Who will blink first? Senate Majority Leader Harry Reid says he is crafting a deal that would cut spending by $2.7 trillion to make up for the $2.4 trillion increase in government borrowing.
Republicans say they doubt those cuts are achievable and House Speaker John Boehner favors a two-step process with $1.2 trillion in cuts and spending caps immediately and a $900 billion debt ceiling increase. That would be followed by the creation of a congressional committee that would find an additional $2 trillion in cuts through 2013.
If an agreement is not reached by Aug. 2, the U.S. won’t have cash to pay all its bills. Economic analysts say that could have a catastrophic impact on financial markets.
- Jay Newton-Small, Time magazine congressional correspondent