SDI 11 File Title Strategy Sheet A particularly strategic use of this DA would be to say that right now a plan that both lifts the debt ceiling and cuts federal spending will pass. Both of those things are necessary to save the economy. There is a 2nc independent link card that you can use if the plan spends a lot of money also in our uniqueness doesn’t overwhelm the link section there is a card that says we might lift the debt ceiling but not do anything to control spending. SDI 11 File Title DA Politics – Debt Ceiling 1NC Senator Reids plan to lift the debt ceiling will pass – it meets both Democrat and Republican criteria. Epstein 7/25 (Jennifer, “Democrats: Harry Reid is man with a plan”, http://www.politico.com/news/stories/0711/59811.html, 7/25/11, sjl) Democratic leaders said on Monday that they are looking toward Senate Majority Leader Harry Reid’s upcoming new proposal to raise the debt ceiling as offering “hope” for a deal — and warned time is fast running out. “I think we’ve got 48 hours within which to do something very, very meaningful,” Assistant House Minority Leader James Clyburn (D-S.C.) said on MSNBC’s “Morning Joe.” The plan that leads to progress, he said, could be Reid’s Sunday proposal, which would cut at least $2.7 trillion in spending and be matched by an equal increase to the debt ceiling. Citing Reid’s plan, Sen. Chuck Schumer (D-N.Y.), the third-ranking Senate Democrat, said, “I think there’s some hope today” for progress. “Sen. Reid is going to put forth an offer that meets the Democrats’ main criteria, going past 2012, and the two Republican criteria — enough cuts to equal the amount you raise the debt ceiling and no revenues,” Schumer said on MSNBC. “And I think that has some hope.” Reid’s as-yet-to-be-unveiled plan, Schumer said, has the potential to be sufficiently conciliatory to House Speaker John Boehner’s (R-Ohio) caucus that an agreement can be reached. “Hopefully it’s the kind of thing that Speaker Boehner can rally his tea party troops toward,” he said. It’s also the kind of proposal that can get enough Democratic support to pass both the House and the Senate, Schumer said. Democrats are ”willing to move and compromise,” he said. Cutting spending is key to deal – vote margin is very slim. Guardian, 7/26 -- Antle is associate editor of the American Spectator, a contributing editor of the American Conservative; he has appeared in the Washington Examiner, Politico, the National Review and more. [7/26/2011, James Antle: “US debt ceiling crisis: Why Republicans won't compromise”. http://www.guardian.co.uk/commentisfree/cifamerica/2011/jul/26/us-debt-ceiling-crisis-republicans, XJADX] Boehner is faced with the fact that as many as 40-50 of his members oppose a debt ceiling increase on principle. Many of them believe default can be avoided by other means. Others simply don't want to cast their votes for more government borrowing. In getting a deal passed, Boehner has to proceed without their votes, making everyone else's vote all the more important. In addition to those who would never vote to raise the debt ceiling, there are many others who would prefer not to. For them, it isn't about finding a compromise that will allow them to support a higher debt limit. Voting for a higher debt limit is the compromise. Many freshmen think they were elected to reverse government debt In his speech, Obama noted that raising the debt ceiling had become a routine matter. He cited statistics showing it was extended 18 times under Ronald Reagan and seven times under George W Bush. But to the Tea Party freshmen, that's exactly the problem. A higher debt ceiling has become routine, with each Congress smashing through the permissible debt levels set by the previous one. They believe that by either rejecting an increase or pairing it with commensurate spending cuts is the only way to reverse this troubling trend. Failure to pass the debt ceiling bill will cripple the world economy MoneyMorning 7/25 (7/25/2011, MoneyMorning.com, “U.S. Debt Ceiling Debate”, http://moneymorning.com/ppc/GOP_Debt_110718.php?code=X304M722&gclid=CIGC6LnjnKoCFcjAKgodZhIvzg , ellipses in original, DFerris) The debt ceiling battle between Congress and the White House has dragged on for months... Now the deadline is only weeks away... and a serious crisis looms. What would happen if the debt ceiling isn't raised by August 2 and Uncle Sam can't pay its bills? Major economic catastrophe... including panic in global markets... big losses in stocks, bonds, 401ks and pensions... a run on the banks... a run on food and gas... and hyper-inflation around the world. It would make the economic recession of 2007 look like a day at the beach. For these reasons, it's hard to imagine anyone elected to Congress delaying passage of a bill to increase the U.S. debt ceiling - and protect the world from calamity. Economic collapse causes nuclear war- extinction Broward 9 ((Member of Triond) http://newsflavor.com/opinions/will-an-economic-collapse-kill-you/) SDI 11 File Title Now its time to look at the consequences of a failing world economy. With five offical nations having nuclear weapons, and four more likely to have them there could be major consequences of another world war. The first thing that will happen after an economic collapse will be war over resources. The United States currency will become useless and will have no way of securing reserves. The United States has little to no capacity to produce oil, it is totatlly dependent on foreign oil. If the United States stopped getting foreign oil, the government would go to no ends to secure more, if there were a war with any other major power over oil, like Russia or China, these wars would most likely involve nuclear weapons. Once one nation launches a nuclear weapon, there would of course be retaliation, and with five or more countries with nuclear weapons there would most likely be a world nuclear war. The risk is so high that acting to save the economy is the most important issue facing us in the 21st century. You must prioritize avoiding nuclear war – it’s the biggest risk of human extinction and the highest level of moral and utilitarian value. Kateb 1992 (George, The Inner Ocean: Individualism and Democratic Culture, “Thinking About Human Extinction (1): Nuclear Weapons and Individual Rights,” p. 111-112) Schell's work attempts to force on us an acknowledgment that sounds far-fetched and even ludicrous, an acknowledgment hat the possibility of extinction is carried by any use of nuclear weapons, no matter how limited or how seemingly rational or seemingly morally justified. He himself acknowledges that there is a difference between possibility and certainty. But in a matter that is more than a matter, more than one practical matter in a vast series of practical matters, in the "matter" of extinction, we are obliged to treat a possibility-a genuine possibility-as a certainty. Humanity is not to take any step that contains even the slightest risk of extinction. The doctrine of no-use is based on the possibility of extinction. Schell's perspective transforms the subject. He takes us away from the arid stretches of strategy and asks us to feel continuously, if we can, and feel keenly if only for an instant now and then, how utterly distinct the nuclear world is. Nuclear discourse must vividly register that distinctiveness. It is of no moral account that extinction may be only a slight possibility. No one can say how great the possibility is, but no one has yet credibly denied that by some sequence or other a particular use of nuclear weapons may lead to human and natural extinction. If it is not impossible it must be treated as certain: the loss signified by extinction nullifies all calculations of probability as it nullifies all calculations of costs and benefits. Abstractly put, the connections between any use of nuclear weapons and human and natural extinction are several. Most obviously, a sizable exchange of strategic nuclear weapons can, by a chain of events in nature, lead to the earth's uninhabitability, to "nuclear winter," or to Schell's "republic of insects and grass." But the consideration of extinction cannot rest with the possibility of a sizable exchange of strategic weapons. It cannot rest with the imperative that a sizable exchange must not take place. A so-called tactical or "theater" use, or a so-called limited use, is also prohibited absolutely, because of the possibility of immediate escalation into a sizable exchange or because, even if there were not an immediate escalation, the possibility of extinction would reside in the precedent for future use set by any use whatever in a world in which more than one power possesses nuclear weapons. Add other consequences: the contagious effect on nonnuclear powers who may feel compelled by a mixture of fear and vanity to try to acquire their own weapons, thus increasing the possibility of use by increasing the number of nuclear powers; and the unleashed emotions of indignation, retribution, and revenge which, if not acted on immediately in the form of escalation, can be counted on to seek expression later. Other than full strategic uses are not confined, no matter how small the explosive power: each would be a cancerous transformation of the world. All nuclear roads lead to the possibility of extinction. It is true by definition, but let us make it explicit: the doctrine of no-use excludes any first or retaliatory or later use, whether sizable or not. No-use is the imperative derived from the possibility of extinction. By containing the possibility of extinction, any use is tantamount to a declaration of war against humanity. It is not merely a war crime or a single crime against humanity. Such a war is waged by the user of nuclear weapons against every human individual as individual (present and future), not as citizen of this or that country. It is not only a war against the country that is the target. To respond with nuclear weapons, where possible, only increases the chances of extinction and can never, therefore, be allowed. The use of nuclear weapons establishes the right of any person or group, acting officially or not, violently or not, to try to punish those responsible for the use. The aim of the punishment is to deter later uses and thus to try to reduce the possibility of extinction, if, by chance, the particular use in question did not directly lead to extinction. The form of the punishment cannot be specified. Of course the chaos ensuing from a sizable exchange could make punishment irrelevant. The important point, however, is to see that those who use nuclear weapons are qualitatively worse than criminals, and at the least forfeit their offices. John Locke, a principal individualist political theorist, says that in a state of nature every individual retains the right SDI 11 File Title to punish transgressors or assist in the effort to punish them, whether or not one is a direct victim. Transgressors convert an otherwise tolerable condition into a state of nature which is a state of war in which all are threatened. Analogously, the use of nuclear weapons, by containing in an immediate or delayed manner the possibility of extinction, is in Locke's phrase "a trespass against the whole species" and places the users in a state of war with all people. And people, the accumulation of individuals, must be understood as of course always indefeasibly retaining the right of self preservation, and hence as morally allowed, perhaps enjoined, to take the appropriate preserving steps. SDI 11 File Title Uniqueness – Debt ceiling will be increased Obama focused on debt ceiling now. MacAskill 7-24 (Ewen, Washington DC bureau chief, “US debt crisis threatens global markets as Congress is locked in blame game”, The Guardian, http://www.guardian.co.uk/world/2011/jul/24/us-debt-crisis-stock-markets) But Obama will remain engaged behind the scenes, and has left his diary for Tuesday, Wednesday and Thursday virtually clear. The Republicans and Democrats have been trying to ensure the other will be blamed by voters if it all goes wrong. The Republicans accused Obama, when a deal was close on Thursday night, of adding extra bits, in particular tax rises. Democrats blame a hard core of Republicans in the house elected last year with Tea Party support. The Democratic leader in the Senate, Harry Reid, labelled the Republicans as intransigent. "Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States," he said. The business secretary, Vince Cable, broke the unwritten rule of non-intervention in other countries' domestic disputes on Sunday by describing diehard Republicans as "nutters". Cable, appearing on the BBC's Andrew Marr show, said: "The irony of the situation at the moment, with markets opening tomorrow morning, is that the biggest threat to the world financial system comes from a few rightwing nutters in the American Congress rather than the eurozone." Debt Ceiling will pass