The Associated Press
Congress has until Aug. 2 to raise the federal borrowing limit or the government will run out of money and possibly default on its debt. House Republicans say they won’t raise the debt limit without equal spending cuts. President Barack Obama and Democrats insist that higher revenues must be included.
Friday’s developments: Congressional leaders put aside negotiations on a sweeping deficit-reduction package despite a plea from President Barack Obama to “do something big” to stabilize America’s finances. Instead, lawmakers embarked on competing fallback plans as the deadline neared. A House Republican version was given little chance of success, even by some supporters, and a bipartisan Senate approach holding out more promise would allow Obama to raise the debt limit without a prior vote by lawmakers. That plan was likely to include limits on spending across thousands of government programs and possibly a down payment on budget cuts.
Markets react: A late rally Friday prevented the stock market from having its worst week in nearly a year as investors seemed unaffected by the debt debate in Washington. Late in the day, the Treasury Department announced it was taking the final steps in an unusual series designed to avoid exceeding the current $14.3 trillion debt limit. Officials have cautioned that a default will occur if the limit is not increased by Aug. 2, causing severe damage to a national economy struggling to recover from the worst recession in decades.
What’s Next: House Republicans prepared to hold a vote next week to allow an increase in the debt ceiling through 2012 as long as Congress approves a balanced-budget constitutional amendment. In the Senate, the Republican and Democratic leaders worked on a bipartisan plan that would allow Obama to raise the debt limit without a prior vote by lawmakers.