By Larry Jones
May 30, 2011

For months now, Vice President Joseph Biden, Jr. has been leading discussions between Administration officials and key leaders of Congress in search of a compromise on a broad debt reduction plan that will clear the way for action on legislation, which would increase the limit on the nation’s borrowing authority. Although Biden and House Majority Leader Eric Cantor (VA) emerged from a May 24 meeting saying they were moving closer to an agreement on a deal that would reduce the federal deficit by more than $1 trillion over the next decade, the two are divided over whether revenues should be included in the final deal. The Vice President’s group is laying the groundwork for final talks between President Obama, House Speaker John Boehner (OH), and Senate Majority Leader Harry Reid (NV).

Cantor and other Republican leaders have made it clear that tax increases cannot be a part of any deficit reduction deal, while Biden has made it clear that revenues must be a part of such deal. But Cantor maintains the House will not support a tax increase. And as a show of party unity, Republican leaders in the House have scheduled a vote the week of May 30 on a bill that would increase the limit on the nation’s debt by $2.4 trillion without any strings attached. This will be a symbolic vote and Republicans are expected to vote against the legislation to show that an increase in the debt limit cannot happen without being tied to a plan calling for significant reductions in the federal deficit.

A deal that only includes spending cuts is likely to require deeper cuts in Conference of Mayors priorities such as Community Development Block Grants, the COPS program, job training, transportation and homeless assistance. Under a budget proposal approved by the House last month, spending on domestic programs would be reduced by $102 billion below what President Obama requested for Fiscal Year 2012. It also calls for deep cuts and controversial changes in the Medicare program.

The proposed changes have already caused Republicans to lose a congressional seat in a special election in a traditional Republican district in New York. A key issue was the proposed changes in the House budget for Medicare and the voters voted against the candidate supporting the proposed changes. To demonstrate party unity in the Senate, Democrats, on a symbolic vote on May 25, voted down the budget proposal approved by the House that includes deep cuts in domestic programs and controversial changes to Medicare. Five Republicans joined Democrats in voting against the measure and two others did not vote.

Technically, the Treasury Department reached the $14.3 trillion limit under current law on May 16 but Treasury Secretary Timothy Geithner told members of Congress he would be able to keep paying the nation’s bills until August 2. If Congress fails to increase the limit before that date, he said the federal government would be forced to default on its obligations, which could quickly lead to another national and international financial crisis. Geithner explained that a $2 trillion increase in the debt limit is needed for the Treasury Department to meet the federal government’s obligation through November 2012.