International Business Times,’11 (July 24, 2011, http://m.ibtimes.com/treasurer-secretary-geithner-says-confident-debt-deal-will-get-done- 185836.html, “Treasurer Secretary Geithner says confident debt deal will get done“, Asg) Treasury Secretary Timothy Geithner said on Sunday it was unthinkable for the United States not to meet its debt obligations and he is confident a deal to raise the debt ceiling will get done. President Barack Obama and congressional leaders are struggling to hammer out a deal and assure investors before Asian markets open that the United States can avert a catastrophic default and hold onto its prized credit rating. They are searching for a way to lift the $14.3 trillion limit on U.S. borrowing by an Aug 2 deadline. Speaking on CNN's "State of the Union" program, Geithner said it was critical that Congress approve a new debt ceiling that gets the country into 2013, past the November 2012 presidential election. "It's unthinkable that this country will not meet its obligations on time. Debt ceiling will pass- senator says so CNN 7-24 (Gabriella Schwarz, 7-24-11, “Feinstein sees a Senate debt solution”, http://politicalticker.blogs.cnn.com/2011/07/24/feinstein- sees-a-senate-debt-solution/?iref=allsearch, Rishi Shah) Feinstein said a deal to raise the debt ceiling is being held hostage by Republican politics, Washington (CNN) - Sen. Dianne but that she can envision an agreement in the Senate to prevent default. The California Democrat said on Sunday there are currently 39 senators who support the so-called “Gang of Six proposal” put forward by three Democrats and three Republicans that would include a combination of spending cuts and revenues to reduce mounting budget deficits and bring Republican support to raise the limit on how much money the government can borrow. “It’s a big step forward for the Senate,” Feinstein said on CNN’s “State of the Union.” “If that could be wrapped into a proposal that would provide the length of time to do it and do it carefully, I think you have an arrangement.” She said Senate Democrats would probably accept “three parts cuts to one part revenues” in a deficit reduction deal, but would not accept $4 trillion in cuts with no additional revenues. “We strongly believe that the wealthiest in our society should help with the crisis,” Feinstein told CNN Chief Political Correspondent Candy Crowley. “It should be a fair share plan, not just the people who are poor and dependent on these programs. That’s not unreasonable.” However, any agreement reached in the Democratic-controlled Senate would have to pass through the Republican-controlled House and vice versa before it reaches the president’s desk. Talks are ongoing between President Barack Obama, House Speaker John Boehner and other congressional leaders to reach a deal after Boehner announced Friday he was withdrawing from direct negotiations with Obama. Republicans and Democrats involved in the talks expressed optimism they could avoid a default on U.S. obligations. Obama pushing the debt ceiling now. Stewart, reporter for CNN, 7-23 (Rebecca, 2011, “Obama calls for leaders to work together on debt deal”, http://politicalticker.blogs.cnn.com/2011/07/23/obama-calls-for-leaders-to-work-together-on-debt- deal/?iref=allsearch, Google News, JMK) President Barack Obama called on Democratic and Republican leaders to come together and do "the right thing" to resolve the nation's debt crisis Saturday in his weekly address. He warned that unless an agreement is reached to raise the amount of money the federal government is allowed to borrow, debt will "weaken our economy, cause higher interest rates for families, and force us to scale back things like education and Medicare." The president summoned congressional leaders to the White House Saturday after House Speaker John Boehner announced Friday SDI 11 File Title night he was pulling out of the debt-ceiling negotiations with the Obama administration. "Neither party is blameless," Obama said of the nation's debt. "Both parties have a responsibility to do something about it." If a deal to raise the debt ceiling is not reached by August 2, the nation risks default, and Americans could face problems including rising interest rates, a declining dollar and increasingly jittery financial markets. Envisioning a way forward, the president said, "We need to put aside our differences to do what's right for the country. Everyone is going to have to be willing to compromise. Otherwise, we'll never get anything done." Obama advocated a "balanced approach" to cutting the deficit that "goes after waste" and "makes some serious cuts to worthy programs" that wouldn't be made "under normal circumstances." And he emphasized the need for everyone to "do their part" because "it's not right to ask middle-class families to pay more for college before we ask the biggest corporations to pay their fair share of taxes." Debt Ceiling will pass Favole and Boles ‘11 (July 22, Jared and Corey, journalists for Wall Street Journal, http://blogs.wsj.com/washwire/2011/07/22/obama- boehner-agree-debt-ceiling-will-be-raised/, “Obama, Boehner Agree: Debt Ceiling Will Be Raised”, VJ) President Barack Obama and House Speaker John Boehner might not agree on how to slash the country’s deficit, but they agree on one thing: Both say the nation’s $14.29 trillion debt ceiling will be raised. President Obama, sounding at times exasperated that talks broke down with Mr. Boehner (R., Ohio), said at a White House news conference that no matter what happens, the debt ceiling must be raised. He said he’ll tell that to congressional leaders Saturday morning when they meet at the White House. “The only bottom line that I have is that we have to extend this debt ceiling through the next election, into 2013,” Mr. Obama said. Mr. Boehner, at a news conference of his own, said he is “convinced” the debt ceiling will be raised. But how can they be so confident? “I am confident simply because I cannot believe that Congress would end up being that irresponsible that they would not send a package that avoids a self-inflicted wound to the economy at a time when things are so difficult,” Mr. Obama said. Mr. Boehner, who sent a letter to congressional colleagues Friday explaining that the talks had broken down, also said he’s “convinced” the debt ceiling will be raised. Mr. Obama currently doesn’t have the power to raise the debt ceiling without Congress’s approval. But a last-ditch option that is being discussed by Senate Majority Leader Harry Reid (D., Nev.) and Senate Minority Leader Mitch McConnell (R., Ky.) would give him power to request a boost in the debt ceiling. Then, though a series of complicated votes, only a minority of lawmakers would be required to raise it. The Treasury has said that the ceiling must be raised by Aug. 2 to avoid the U.S. defaulting on its financial obligations. Mr. Obama said he wants a clear understanding before the weekend ends of what the next move is. He said lawmakers need to recognize “that Wall Street will be opening on Monday and we better have some answers during the course of the next several days.” The president said he still wants to continue to try and find common ground on slashing the deficit. Only raising the debt ceiling, Obama warned, might not be enough to avoid a downgrading of U.S. debt. “If we can’t come up with a serious plan for actual deficit and debt reduction, and all we’re doing is extending the debt ceiling for another six, seven, eight months, then the probabilities of downgrading U.S. credit are increased,” Mr. Obama said. He continued, “And that will be an additional cloud over the economy and make it more difficult for us and more difficult for businesses to create jobs that the American people so desperately need.” SDI 11 File Title Uniqueness – spending being reduced now Plan unpopular, defense cuts now Whitlock 7/20/11 (Craig, 20 July 2011, http://www.washingtonpost.com/world/national-security/pentagon-braces-for-much-deeper- military-spending-cuts-as-part-of-debt-deal/2011/07/20/gIQAdBKfQI_story.html, “Pentagon braces for much deeper military spending cuts as part of debt deal”, Washington Post, eys) The Pentagon is bracing for spending cuts far deeper than what it was expecting just a few weeks ago, including the possible elimination of an aircraft carrier group and other weapons programs , as an increasing number of lawmakers float proposals for slashing the once-sacrosanct defense budget. Defense officials have been warning for months that the Pentagon must prepare for a new era of austerity after a long period of growth that has swelled military spending to its highest level, adjusted for inflation, since World War II. But as lawmakers and the White House move closer to a grand bargain that could reshape the country’s fiscal priorities, Pentagon budget planners are scrambling to keep up. Military officials said they are girding for the possibility that they will have to reduce projected spending by as much as $800 billion over the next 12 years. That’s twice the worst-case forecast they confronted as recently as April, when President Obama warned his administration that it might have to cut $400 billion from its national-security budgets over the same time frame. “We’re doing due diligence on that,” Gen. James E. Cartwright, vice chairman of the Joint Chiefs of Staff, told reporters at a Defense Writers Group breakfast last week. “But the reality is you’re most worried about a deeper cut. Is there another $400 billion beyond the first $400 billion?” That has opened the door to internal discussion on whether the Pentagon will have to revisit several high-profile weapons programs that until recently were considered safe. The Navy, for instance, is feeling pressure to cancel its next-generation ballistic-missile submarine and to reduce its fleet of 11 aircraft carriers. The Air Force is facing renewed doubts about its futuristic long-range bomber. And the Army is worried that it will have to shrink the size of its active-duty force even further; the number of soldiers is already planned to drop from 569,000 to 520,000 over the next five years . Officially, the Pentagon says nothing is off the table when it comes to possible cuts. In April, then-Defense Secretary Robert M. Gates ordered a “comprehensive review” of Pentagon spending, saying he wanted to reconsider the department’s strategic priorities instead of just ordering across-the-board spending reductions. The results of that review, however, are not scheduled to be released until February, which could render the Pentagon’s recommendations moot if Congress and the White House agree on a deal before then. New Defense Secretary Leon Panetta, who took office July 1 after Gates’s retirement, has said little publicly in reaction to the various proposals to curtail defense spending. But as a longtime budget expert in Congress and the Clinton administration, he is expected to endorse any agreement hammered out between Obama and lawmakers. In the past, the Pentagon could count on strong support for ever-rising budgets from Republicans and conservative Democrats. But that has changed rapidly; even some GOP leaders are now calling for once-unthinkable reductions in military spending. On Monday, for example, Sen. Tom Coburn (R-Okla.) released a plan that would shrink the Pentagon’s planned budgets by $1 trillion over the next decade. Other Republicans, while not as ready to cut military spending that deeply, say it’s more important to avoid tax hikes as they look for solutions to the nation’s fiscal ills. “Who knows where the needle will end up?” said Thomas Donnelly, director of the Center for Defense Studies at the American Enterprise Institute. “Nobody has defense as a high priority. It’s increasingly looking like everybody wants to toss the military overboard.” As recently as a year ago, the Pentagon had hoped it could escape relatively untouched. In May 2010, Gates ordered the armed services to scrape together $100 billion in savings over five years in what he called an “efficiencies” drive. But rather than give the money back to the Treasury, Gates said the services could spend the money on new programs instead. In January, Gates tried again to deflect fiscal pressures by ordering the Pentagon to cut $78 billion in projected spending over five years. But that figure was soon dwarfed by Obama’s directive in April to identify $400 billion more in possible cuts over 12 years. While those may sound like big numbers, some analysts said they represent a reduction in projected spending only and that the Pentagon’s budget would actually continue to grow slightly, about at the rate of inflation. Even cuts of $1 trillion over 10 years could be absorbed relatively easily, said Gordon Adams, who oversaw national-security budgets for the Clinton White House and is now a professor at American University. “It’s not like it would be whacking American’s defense budget to the bone,” he