U.S. Debt Limit Deadline Looms from the CFR

U.S. Debt Limit Deadline Looms

The White House wants to close a deal with leaders in Congress on debt reduction by July 22 to give the government enough time to raise its borrowing limit to avoid a default early next month (WSJ). The Senate has cancelled its holiday recess to try to reach agreement. There have been new reports of a possible short-term deal (Politico) to prevent a default that includes about $1 trillion in spending cuts. The Obama administration denied this, saying it was seeking a long-term deficit-cutting deal.

Meanwhile, Treasury Secretary Timothy Geithner has reportedly announced he will step down after a debt deal is reached (Bloomberg).

Analysis:

The political gridlock in Washington over the debt limit could heavily damage the U.S. economy and standing in the world, writes CFR's Sebastian Mallaby in a new analysis.

Despite what it calls "incalculable damage" that could be caused by a U.S. default on its debt, the Economist's Lexington column says Republicans are trying to capitalize on the deadline by "their own radical vision of how to reform America."

But the Republicans' stress on trying to use the debt talks to reduce long-term deficits is "hardly irresponsible," writes Robert J. Samuelson in the Washington Post. It is longstanding Democratic failure to curb social spending that is at fault in the current impasse, he writes.

Andrew Stiles writes of a "palpable tension" on Capitol Hill (NRO) and the gulf between Democratic and Republican positions.

This CFR Backgrounder examines the issues involved in raising the debt ceiling and the consequences if it does not happen.