obama debt

Story highlights

If the debt ceiling isn't raised by August 2, U.S. will default on its loans

Democrats are trying to minimize the impact of cuts to social services

Republicans are refusing to go along with any increase unless it includes deep spending cuts

Washington (CNN) – Negotiations on raising the debt ceiling, tied to tackling the nation’s growing deficit, have officially reached an impasse.

Lawmakers must raise the nation’s $14.3 trillion legal borrowing limit soon. The Treasury Department says that on August 2 it will run out of money to pay the nation’s bills in full and on time.

Top economic analysts warn of potentially catastrophic repercussions if the ceiling is not raised, including skyrocketing interest rates and a plummeting U.S. dollar.

Congressional leaders remain at sharp odds over what sort of conditions should be attached to an increase in the current ceiling. Republicans are refusing to go along with any increase unless it includes deep spending cuts and avoids any tax increases. Democrats are trying to minimize the impact of cuts to social services and are calling for the elimination of certain tax breaks and loopholes benefiting wealthier Americans.

When the Pew Research Center asked Americans last month who they would hold responsible if no deal was reached, 42% blamed Congressional Republicans, 33% blamed the Obama administration and 13 blamed both.

With time running out, President Obama will convene talks with the top two Democrats and Republicans in the House and Senate, asking them to “check their ultimatums at the door.”. Here’s who will be at the table:

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Vice President Joe Biden

Biden has led closed-door bipartisan talks for weeks on various proposals to cut spending, from both discretionary programs and entitlement programs, such as Medicare.

The White House wants to close loopholes that benefit the owners of private jets and raise taxes on hedge fund managers who pay lower tax rates on so-called “carried interest.”

Additional proposals would change how business inventory is taxed and eliminate government subsidies for oil and gas companies.

“Over the past several weeks, the bipartisan debt talks have made significant progress on a blueprint for putting America’s fiscal house in order,” Biden said in a recent statement. “Working together in good faith, we have found many areas of common ground and potential agreement on substantial savings. … We have made real headway and laid the groundwork to get this done.”

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President Barack Obama

In a news conference on Tuesday, Obama said he invited Democratic and Republican leaders from the House and Senate to the White House for a meeting Thursday to discuss deficit reduction and the need to raise the federal debt ceiling.

Obama told reporters he wanted the meeting to “build on the work that’s already been done and drive toward a final agreement” that would address expanding federal deficits and bring congressional approval for increasing how much money the government can borrow.

Obama also said he’s opposed to a short-term increase in the debt ceiling and believes the dispute over raising the ceiling is a “‘unique opportunity to do something big” and put the “economy on a stronger footing for the future.”

The president was criticized last week after he chided Congress to “do your job” and get a deal done.


Senate Minority Leader Mitch McConnell

On Tuesday, McConnell, R-Kentucky, accused Democrats of wanting to increase spending to solve a deficit problem.

He has said flat out that there would be absolutely no give from the GOP on tax increases.

Before Obama’s invitation to meet, McConnell repeated an earlier invitation for Obama to come to Congress and hear from Republicans why they won’t support any agreement that includes tax increases.

After Obama’s press conference, McConnell said he views Thursday’s meeting “as an opportunity for the congressional leadership and the president to talk about what’s actually possible.”

“I view it as an opportunity to know whether or not the president will finally agree to a serious plan to reduce the deficit,” he said. “Or if in the middle of a debt crisis, he’ll insist on more stimulus spending; whether in the middle of a jobs crisis, he’ll continue to insist on hundreds of billions in tax hikes that we know – and he has acknowledged – will kill jobs.”

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Senate Minority Whip Jon Kyl

Kyl, R-Arizona, said in a joint statement with McConnell last week that the White House and Democrats are “insisting on job-killing tax hikes and new spending.”

“That proposal won’t address our fiscal crisis, our jobs crisis, or protect and reform entitlements. And a bill with new spending and higher taxes would fail with bipartisan opposition – as it should. President Obama needs to decide between his goal of higher taxes or a bipartisan plan to address our deficit. He can’t have both. But we need to hear from him.”

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Senate Majority Leader Harry Reid

Reid , D-Nevada, says he’s willing to support debt reduction if Republicans show good faith in working with his party.

But the Nevada Democrat on Tuesday accused Republicans of putting the nation’s economic recovery at risk by threatening to oppose an increase in how much money the government can borrow.

Last week Reid forced the Senate to work during its regular July Fourth recess.

“There is still so much to do to get Americans back to work, cut our deficit and get our economy back to work. It’s very important we do this,” Reid said on the Senate floor June 30. “The obstacles too steep and the time too short to waste even a moment.”


Senate Majority Whip Dick Durbin

Durbin, D-Illinois, said if negotiations fail, there needs to be a short-term debt ceiling deal so the United States doesn’t default on its loans.

“We’ve never in our history defaulted on America’s mortgage. If we do, I’m afraid the credit reputation of the United States will suffer, and specifically, interest rates go up,” Durbin told WFLD, Chicago’s Fox station, on July 1.

Obama said on Tuesday that he’s not interested in any short-term deal.


House Speaker John Boehner

Boehner, R-Ohio, is wholeheartedly opposed to raising taxes as a part of any grand bargain with the White House.

After Obama’s Tuesday press conference, Boehner said in a statement, “The legislation the president has asked for – which would increase taxes on small businesses and destroy more American jobs – cannot pass the House, as I have stated repeatedly. The American people simply won’t stand for it. And their elected representatives in Congress won’t vote for it.”

Boehner said he was happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality.

“I’m pleased the president stated today that we need to address the big, long-term challenges facing our country,” he added.


House Majority Leader Eric Cantor

Cantor, R-Virginia, has been steeped in the negotiations until recently when he bolted from a bipartisan meeting on June 23 and refused to come back. The issue? Taxes.

“There is not support in the House for a tax increase, and I don’t believe now is the time to raise taxes in light of our current economic situation,” he said. “Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue.”

Multiple Democratic sources claim Cantor backed out of the talks because he doesn’t want his fingerprints on an agreement that could face opposition from many House Republicans.

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House Minority Leader Nancy Pelosi

After the president’s news conference, Pelosi, D-California, said in a statement “Bravo! This is the fight House Democrats have been making for the last six months under the Republican majority as they move to end Medicare and continue tax breaks for Big Oil.”

“The president has spoken out and there will be a clearer understanding of what the choices are for the American people,” she said. “We join the president in what he has long called for: a balanced, bipartisan package that creates jobs, protects Medicare and respects the retirement of our seniors and the education of our children.”

Pelosi said in late June that history has shown tax cuts produce deficits, not jobs, and questioned the patriotism of those at the receiving end of generous corporate tax breaks.

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House Minority Whip Steny Hoyer

Hoyer, D-Maryland, blasted Republicans on Tuesday, saying they haven’t listened to economists, Wall Street executives and business leaders.

Now, he said in a press release, “Will they listen to themselves?”

“It’s time for Republicans to stop risking our economic security and work with Democrats to agree on a balanced approach to reduce the deficit that includes revenues and spending cuts.”