said. While a reduction of $1 trillion would be significant, he said, it would represent a much smaller-percentage decline in defense spending than what the Pentagon encountered at the end of the Cold War, when its budget declined by 36 percent between 1985 and 1998. Meanwhile, signs that the Pentagon is entering a period of thrift are becoming apparent. On Thursday, the Defense Business Board, a private-sector panel that advises the secretary of defense on financial matters, will convene its quarterly meeting to discuss a report on “corporate downsizing applications” that might prove relevant for the military. “This new era will require a different mindset,” Ashton B. Carter, the Defense Department’s chief weapons buyer, said to an audience at the Brookings Institution. While expensive weapons programs may grab the most public attention, analysts said the biggest — and toughest — target for spending reductions will be personnel costs, which are rising at unsustainable rates. Also soaring are expenses for overhead, back-office functions, military schools, commissaries and other functions that are distant from the battlefield, said Arnold L. Punaro, a member of the Defense Business Board and a retired general in the Marine Corps. “The reason we have a Department of Defense is to break things and kill people,” Punaro said. “The problem we have now is that so much of the money is not going to the people who are breaking things and killing people.” SDI 11 File Title Links Spending cuts key to a deal International Business Times,’11 (July 24, 2011, http://m.ibtimes.com/treasurer-secretary-geithner-says-confident-debt-deal-will-get-done- 185836.html, “Treasurer Secretary Geithner says confident debt deal will get done“, Asg) It's just unthinkable we'd ever do that. It's not going to happen," he said. "The most important thing is that we remove this threat of default from the country for the next 18 months," Geithner added. "What the leaders know is that they need to agree on something together that will pass the House (of Representatives), pass the Senate that the president can accept." He also said that a two-tiered proposal by U.S. House Speaker John Boehner, the top Republican in Congress, to lift the debt ceiling through the end of 2011 and then do it again later does not have the votes to pass Congress and it was not acceptable to the White House. "What we cannot do -- because it would be irresponsible -- is to leave the threat of default hanging over the American economy for a longer period of time," Geithner said. The United States will run out of funds to service its debt on August 2 if Congress does not approve additional borrowing. Republicans have insisted the White House agree to deep spending cuts for long-term deficit reduction before they approve any increase in America's debt burden. Negotiations toward that agreement have whipsawed for weeks, finally hitting a brick wall over taxes, one of the most ideologically divisive issues in U.S. politics. Geithner said Obama was communicating with all congressional leaders throughout the day on Saturday. ECONOMIC GROWTH In his CNN interview, Geithner also said that the U.S. economy slowed "a lot" in the first half of 2011 and that growth should be better in the second half. He also said the jobless rate was unacceptably high. An aide to Republican leaders said on Saturday lawmakers were working on a plan for $3 trillion to $4 trillion in savings over 10 years, but another high-ranking Republican official said no numbers had been set. It was not clear if this package contained additional tax revenue alongside cuts in government spending, as Obama has demanded. Republican leaders want "to show progress" by 4 p.m. Cutting excessive spending key to a deal. Montopli 7/22 (Brian, “Obama, Boehner at war over debt talk collapse”, http://www.cbsnews.com/8301-503544_162-20082266- 503544.html, 7/22/11) He said there had been a closed-door agreement to increase revenues $800 billion through tax reform, but that Mr. Obama then insisted on an additional $400 billion in tax increases over 10 years. Asked how the deal could break down over $40 billion per year over 10 years, Boehner said the tax increases would have been on "the very people that we expect to invest in our economy and create jobs" -- presumably high-earners. "I can tell that you [House Majority Leader Eric] Cantor and I were very disappointed in this call for higher revenue," Boehner said. "Secondly, they refuse to get serious about cutting spending and making the tough choices that are facing our country on entitlement reform. That's the bottom line. I take the same oath of office as the president of the United States. I've got the same responsibilities as the president of the United States. And I think that's for both of us to do what's in the best interest of our country. Cutting spending key to a deal. CNN, News Agency, 7/22/11 (CNN, http://www.cnn.com/2011/POLITICS/07/22/debt.talks/index.html, “Debt talks between Obama, House Speaker Boehner collapse”, AD) There is simply no more time to waste debating and voting on measures that have no hopes of becoming law," Reid said. There is "no more time to waste playing partisan games." Republicans argued that Democrats are obstructing sorely needed spending reforms. "The House has done its job," Boehner declared. "We have a spending problem. Somebody's got to get serious about cutting spending." The talks, meanwhile, have become a race against the clock. If Congress fails to raise the $14.3 trillion debt limit by August 2, Americans could face rising interest rates, a declining dollar and increasingly jittery financial markets, among other problems. "Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem," Obama wrote in an op-ed that appeared in Friday's USA Today. "That's what the American people expect of us." SDI 11 File Title Internal links – Political capital key to lifting debt ceiling Debt ceiling requires political capital from both sides Youngman and Wasson 7/11 (Sam, Erik, 2011, http://thehill.com/homenews/administration/170841-debt-talks-hit- brick-wall-obama-gop-trade-jabs, “Debt-ceiling talks hit brick wall as President Obama, GOP trade jabs”, js) President Obama and GOP leaders traded accusations Monday over who was to blame as talks to raise the nation’s $14.3 trillion debt ceiling stalled over the size and scope of the package . Both sides pointed to the other as inflexible as the odds increased that Congress will not raise the nation’s borrowing limit by an Aug. 2 deadline. Obama said Republicans were refusing to allow any tax hikes in the deal, including provisions aimed at the wealthiest taxpayers, while Republicans said the White House’s insistence on tax increases and resistance to meaningful Social Security and Medicare reforms was the problem. Obama said during a late morning press conference that he had “bent over backwards” to meet the GOP halfway. “I do not see a path to a deal if they do not budge. Period,” Obama said. Less than two hours later, Speaker John Boehner (R-Ohio) retorted: “It takes two to tango. “I understand that this is going to take sacrifice, and is going to take political capital on both sides,” Boehner said . “I’m certainly willing to take my fair share of it, but if we’re going to take political capital, then let’s stand up and do the big thing, the right thing for the country.” Obama reiterated that he will not sign a short-term deal into law, citing election-year politics: “It’s not going to get easier. It’s going to get harder. So we might as well do it now — pull off the Band-Aid; eat our peas.” Leaks after a Monday afternoon meeting at the White House between Obama and congressional leaders underscored the tensions. Weeks ago, details barely emerged from closed-door talks, while on Monday all sides were frantically working to get their message out. Republicans said their meeting focused on the medium-sized deal based on the Biden talks, despite Obama’s public push for a larger deficit-reduction package. Democratic officials, for their part, said Obama echoed the call he made during a morning news conference, telling Republicans they should shoot for the biggest deal possible and lay out why a “cut-only” plan would not add up to the savings sought by Boehner. Obama said the savings identified by the Biden group would yield about $1.5 trillion, not enough to raise the debt ceiling beyond the 2012 elections and meet Boehner’s requirement that deficits be cut by a higher amount than the borrowing limit is raised. What’s more, Obama said no Democrat would be willing to sign on to a plan that cuts $1.5 trillion but doesn’t require any concessions from Republicans. The two sides plan to meet again on Tuesday afternoon. After the dueling press conferences, talks resumed at the White House between Obama and the top two congressional leaders from each party and chamber, but there appeared to be little if any progress. Talks broke down over the weekend over the issue of taxes after some signs that Obama and Boehner were both interested in pursuing a grand $4 trillion deficit-reduction package that would tackle entitlements, domestic and defense spending and the tax code. Sources familiar with the talks said Obama offered a proposal to eliminate breaks in the tax code while lowering rates, though not the Bush-era tax rates for families with income over $250,000. Some of the $1.7 trillion in new revenue in the $4 trillion deal would have been found by counting the expiration of the Bush tax rates for the wealthy, these sources said. Obama had suggested this would not be a tax increase if it were offset by a future promise of tax reform that ultimately lowered all rates, including the rate paid by the wealthiest taxpayers. In rejecting the $4 trillion deficit-reduction package on Saturday night, Boehner rejected this suggestion. Obama on Monday said he and other, wealthier taxpayers should be asked to contribute to a package reducing the deficit to ensure pain does not fall only on the middle class and poor. “I do not want, and I will not accept, a deal in which I am asked to do nothing — in fact, I’m able to keep hundreds of thousands of dollars in additional income that I don’t need — while a parent out there who’s struggling to figure out how to send their kid to college suddenly finds that they’ve got a couple thousand dollars less in grants or student loans,” Obama said. The president also disputed Republicans who have suggested he is looking to immediately raise taxes, saying that what he is proposing would not take effect until 2013. “Nobody’s looking to raise taxes right now,” Obama said. “What we have talked about is that starting in 2013, that we have gotten rid of some of these egregious loopholes that are benefiting corporate jet owners or oil companies at a time where they’re making billions of dollars of profits. “So I have bent over backwards to work with the Republicans to try to come up with a formulation that doesn’t require them to vote sometime in the next month to increase taxes. What I’ve said is, let’s identify a revenue package that makes sense, that is commensurate with the sacrifices we’re asking other people to make, and then I’m happy to work with you to figure out how else we might do it.” House Majority Leader Eric Cantor (R-Va.) told reporters no taxes should be raised, given the sour economy. “We don’t believe that we ought to be raising taxes right now on people in this recession and in this economy, and they do,” Cantor said. “That is just an irreconcilable difference, and if the president wants the debt ceiling — we’re not going to go along with that if they want to raise taxes, and it just is what it is.” The talks take place against the backdrop of a troubled economy. Friday’s jobs report for June showed the economy added a paltry 18,000 jobs for the month, and stocks on Monday fell as investors worried about the global economy. Obama on Monday refused to give in on the idea of a grand bargain. The president said he is willing to “take on significant heat” from Democrats who are furious that Obama has put entitlement programs on the negotiating table, and he challenged Republicans to join him in pushing for the $4 trillion package. Getting debt ceiling deal will require political capital. WELNA 7-12 (David, 2011 “Debt-Ceiling Negotiations Are Taxing For Both Sides,” http://www.npr.org/2011/07/12/137783978/debt-ceiling-negotiations-are-taxing-for-both-sides, SPT) WELNA: The president's insistence on tax revenues being part of a deal has cost him a key partner in his pursuit of a grand bargain that would cut deficits by $4 trillion over the next decade. Representative JOHN BOEHNER (Republican, Ohio): The president and I do not agree on his view that government needs more revenues through higher taxes on job creators. WELNA: That's speaker of the House John Boehner. Yesterday, he was explaining to reporters why, over the weekend, he