” Mr. Geithner said on ABC’s “This Week” program.
“To achieve that deadline, they need to have a framework that they know with complete confidence will pass both houses of Congress that is acceptable to the president. That should happen today.”