backed out of seeking a bigger deficit reduction deal with President Obama. Still, Boehner did not sound as if he'd completely given upon getting that bigger deal. Rep. BOEHNER: I SDI 11 File Title understand that this is going to take sacrifice and it's going to take political capital on both sides. And I'm certainly willing to take my fair share of it. But if we're going to take political capital, then let's step up and do the big thing and the right thing for the country. SDI 11 File Title Internal link expander – every vote key Every vote is key. Guardian, 7/26 -- Antle is associate editor of the American Spectator, a contributing editor of the American Conservative; he has appeared in the Washington Examiner, Politico, the National Review and more. [7/26/2011, James Antle: “US debt ceiling crisis: Why Republicans won't compromise”. http://www.guardian.co.uk/commentisfree/cifamerica/2011/jul/26/us-debt-ceiling-crisis-republicans, XJADX] Boehner is faced with the fact that as many as 40-50 of his members oppose a debt ceiling increase on principle. Many of them believe default can be avoided by other means. Others simply don't want to cast their votes for more government borrowing. In getting a deal passed, Boehner has to proceed without their votes, making everyone else's vote all the more important. In addition to those who would never vote to raise the debt ceiling, there are many others who would prefer not to. SDI 11 File Title Internal link expander – every day is key It will take several days to get a plan through Congress. Feller, associated press white house correspondent, 7/24 (Ben, 7/24/11 http://www.boston.com/business/articles/2011/07/24/leaders_seek_debt_deal_before_asian_markets_open/ “Boehner: GOP ready to act alone on debt deal” ctc) One key Republican lawmaker scoffed at the administration's opposition to a debt-ceiling plan that doesn't last into 2013. "I think that's a ridiculous position because that's what he's going to get presented with," said Sen. Tom Coburn, R-Okla. Under any scenario, Washington's leaders have run themselves almost out of time. It will take days to move legislation through Congress. SDI 11 File Title Impacts - economy Debt ceiling would cause an unprecedented world economic collapse Cha 11 (Ariana Eunjung Cha, The Washington Post with Bloomberg Business, 4-18, “What’s the debt ceiling, and why is everyone in Washington talking about it?”, http://www.washingtonpost.com/business/economy/whats-the-debt-ceiling-and-why-is-everyone-in-washington- talking-about-it/2011/04/15/AFSS4R1D_story.html, Rishi Shah) What happens if the debt ceiling is breached? If Congress does not increase the limit, borrowed funds would not be available to pay bills and the United States may be forced to default on its debt obligations. There’s no precedent for this situation. Treasury has never been unable to make payments as a result of reaching the debt limit. With a fragile global recovery counting on U.S. economic stability, the debt limit issue could roil international financial markets. Democrats and Republicans agree that if the debt limit is not raised we would be inviting economic catastrophe. Lifting debt ceiling key to the world economy. Conservative Refocus 7/18/11 (Barry Secrest, July 18th, http://webcache.googleusercontent.com/search?q=cache:h_iWSPLEaOAJ:www.conservativerefocus.com/blog5.php/2011/07/18/senate-cobbles- plan-to-deal-with-debt-ceiling-debt-reduction-attempts-grow-smaller-and- smaller+failure+to+pass+debt+ceiling+causes+economic+collapse&cd=3&hl=en&ct=clnk&gl=us&source=www.google.com, “Senate Cobbles Plan To Deal With Debt Ceiling: Debt Reduction Attempts Grow Smaller and Smaller,” WS) A bipartisan group of US Senators tried on Monday to cobble together a deficit reduction plan that would allow President Barack Obama to avert a potentially catastrophic debt default in return for $1.5 trillion in spending cuts. With two weeks to go until what Obama has termed economic "Armageddon," the rival Senate leaders, Mitch McConnell of the Republicans and Harry Reid of the Democrats, were working on a complex path out of the crisis. A $2.5 trillion increase in the debt ceiling would come in three tranches over the next year with no Republican backing and Obama facing condemnation each time for raising it in symbolic resolutions of disapproval. The spending cuts, implemented over a decade, would be accompanied by the setting up of a powerful bipartisan congressional committee charged with producing a comprehensive debt reduction plan by the end of the year. "The panel will require only a simple majority to report a plan to Congress, it would be protected from Senate filibuster and it would not be subject to amendment," The Washington Post reported. Obama had urged rival Democrats and Republicans to strike a "grand bargain" to reduce the yawning deficit by some $4 trillion over 10 years, in tandem with allowing the crucial increase to the borrowing limit. But with Congress divided between the Republican-controlled House of Representatives and the Democrat-held Senate, he has failed to straddle a sharp ideological divide over taxation and the size of government. The president said he would only cut Medicare and Social Security -- programs that help the elderly and are beloved by his Democratic Party -- if Republican foes agreed to sacrifices too, namely tax hikes for the wealthy. After five straight days of testy White House talks with congressional leaders ended Thursday without a clear solution, Obama implored lawmakers to embrace "shared sacrifice" to help break the stalemate. With time running out and no deal in sight, it looks like the president could have to agree to a carefully choreographed series of moves on Capitol Hill to steer the country out of crisis and save face all round. Republicans are expected to table a plan early in the week that would cut the deficit, cap federal spending and amend the constitution to require a balanced budget, while also containing a provision to raise the debt ceiling. The so-called "cut, cap and balance" plan, favored by Republican lawmakers close to the ultra-conservative Tea Party movement, might pass the House but is unlikely to win enough support from Democrats to pass the Senate. "The Republicans are insisting this debate take place before anything happens," number two Senate Democrat Dick Durbin told CBS's "Face the Nation" program, adding: "We have to check the boxes." After its expected failure, McConnell and Reid hope to pass a debt limit measure through the Senate that would then be amended in the House with a proposal to reduce spending by $1.5 trillion over a decade. White House budget director Jake Lew insisted Obama still wanted a big debt reduction deal right away but confirmed the basics of the back-up plan and didn't dismiss it. "My understanding is what they are working on right now would simply provide a mechanism for extending the debt and provide for a committee, a joint committee of the Congress, to take action on the deficit," Lew said. "At a minimum, and business leaders have Congress has a way to action and avoid default on the US debt. It's critical," he told CNN. Economists warned that failure to raise the US debt ceiling by August 2 could send shock waves through a world economy still reeling from the 2008 financial collapse. The budget showdown is enmeshed in America's perpetual election cycle as Republicans seek to block Obama's agenda, painting him as a big-spending liberal who would drive the country to economic ruin if reelected in 2012. But Republicans have to walk a fine line as any obviously cynical politicking seen as detrimental to the fragile US economy or imperiling jobs would also be electoral suicide. "The country will not default, whether or not there are savings achieved in the process remains open to question," number two Republican in the Senate Jon Kyl told ABC. The US government reached its debt limit of $14.29 trillion in May, and since then the Treasury Department has used special measures to allow the government to keep paying its bills. Unless the limit is raised by August 2, the Treasury says, growing commitments will force a default. Federal Reserve Board Chairman Ben Bernanke warned last week that failure to raise the ceiling would cause "a very severe financial shock" to the global economy. Ratings agencies Moody's and Standard & Poor's have warned they may downgrade Washington's sterling Triple-A debt rating, and leading US creditor China, Wall Street titan JPMorgan Chase have all sounded the alarm. SDI 11 File Title Failure to increase debt ceiling will increase interest rates, cause a dollar decline and scare financial markets. Stewart, reporter for CNN, 7-23 (Rebecca, 2011, “Obama calls for leaders to work together on debt deal”, http://politicalticker.blogs.cnn.com/2011/07/23/obama-calls-for-leaders-to-work-together-on-debt- deal/?iref=allsearch, Google News, JMK) Washington (CNN) - President Barack Obama called on Democratic and Republican leaders to come together and do "the right thing" to resolve the nation's debt crisis Saturday in his weekly address. He warned that unless an agreement is reached to raise the amount of money the federal government is allowed to borrow, debt will "weaken our economy, cause higher interest rates for families, and force us to scale back things like education and Medicare." The president summoned congressional leaders to the White House Saturday after House Speaker John Boehner announced Friday night he was pulling out of the debt-ceiling negotiations with the Obama administration. "Neither party is blameless," Obama said of the nation's debt. "Both parties have a responsibility to do something about it." If a deal to raise the debt ceiling is not reached by August 2, the nation risks default, and Americans could face problems including rising interest rates, a declining dollar and increasingly jittery financial markets. Lifting debt ceiling key to preventing economic collapse Huffington Post 7/23/11 (7/23/2011, Huffington Post, “Obama: Debt Ceiling Talks Fell Apart, Boehner Walked Out”, http://www.huffingtonpost.com/2011/07/22/obama-debt-ceiling-talks-boehner_n_907502.html, DFerris) Obama: Boehner Withdraws From Debt Talks The president appeared genuinely flummoxed at the talks falling apart, saying there "doesn't seem to be a capacity for [Republicans] to say yes." He said he couldn't believe Congress would "end up being that irresponsible" as to impose a "self-inflicted wound on the economy at a time when things are so difficult." The New York Times also played a major part in the breakdown of talks between Boehner and the White House, reporting Thursday that the pair had moved very close to a deal. Both sides spent the rest of the day knocking down the report, while Senate Democrats fumed that the White House was caving. The latest breakdown comes with about a week left until the Aug. 2 deadline, at which point the government is expected to run out of money to pay its bills. Even if a default is averted, the protracted debate over raising the debt limit has left the U.S. government dangerously close to having its credit rating downgraded . In that event, Americans could expect a spike in interest rates on their credit cards, student loans and mortgages, with ramifications felt through the U.S. and global economy. "We have now run out of time," the president said. He said he told congressional leaders to come back to the White House at 11 a.m. on Saturday "to explain to me how we are going to avoid default." In a press conference later Friday night, Boehner accused the White House of having “moved the goal post” in negotiations. “The president demanded $400 billion more” in revenues when the two of them met Thursday, Boehner said, which is “nothing more than a tax increase on the American people.” He said he and House Majority Leader Eric Cantor (R-Va.) were “very disappointed” by that demand. Boehner also sent a letter to House Republicans on Friday night explaining why he pulled out. "It has become evident that the White House is not serious about ending the spending binge that is destroying jobs and endangering our children's future," the GOP leader wrote. "A deal was never reached, and was never really close." Boehner: No One Wants a Government Default At a briefing with reporters shortly after the president spoke, three senior White House officials laid out in detail their version of where the discussions fell apart. On the discretionary spending front, both sides had "identical offers," said one of the officials. There would be $1.2 trillion in cuts over the course of ten years; $1 trillion in savings that would come from the draw-down of the wars in Afghanistan and Iraq; and $250 billion in savings in Medicare over the course of 10 years. Both sides had also agreed to attach a second piece of legislation, to be decided via the reconciliation budget process, that would have changed the retirement age for Medicare and changed the premium structure for Medicare Part B and D, while eliminating certain kinds of supplemental insurance. That bill would also contain changes to the way Social Security benefits were paid starting in 2015, with buffers put in to protect the lowest-income beneficiaries. There was, in addition, an informal agreement to try and extend Social Security's solvency by an additional 75 years. How they would get there, however, remained a point of contention, with the president wanting a package of benefit and premium changes and Republicans focusing just on the benefit side. Unable to overcome that impasse, the two sides settled on vague language requiring them to meet that 75-year goal with future reforms. Where the two sides remained apart were on Medicaid cuts, with Republicans demanding tens of billions of dollars more in cuts than the president was comfortable making. White House officials described that difference as possible to overcome, however. The revenue component, in the end, remained unbridgeable. According to senior White House officials, each side had agreed to pass tax reform down the road that would result in $800 billion in revenue generated -- the equivalent amount of savings that would be achieved if the top-end Bush tax cuts were simply allowed to expire. The administration wanted $400 billion in revenues on top of that. Republicans wanted zero, and in statements on Friday night GOP leadership aides insisted that the White House had changed the contours of the negotiations by making that demand in recent days. Obama offered to move off that $400 billion mark should GOP leadership lessen the type of cuts to entitlement programs they were demanding, White House aides said. In addition, the two sides could not figure out what to do if that aspirational tax reform package wasn't achieved. The White House, at various points, proposed that the fallback option be the actual expiration of the Bush tax cuts for the wealthy. Republicans demanded that they have something as bluntly frightening to Democrats. On Thursday, GOP leadership proposed that the penalty for inaction on tax reform be the repeal of the health care law's individual mandate as well as the newly created Independent Advisory Board, which has been set up to find cost savings in Medicare. The White House balked at the offer. "Our view was we are not going to put the individual mandate in a deficit reduction package," said a senior White House official. "But we were open to other ideas and there are any number of formulations for us." All of which does not mean that the big deal is now dead. In fact, White House officials made it abundantly clear that they would welcome GOP leadership back into those discussions. "The speaker withdrew from the talks. This offer is still available,” said one of those officials. Boehner, at his briefing, said he didn’t think his relationship with Obama, or debt talks, are beyond repair. He said he planned to go to the White House on Saturday with other leaders. At this stage, the most viable proposal left on the table appears to be a far less ambitious debt plan put together by Reid and McConnell. Their proposal, dubbed a "fallback option," calls for $1.5 SDI 11 File Title trillion in cuts, generates no new revenues and would put the onus fully on Obama to raise the debt limit, without Congress. It would also require the president to raise the debt ceiling in three increments over the next year and a half -- a politically driven requirement by McConnell aimed at making Obama take responsibility for all debt ceiling hikes ahead of the 2012 elections. The other potential remedy -- for the president to exercise the so-called constitutional option and invoke 14th Amendment powers to raise the debt ceiling himself -- was ruled out, once again, during the White House briefing. "There are no options other than a legislative solution,” said a senior White House official. A Democratic staffer familiar with Hill negotiations concurred that the Reid-McConnell plan appears the most likely resolution. The fight now heads to the trenches: The leaderships of both parties will cobble together coalitions in the House and Senate that can move the package through. In both parties, the wings will generally oppose leadership and the center will hold, if history is any guide. The same coalition passed the Wall Street bailout and the Obama-GOP tax cuts. "We are prepared to compromise consistent with our values," House Minority Leader Nancy Pelosi (D-Calif.) said in response to the news. "Speaker Boehner's ‘adult moment’ is long overdue. Our economy, our children's education, our seniors' security and our nation's fiscal soundness require that we act without further delay." Of course, there's also the bipartisan Senate Gang of Six proposal, which would slash $3.7 trillion in deficits over 10 years and raise up to $1 trillion in new revenues through tax code reform. But that proposal has critics in both parties, and some say there isn't enough time to turn it into a bill, send it to various committees for debate and pass it by Aug. 2. Frustrations are clearly high on both sides of the aisle. As Twitter blew up at the news of the Obama-Boehner talks crumbling, Cantor spokesman Brad Dayspring chimed in with a tweet knocking Obama for making it seem as if Republicans thwarted the process. “As if there's really a question whether President Obama threw a tantrum at the White House last week - same guy just appeared,” Dayspring tweeted. Rep. Peter Welch (D-Vt.) said Congress had to move fast now that things have gotten hairy. He warned that the situation is nothing like the government shutdown narrowly averted earlier this year. "If you've got the speaker walking away from the White House -- astonishing in and of itself -- the next step is meltdown in the markets," Welch said. "This is tempting the markets to turn, and when they do, it will be sudden and savage, then things will be out of control and the damage will be huge and irreversible." Failure to lift the debt ceiling bill will cripple the world economy Bua 7/25 (7/25/2011, Jon-Christopher, “Debt Crisis Warfare”, http://blogs.news.sky.com/washingtonnotebook/Post:bce66e0d- 01ea-4bfb-89eb-945e2287aab9, DFerris) Raising the debt ceiling is a routine activity that has occurred approximately 70 times without much ado in Democratic and Republican administrations alike. What did not need to become a crisis has now become a very big one. And the world is watching. There is an immediate and very real problem. The US must raise its debt ceiling to avoid the crisis of a default on its existing debt. To be very clear - the failure to raise the debt ceiling would be nothing short of catastrophic. As is the way of Washington, there is a difference between political rhetoric and facts - neither party is entitled to its own facts. Despite the messages from both parties some irrevocable damage has already been done. The world - especially the financial community - no longer believes the US Government functions properly and may not be able to be trusted to act like responsible adults in charge of the world's most important economy. Clearly further damage will occur without question if a deal is not reached immediately! If the debt ceiling is not increased and this "game of chicken" is not stopped, there will be real and measurable consequences for every American and the rest of the world as well. These devastating consequences are something this administration has failed to make clear. Perhaps it has chosen not to do so in an effort keep the markets from utter panic. Unfortunately the time may have come for the president to paint a clear picture for Congress and the American people of what it will be like to fall off the edge of the economic abyss. This just might be the reality check that Congress needs to get them to act responsibly. Here is what's at stake: 1. The debt the U.S. already has accrued would become even more expensive to continue to finance. This is like your credit card company announcing tomorrow that your current balance (not any future spending) - will now cost you 21% interest instead of your current rate. 2. All loans would become more expensive - possibly intensifying the economic crisis and stopping any recovery. All credit could dry up. 3. The value of the "Almighty Dollar" will sink - this means that everything the US imports will immediately become more expensive - the price oil and gas will go up. 4. The stock market would probably take another precipitous dive - the second in the same decade - making it almost impossible for people's savings and retirement accounts to recover in time for anyone to ever retire. 5. Last, but by no means least, all of this could precipitate the "Great Collapse" that was narrowly avoided in 2008. This would of course ripple through the world economy. Not lifting the debt ceiling will cause economic collapse Gorsegner 7-25 (Michael, Staff reporter, “Debt ceiling debate continues; What no deal means for your wallet”, FOX, http://www.fox43.com/news/wpmt-amnews-debt-ceiling-affect-wallet,0,5557228.story, DJ) HARRISBURG— The debt ceiling debate continues in Washington as the President and Congressional leaders try to fix the growing deficit. With the August 2 deadline just around the corner, no deal could mean a huge impact on your wallet. If the debt ceiling isn't raised by the August 2 deadline, the U.S. will be in default. That means everyday costs like credit card bills and gas prices could spike, sending the economy into a spiral. "Congress must pass this. It SDI 11 File Title is their responsibility to extend the debt ceiling," said White House Chief of Staff Bill Daley on an appearance on CBS' "Face the Nation." The debt ceiling is basically the country's credit line. If Congress doesn't raise the ceiling, the affects on the U.S. economy would be immense. With the ability to only pay about half of its bills, the U.S. government would be in default. "Our plan is to get Congress to raise the debt ceiling on time. That's their plan, too. That's what's always happened. It will happen this time, too," said Treasury Secretary Tim Geithner during an appearance on FOX News Sunday. But if it doesn't happen, Americans will feel the pinch. Defaulting could lead to rising credit card charges on any unpaid balances, a sharp jump in mortgage rates, and a drop in the value of the U.S. dollar. A decreasing dollar value could spike the price of gasoline and other imported goods. With these dire consequences, Geithner says doing nothing isn't an option. "We do not have the ability to protect the American people from the consequences of Congress not taking that action," he said. Besides affecting those wallet issues, defaulting would mean the U.S. would have to decide between paying off its creditors and paying many entitlement programs like Social Security, Medicare and veteran's benefits. Everyone agrees on one thing, something needs to be done. SDI 11 File Title Impacts – Hegemony Lifting debt ceiling key to the dollar The Wall Street Journal 7-24 (Stephen L. Bernard, 7-24-11, “Markets Bracing For Volatility As Debt Ceiling Debate Drags On”, http://online.wsj.com/article/BT-CO-20110724-703402.html”, Rishi Shah) Given that state of play,investors are bracing for a negative reaction in the markets. Any fear that the debt ceiling won't be raised--and thus that a default is possible--could see stocks, commodities, the dollar and long-dated Treasurys fall while safe-haven flows would move to shortest end of the Treasurys curve. Gold, which recently moved above $1,600 an ounce might also benefit, as could safe-haven currencies such as the Japanese yen and the Swiss franc. "The markets will exhibit a fair amount of volatility until the official announcement of a debt deal," said Abdullah Karatash, head of U.S. fixed income credit trading at Natixis in New York. "I expect a volatile trading week with stocks, corporate bonds and Treasurys likely selling off until an official announcement of a deal." Without a comprehensive deal, long-dated Treasurys could bear the brunt of investor concerns as they are directly impacted by the long-term fiscal health of the country. Traders would likely shift out of them into the perceived safety of cash and short-dated Treasurys. "Long-end Treasury yields are liable to jump as increased default concerns cause players to seek safety from what until now had been the ultimate financial safe-haven," said John Canavan, market analyst at Stone and McCarthy Research Associates in Princeton, N.J. If no deal is reached, yields on 30-year bonds could jump to around 4.40% to 4.45% Monday from their Friday close of 4.259%, Canavan predicted. The 10-year note yield could spike to around 3.10% from 2.964%, Canavan said. Treasury yields move inversely to their prices. Investors' most immediate fear is that the government will be forced to default if the impasse in negotiations sees no increase in its legal borrowing limit by Aug. 2. But even if a temporary solution is found, the two sides' failure to hammer out an effective long-term deficit reduction plan won't bode well for the United States's perfect "AAA" credit rating. Both Moody's Investors Service and Standard & Poor's have placed the U.S. credit rating on review for a potential downgrade. S&P said a broad long-term deficit reduction would be needed to avoid that outcome. Given the importance of U.S. Treasurys to the global financial system, a downgrade could have far-reaching effects, especially as various institutional investors are required by their charters to hold only "AAA" assets. Stocks drew strength last week from what looked like progress in the negotiations, with the Dow Jones Industrial Average rising 1.6% for the week to get within 1% of the 2011 high it reached in late April. But with the post-market close breakdown in talks between House Republicans and the White House Friday, the risk of investor disappointment is now high. "The uncertainty that this creates could lead to some selling pressure [in stocks] Monday," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, who added that he still believes a deal will eventually be reached. Meanwhile, a soured image of the United States's capacity to get its debt problems in order could hurt the dollar if foreign investors in U.S. bonds take flight. The biggest beneficiaries would likely be the perceived safe havens of the Japanese yen and Swiss franc, against which the dollar ended Friday at Y78.52 and CHF0.8182, respectively. Although the market is "pricing in a deal" of some sort , the closer it gets to the Aug. 2 deadline without a deal, the more selling pressure is likely to bear on the dollar, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Alternatively, if Boehner were to surprise the market with a positive announcement later Sunday, the week could kick off with a "knee-jerk" relief rally in the dollar, Eisner added, though that would be tempered if the deal includes no meaningful long-term deficit reduction. Similarly, an unexpected positive announcement Sunday would lift the U.S. bond market. "Treasurys might initially rally on the news, but would start to trade more on economic fundamentals over time as a major source of uncertainty would be eliminated," said James DeMasi, chief fixed-income strategist at Stifel Nicolaus & Co. in Baltimore. Dollar solves hard and soft power Kirshner ‘8 (Jonathan Kirshner, Department of Government @ Cornell University, “Review of International Political Economy,” august 1, Review of International Political Economy,15:3,418 — 438 Informaworld) During the 1960s it was understood that the ‘principal advantage’ of the Bretton Woods system for the US was that its balance of payments deﬁcits ‘can be ﬁnanced in part through increases in the dollar reserves held by foreign monetary authorities’. To the extent that its deﬁcits are ﬁ- nanced in part by increased holdings of dollar reserves abroad, the US could run larger balance of payments deﬁcits than other states; more- over, and perhaps with even greater consequences, ‘it [could] take greater risks in adopting economic policies that might have adverse effects on the balance-of-payments’.24 This remains true for as long as the dollar retains its attractiveness abroad; today, the principal overt beneﬁts that the US enjoys from the international role of the dollar are the ability to sustain deﬁcits on its international accounts that others can not, and the related and crucial ability not simply to run deﬁcits at a certain magni- tude, but to take risks and adopt economic policies that would, anywhere else, elicit a withering ‘disciplinary’ response from international ﬁnancial markets. The key currency role of the dollar also provides to the US not only overt power via its enhanced autonomy and discretion, it increases the political inﬂuence and capacity of the US, via what has been called ‘structural power ’. There are two distinct (if related) strands of thought on structural power that are relevant here, one associated with Susan Strange and the other with Albert Hirschman. SDI 11 File Title Strange’s conception of structural power owes something to Woody Allen; as with aspiring playwrights, for hegemons, 90% of structural power is just showing up. Simply by its enormous size, a dominant state creates the context in which political interactions take place – often without even the intention of doing so. Thus, for example, any discussion of the inter- national monetary system takes place in the context of dollar primacy. Of course, structural power can also be quite purposeful, although it is ex- pressed not by ‘relational’ power or coercion over speciﬁc outcomes, but via agenda setting – ‘the power to decide how things shall be done, the power to shape frameworks within which states relate to each other ’.25 The strand of structural power associated with Hirschman emphasizes how the pattern of economic relations between states can transform the calculation of political interest. States (and private actors within states) that use the dollar (and especially those that hold their reserves in dollars) develop a vested interest in the value and stability of the dollar. Once in widespread use, the fate of the dollar becomes more than just America’s problem – it becomes the problem off all dollar holders (to varying de- grees from case to case). Even those that simply peg to the dollar as part of a broader international economic strategy also have an interest in fu- ture of the greenback even without signing on as ‘stakeholders’ the way large holders of dollars have, advertantly or not, as they accumulate dollar denominated assets.26 In the contemporary system, then, dollar primacy increases both the ‘hard power ’ and the ‘soft power ’ of the US Regarding the former, Amer- ica’s coercive capacity is enhanced by its greater autonomy to run deﬁcits and to adopt policies that would otherwise elicit a countervailing market reaction. As for the latter, the structural beneﬁts afforded to the US can be classiﬁed under Nye’s deﬁnition of ‘soft power ’ – getting others to want what you want them to want. For Strange the weight of the dollar beneﬁts the US by necessitating that relevant political arenas will be operate in such a way that cannot but account for American interests. For Hirschman, the US gains because participation in a dollar-based international monetary or- der both shapes the perceived self-interests of states and of many private actors within states, and also, more concretely, by creating stakeholders in the fate of the dollar. SDI 11 File Title AT Short term deal Obama will veto short term plan San Francisco Chronicle, with assistance from Mike Dorning in Washington, 7-26 (2011, “Sperling Says Obama Would Veto Short-Term Debt Ceiling Increase”, http://www.sfgate.com/cgi- bin/article.cgi?f=/g/a/2011/07/26/bloomberg1376-LOXVF91A1I4H01- 1SOJNKHCMUNJMNEF5T8BQMT240.DTL, Google News JMK) President Barack Obama would veto a short-term, six-month increase in the debt ceiling, the director of the White House National Economic Council said. "The president has been pretty clear that he does not find that acceptable," Gene Sperling said in an interview on MSNBC today. Short term deal won’t solve our economy impacts The Baltimore Sun 7/25/11 (“The Ohio two-step: Why Boehner’s debt plan is a bad idea”, The Baltimore Sun, http://www.baltimoresun.com/news/opinion/editorial/bs-ed-debt-ceiling-20110725,0,5383234.story, FJR) With just one week to go before the August 2 deadline for raising the nation's debt ceiling, the fault line between House Republicans and President Obama and the Democrats appears to center on whether Congress should allow enough borrowing to cover the government's expenses until early 2013 or whether it should agree to a lesser amount that will force another vote in six months or so. House Speaker John Boehner is the chief proponent of the two-step solution, and he used some pretty harsh words on "Fox News Sunday" to criticize President Obama's opposition to the idea: "I know the president's worried about his next election. But my God, shouldn't he be worried about the country?" Of course, crying politics at this late stage in the greatest game of political chicken we've seen in at least 15 years is laughable. Mr. Boehner is suggesting that Mr. Obama just wants to avoid having another debt vote before the 2012 election because doing so would hurt his chances of success. The flip side of that coin is that forcing another vote on the debt ceiling before the 2012 election would be good for Mr. Boehner's party. The politics are a wash. But there is good policy justification for Mr. Obama's insistence on a longer-term deal. Administration officials say it is crucial to add some element of stability and certainty to the world financial markets and not have the possibility of another giant political showdown — in an election year, no less. There's real truth to that because this crisis isn't really about whether the United States has sufficient resources to continue paying its debts in the short term. That we can certainly do; even without an increase in the borrowing limit, the nation would have enough cash flow to make interest and principal payments on the debt, assuming those are put at the head of the line, which they almost certainly would be. The question is about whether the nation's political system is capable at this point of making the difficult decisions necessary to reduce borrowing over the medium and long term. That's why the bond rating agency Standard & Poor's, for one, has indicated that the United States could face a costly downgrade even if it does avoid default next month. Short term deal won’t save the dollar Hastings 7/25/11 (Nicholas, Dollar Will Suffer With or Without Financial Armageddon, The Wall Street Journal, http://blogs.wsj.com/source/2011/07/25/dollar-will-suffer-with-or-without-financial- armageddon/?mod=google_news_blog, FJR ) Financial Armageddon will probably be avoided in the U.S.. But, that won’t necessarily be good news for the dollar. On the contrary, protracted negotiations on raising the U.S. debt ceiling could well increase the threat of a ratings downgrade, and at the same time talk of further U.S. monetary easing is likely to return. In other words, neither fiscal nor monetary forces will be working in the dollar’s favor for the foreseeable future. Hopes had been high before last weekend that President Obama was close to hammering out a deal with the Republicans on raising the debt ceiling and allowing the Treasury to continue raising money. But, with the talks now in tatters and the August 2 default deadline drawing closer, it looks increasingly likely the two sides will only come up with a short-term compromise that will keep the Treasury solvent but postpone any tough decision on spending cuts and tax increases until next year. The problem then, of course, is that negotiations could prove even more difficult as they will be taking place just as the two parties start their campaigns for the next presidential election. This will hardly put the U.S. in a good light and with credit agencies likely to keep their threat of a U.S. downgrade alive, Washington could well find it has to offer a weaker dollar and higher Treasury yields to keep foreigners buying its debt. So, the fiscal stresses that have overshadowed the dollar for the last few months could actually intensify if Congress fails to find a longer-term debt solution. And, the pressure from monetary policy isn’t going to be much better. Although the U.S. Federal Reserve made it clear only a few weeks ago that it doesn’t have any plans for easing monetary policy any further, calls for more quantitative easing are likely to increase again in coming weeks as the pace of the U.S. economic recovery continuous to disappoint. This week will likely bring more evidence of just how badly the SDI 11 File Title recovery has stumbled with house prices expected to continue falling and with the recent weak payroll figures likely knocking consumer confidence levels even lower. Growth in durable goods orders is expected to have slowed and, most importantly, GDP data on Friday will not only show that annualized second quarter slowed to 1.8% from 1.9% in the first quarter, but that previous growth estimates for the last year or two were revised down. Although the dollar may be weathering the latest headlines on the debt negotiations out of Washington rather well, with the Dollar Index actually staging a small rally, chances are the U.S. currency could be heading for a nasty fall, especially if more disappointment on the debt ceiling coincides with another batch of negative economic numbers that puts QE3 back in the frame. Despite last weekend’s breakdown in congressional debt ceiling negotiations, financial Armageddon will probably be avoided as U.S. legislators will eventually move back from the brink of default. But, this may not be such good news for the dollar. Democratic leaders oppose and Obama will veto short term deal CBS News, 7/24 (July 24, 2011, http://www.cbsnews.com/8301-503544_162-20082697-503544.html, “As deadline looms, Congress scrambles for debt limit deal”, ky) Boehner argued that it was just "not physically possible" to achieve all of the necessary goals in one step - and alleged that President Obama's objection to the two-step process was derived from his own political interests. "There will be a two-stage process; it's just not physically possible to do all of this in one step," he said on Fox News. "I know the president is worried about his next election. But my God, shouldn't he be worried about the country? We have got a budget deficit of $1.5 trillion. We're borrowing 42 cents on every dollar we spend, we have $14.5 trillion national debt. It is time to get serious about stopping the spending here in Washington, D.C." Mr. Obama has repeatedly said he will not sign a short-term deal, and argues that the debate over a subsequent raise in the debt ceiling will only grow more contentious as election season moves into full swing. Democratic leadership, too, has vowed to fight any plan that does not raise the debt ceiling through the end of 2012. "I want to reaffirm my statement from last night: I will not support any short-term agreement, and neither will President Obama nor Leader Pelosi," Senate Majority Leader Harry Reid said in a Saturday night statement. "We seek an extension of the debt ceiling through at least the end of 2012. We will not send a message of uncertainty to the world." White House Chief of Staff William Daley affirmed on Sunday that Mr. Obama would veto any package that did not raise the limit through 2012. Obama will veto short term deal. Madison, Political Reporter for CBS News, 7/24 (Lucy, http://www.cbsnews.com/stories/2011/07/24/ftn/main20082678.shtml, “Kyl: Obama prioritizing election over economy,” CBS News, 7/24/11, MWH) Mr. Obama, however, has vowed not to sign a short-term debt limit, and argues that the debate over a subsequent raise in the debt ceiling will only grow more contentious as election season moves into full swing. "If we think it's hard now, imagine how these guys are going to be thinking six months from now in the middle of election season when they're all up. It's not going to get easier; it's gonna to get harder. So we might as well do it now, pull off the Band-Aid, eat our peas," Mr. Obama said in a July news conference. No short term deal – Reid will stop it. Feller, associated press white house correspondent, 7/24 (Ben, 7/24/11 http://www.boston.com/business/articles/2011/07/24/leaders_seek_debt_deal_before_asian_markets_open/ “Boehner: GOP ready to act alone on debt deal” ctc) Any plan must get through the Democratic-run Senate, where Majority Leader Harry Reid, D-Nev., has called a short-term debt limit expansion unacceptable. Obama's role looms, too. Asked if Obama would veto a plan that did not extend the government's borrowing authority into 2013, Daley said, "Yes." One key Republican lawmaker scoffed at the administration's opposition to a debt-ceiling plan that doesn't last into 2013. "I think that's a ridiculous position because that's what he's going to get presented with," said Sen. Tom Coburn, R-Okla. No short term deal Madison 7/24/11 (Lucy, CBS News, “Daley: GOP wants “their way or the highway” on debt”, HH) SDI 11 File Title Now Boehner says he hopes to introduce a framework for a deal on the debt limit later on Sunday. That framework would likely include a two-part plan with two debt limit increases. Leading Democrats, however, have vowed to vote against a short-term debt limit, and such a proposal is unlikely to pass in the Senate. Daley argued that Republicans - unlike Democrats - were not committed to a bipartisan solution. A short-term deal would also jeopardize the economy Davis 7/24 (Julie Hirschfield, “Durbin Says Short-Term Debt Increase Could ‘Jeopardize’ Economy”, http://www.bloomberg.com/news/2011-07-24/durbin-says-short-term-debt-increase-could-jeopardize- economy.html, 7/24/11, sjl) Dick Durbin, the second-ranking Democrat in the U.S. Senate, said it would be dangerous to the economy for Congress to pass a shorter-term debt ceiling increase than the $2.4 trillion boost President Barack Obama has requested. “A short-term extension of the debt ceiling is going to jeopardize our economy,” Durbin, of Illinois, said in an interview on CBS’s “Face the Nation” program, as House Speaker John Boehner considered forcing action on such a plan. “We can’t do that.” Durbin said Boehner, an Ohio Republican, is ignoring the warnings of credit rating companies that have said they may downgrade U.S. debt if Congress fails to enact a long-term plan to address deficits. “The American economy is too fragile at this point in the recovery to allow that to happen,” Durbin said. A short term increase is too much uncertainty for the economy CBS 7-25 (CBS, 7-25-11, “Boehner, Reid work on partisan debt plans” http://www.cbsnews.com/stories/2011/07/25/earlyshow/main20082828.shtml, SPT) Treasury Secretary Timothy Geithner said a short-term increase would inject too much uncertainty into a weak economy. "The most important thing is, we can't adopt an approach that leaves the threat of default hanging over the country for another six months or so - that would be deeply irresponsible," Geithner said on ABC' "This Week." Failure to make spending cuts makes economic collapse inevitable – even if we raise the debt ceiling. The American Thinker 7/24 (“Debt Ceiling’s Impact is Overrated”, The American Thinker, 7/24/11, http://www.americanthinker.com/2011/07/debt_ceilings_impact_is_overrated.html, FJR) Some parts of the doomsday scenario posed by officials like Senator Warner, Treasury Secretary Tim Geithner, and the president may well come to pass: rising interest rates, consumer confidence falling, job creation declining. However, it is not likely to be the sole result of a failure to raise the debt ceiling, as we already see many of these symptoms occurring. A good example is the case of interest rates. It is claimed that without increasing the debt ceiling, the U.S. would default on some of its loans and its credit rating would take a hit. As a result, interest rates would rise, as lenders charge a risk premium for the added possibility of default. Raising the debt ceiling does not remove this threat, and it will continue to be a threat if the debt and the government spending fueling it are not contained. By raising the debt ceiling and not addressing the debt problem, government borrowing continues to rise, the demand for money rises in the loanable funds market and interest rates rise, anyway. This is why Moody's has been widely cited for threatening to downgrade America's credit rating should the debt ceiling not be raised, yet they also say they may well do the same should the debt not be contained. If investors believe the government will not continue binge spending after the debt ceiling is raised, and that the possibility of default is low, interest rates would remain low. However, investors have an incentive to be knowledgeable about the investments they make, and they know that as government spending continues to rise, the riskiness of lending to the government rises as well. The powerful internal forces of the market will ultimately determine interest rates. This is not to say that the debt ceiling shouldn't be raised, but to suggest to the American people that the sky will fall without raising the ceiling is dishonest and bad economics. Though, the sky will fall eventually if the true debt problem is not addressed. Politicians must take meaningful steps to bring about economic recovery. Economic growth occurs best when people are left to their own devices, not when government engineers the process by raising the debt ceiling here, expanding the money supply there, and raising taxes somewhere else, and any serious plan for economic recovery must acknowledge this reality. Structural budget reforms must be made in order to restore long-term economic growth, including dramatic cuts in federal spending, a restructuring of entitlement programs, and the realization by Senator Warner and others in Washington that the economy is not a game of chess, but the ongoing product of the hard work of millions of Americans, and is far too complicated for effective bureaucratic intervention. Otherwise, we risk seeing an increased debt ceiling absent serious spending reform; and will face downgrade and default once again. Raising the debt ceiling is not an easy way out of meaningful budget reform; it is simply a sign that our nation's spending addiction is winning the battle, and that Washington is failing to administer the required treatment. SDI 11 File Title AT Uniqueness Overwhelms the Link Uniqueness doesn’t overwhelm the link – no guaranteed the debt ceiling will be lifted progress is being made but stumbling blocks remain. CNN, News Agency, 7/22/11 (CNN, http://www.cnn.com/2011/POLITICS/07/22/debt.talks/index.html, “Debt talks between Obama, House Speaker Boehner collapse”, AD) Washington (CNN) -- House Speaker John Boehner walked away from debt talks with President Barack Obama's administration Friday, raising the stakes in the country's ongoing effort to stave off national default. "In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country," Boehner wrote in a letter to his fellow Republicans. The House speaker said that "a deal was never reached, and was never really close." "For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward," he wrote. Speaking to reporters soon after news of Boehner's decision broke, a visibly frustrated Obama said that he has told the Republican and Democratic leaders in Congress to come to the White House on Saturday morning to "explain to me how we are going to avoid default" on the nation's debt. Boehner told reporters at a news conference later he would attend that meeting. The president said his administration had offered "an extraordinarily fair deal" to cut expenditures and raise revenues, in return for Congress agreeing to hike the nation's debt ceiling. But he said that Boehner "left (him) at the altar" by ending negotiations around 5:30 p.m. Friday. "I remain confident that we will get an extension of the debt limit and we will not default. I am confident of that," Obama said. "I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits. That requires tough choices." The negotiations -- necessary to stave off an unprecedented national default that could prove economically devastating -- are testing the ability of leaders on both sides of the aisle to legislate effectively in an era of increasingly shrill and unyielding partisanship. Republicans, who have railed against the growth of government, remain staunchly opposed to any tax increases. Democrats are trying to protect some of their party's primary legacies -- entitlements such as Social Security and Medicare, programs forged at the height of the New Deal and Great Society. Speaking after Obama did, Boehner accused the White House of "moving the goalposts" by requesting an additional $400 billion in revenue hikes, a move that he said prompted his decision to call off talks with the president. The Ohio Republican said members of Congress now "will work together" -- absent representatives from the White House -- to reach a deal that involves spending cuts and raising the nation's debt ceiling. He said he was confident that the government would act to avoid default. "We can work together here on Capitol Hill to forge an agreement, and I'm hopeful that the president will work with us on this agreement," said Boehner, who compared dealing with the White House to dealing with a bowl of Jell-O. Senior White House officials, speaking on background, denied moving the goalposts and said they had not expected Boehner would walk away from a deal that would have tied between $3.5 trillion and $4 trillion in new savings to an increase in the debt ceiling. Republicans and Democrats agreed on a number of points, including $800 billion in revenue increases and certain entitlement reforms, the officials said. They disagreed over an additional $400 billion in revenue hikes and how deep cuts to Medicaid should be, they added. "Obviously this paper is not going in the shredder," said one senior White House official, suggesting the proposal could be revived. Another senior administration official said that the White House is not happy about Boehner's timeline in notifying the president, as the house speaker's office was briefing reporters on his decision even before Boehner had returned Obama's call. House Republican leadership aides told reporters that the White House and Boehner had been discussing a plan that would have tied between $3 trillion and $3.5 trillion in new savings over the next decade to an increase in the debt ceiling, not including revenue. They stressed that whatever deal moves forward must meet two criteria. Any increase in the debt limit will need to be accompanied by spending cuts or reforms greater than the debt increase, and taxes must not be raised, they said. Meanwhile, Senate Minority Leader Mitch McConnell, R- Kentucky, said that he found it "disappointing that the talks with the White House (and Republicans) did not reach a favorable conclusion," even as he welcomed the news that the debt-ceiling discussions would be decided in Congress. "It's time now for the debate to move out of a room in the White House and onto the House and Senate floors, where we can debate the best approach to reducing the nation's unsustainable debt," he said in a statement. Earlier Friday, the SDI 11 File Title AT Economy won’t collapse Economic collapse is a real possibility. Witt 7-24 (Ryan, Political analyst, Worst case scenario unfolding in debt ceiling crisis, Examiner, http://www.examiner.com/political-buzz-in-national/worst-case-scenario-unfolding-debt-ceiling-crisis, DJ) The debt ceiling has been a looming issue ever since the Republicans took control of the House of Representatives this January. The alarmist crowd warned that if the debt ceiling is not raised it could lead to a United States default, higher interest rates, and perhaps even an economic catastrophe. The more optimistic crowd said that as the deadline neared both sides would come to their senses and eventually pass a debt ceiling increase. The default scenario is now just over one week away, and the alarmists seem to have the better argument thus far. Today White House Chief of Staff Bill Daley said the debt standoff has already done “tremendous damage” to the United States economy. Credit rating agencies have already said that they are looking closely at the full faith and credit of the United States. Businesses have apparently put off hiring until the uncertainty is resolved. In addition, there are currently no signs of a big breakthrough. The Republicans are still digging in, demanding a package that includes spending cuts but no revenue increases. In addition, the GOP is demanding the debt ceiling be raised in a two-step process, with another debt ceiling increase coming before the 2012 election. Democrats believe a “balanced approach” must include revenue increases, and are also opposed to necessitating another debt ceiling vote before the next election. In the Senate Majority Leader Harry Reid (D-NV) is working on one plan, and in the House Speaker John Boehner (R-OH) is preparing another. The problem is neither plan can actually become law without the cooperation of the other side. Time is also starting to run out in order to make a deal. In the Senate multiple members have vowed to filibuster a debt ceiling increase. A filibuster could be broken with a vote of 60 Senators, but it might take up to three of four days to accomplish that task. In the House the Republicans passed a rule that stated all legislation must be written 72 hours before it is voted on. Even worse, the markets will soon start reflect the lack of progress. Today Speaker Boehner said he wanted to produce a deal before 4 pm EST in order to reassure the Asian trading markets before they open. Boehner’s own 4 pm deadline came and went with no agreement. Tomorrow the United States and European markets will open. Once investors start to seriously account for a default the damage to the economy may be irreversible. As the clock ticks on the default bomb pragmatism and compromise are taking a backseat to ideology and stubbornness. The “unrealistic” worst case scenario is suddenly becoming very real indeed. SDI 11 File Title AT US economic collapse won’t spillover to the world Failure to lift US debt ceiling will crush the global economy. Gardner 7/26 (7/26/2011, David, “Sort out your debt crisis or the world will suffer, IMF tells U.S.”, http://www.dailymail.co.uk/news/article-2018793/Debt-ceiling-Sort-economic-crisis-world-suffer-IMF-tells- US.html?ito=feeds-newsxml, DFerris) The U.S. must find a solution to its debt crisis for the sake of the global economy, the International Monetary Fund said last night. It issued the ultimatum as the world’s money markets shuddered over the country’s latest failure to reach an agreement to raise its $14.3trillion (£8.8trillion) debt ceiling. Yesterday Republicans and Democrats were negotiating separately on rival plans to avert a first-ever federal default next week, after joint talks broke down over the weekend. Pressing for tax increases and spending cuts in health care, the IMF warned that the U.S. risked a sudden interest rate rise and humiliating drop in its top-notch credit rating if the deadlock is not broken before next Tuesday’s deadline. ‘These risks would also have significant global repercussions, given the central role of U.S. Treasury bonds in world financial markets,’ the IMF said in a statement. It added that an ‘excessively large upfront fiscal adjustment’ (overly savage spending cuts) should be avoided, because this would further dampen domestic demand and slow growth. The Republicans, who control the House of Representatives, are pushing for an aggressive debt-reduction plan with sharp spending cuts but little in the way of tax rises before lending their approval to a deal to lift the ceiling. But the White House – which cannot borrow without approval from Congress – would prefer a process that raises tax revenues from the wealthy. U.S. House Speaker John Boehner, the top Republican in Congress, introduced a new plan yesterday to approve an increase in the debt ceiling and said it would be irresponsible for President Obama, a Democrat, to veto it. In his televised address to the nation last night, Mr Obama warned that if Congress failed to take steps to lift the debt ceiling, it would severely harm the U.S. He has said he will veto any rise in the debt ceiling that does not go beyond November 2012, drawing criticism that he is trying to put off the problem until after his campaign for a second term. Debt default would be catastrophic for the world economy. MacAskill 7-24 (Ewen, Washington DC bureau chief, “US debt crisis threatens global markets as Congress is locked in blame game”, The Guardian, http://www.guardian.co.uk/world/2011/jul/24/us-debt-crisis-stock-markets) Until now, market traders had appeared confident that agreement would eventually be reached but US legislators fear that, following the collapse of talks on Friday, there could be the first signs of panic when Wall Street opens on Monday as well as other markets round the world. According to the US treasury, America has to raise its $14.3tn (£8.77tn) debt ceiling by 2 August or risk defaulting for the first time. Economists warn a default will have a catastrophic impact worldwide. The treasury secretary, Tim Geithner, attempted to calm the markets by insisting the debt ceiling will be raised, telling ABC News that it was unthinkable that there would be a time when the US could not pay its bills. Geithner said that congressional leaders were working on a compromise package on Sunday to try to forestall any panic. But Boehner, in a Fox News interview, did not indicate that a compromise was near and instead blamed Obama. "I know the president's worried about his next election. But my God, shouldn't we be worried about the country?" He said he planned to announce details of legislation on Sunday based on a Republican plan that would provide a short-term solution. Democrats are unlikely to support it. The White House countered that it was not interested in a short-term solution but wanted a "grand bargain", a 10-year plan for reducing the country's burgeoning debt by cutting spending and raising taxes. Daley said that a short-term fix would fail to reassure the markets because the business world is looking for evidence that America is going to take long-term measures to reduce its debt. US economic collapse will go global. Harnden 7/25 (Toby, “US parties no closer to debt deal as default fears grow”, http://www.telegraph.co.uk/finance/financialcrisis/8660880/US-parties-no-closer-to-debt-deal-as-default-fears- grow.html, 7/25/11, sjl) However, gold hit a fresh high of $1,622.49 as some investors sought a safe haven. European markets where equally subdued, with the FTSE 100 off 0.16pc, France's CAC 40 losing 0.77pc and Germany's DAX up 0.25pc. The International Monetary Fund has urged the US to raise the debt limit, on Monday warning that failure to reach a deal would would cause "significant global repercussions, given the central role of US Treasury bonds in world financial markets". Failure to lift debt ceiling could cause world economic collapse. Taylor 7/24/11 SDI 11 File Title (Jeff, “US is on the verge of debt fuelled disaster”, The Economic Voice, http://www.economicvoice.com/us-is-on- the-verge-of-debt-fuelled-disaster/50021970#ixzz1T9IY8YV1, FJR ) The repercussions from a US default would be felt across the globe’s intensely interwoven economic infrastructure. It could lead to another massive economic downturn hurting everyone. Stock and bond markets across the world could well plunge. There is even the fear that a deal needs to be done by tomorrow (Monday) morning to prevent the slide starting even before the deadline is reached. Failure to pass the debt ceiling will lead to world economic downturn McDonald 7/25/11 (Joe, AP Business Writer, The Associated Press, “World stocks fall as US debt deadlock continues”, Lexis, FJR) World stock markets were lower Monday after U.S. political leaders failed to reach a deal to raise Washington's debt limit and avoid a default. Oil prices fell to near $99 a barrel in Asia amid investor concern the lack of a debt agreement might damage the world's biggest economy and reduce demand for crude. Investors were not reassured by Secretary of State Hillary Rodham Clinton's assertion that America's economy is sound despite its current woes and the deadlock over the national debt. Speaking in Hong Kong, Clinton predicted a debt deal would be reached before the Aug. 2 deadline to avoid an unprecedented default. She said the partisan debate over the debt ceiling was a fact of life in American politics. In Europe, France's CAC-40 was down 0.3 percent at 3,380.76 and Germany's DAX was off 0.1 percent at 7,321.78. London's FTSE was little changed at 5,934.15. Futures augured losses on Wall Street. S&P 500 futures dropped 0.7 percent to 1,331.40 and Dow futures fell 0.7 percent to 12,532. Japan's Nikkei 225 closed down 0.8 percent at 10,050.01. China's Shanghai Composite Index slid 3 percent to 2,688.75 after a weekend bullet train collision killed 38 people. Hong Kong's Hang Seng Index lost 0.7 percent to 22,293.29. Elsewhere, South Korea's Kospi shed 1 percent to 2,150.48 and Australia's S&P/ASX 200 dropped 1.6 percent to 4,530.40. Markets in Singapore, Taiwan and Indonesia also fell while India and Thailand gained. "The only thing you can be assured of over the coming hours and days is volatility as the political posturing continues in the U.S.," said Ben Potter, market strategist for IG Markets, in a report. U.S. leaders had hoped to strike a deal Sunday to reassure investors. President Barack Obama has insisted on raising revenues, mainly through letting tax cuts for wealthier Americans expire, but Republicans want more spending cuts and have rejected higher taxes. A default would mean the U.S. government could not pay all its bills starting next month, including interest and principal on Treasury bonds. That would cause shockwaves through the global economy and financial markets. Many analysts expect U.S. leaders to reach a last-minute deal to raise the government's $14.3 trillion borrowing limit before the Aug. 2 deadline. But markets are watching anxiously for what tax or spending changes might be part of the settlement. Chinese shares suffered their biggest one-day loss in six months as railway-related shares plunged after this weekend's deadly bullet train crash that raised doubts about rapid expansion of the high-speed rail network. Producers of cement and water conservation technology also suffered. China South Locomotive and Rolling Stock Corp. declined 8.9 percent and Gem Year Industrial Co. Ltd., a maker of fasteners used by the railway industry, fell by the daily 10 percent limit. "Investors might be affected by the accident and prefer to watch the market. Also, many people are wondering whether such quick economic development is correct," said Yang Yining, an analyst at Capital-Edge Investment & Management Co. in Shanghai. The dollar fell to 78.18 from 78.43 late Friday in New York. The euro was little changed at $1.4374. Benchmark oil for September delivery was down 54 cents to $99.33 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose 74 cents to settle at $99.87 on Friday. In London, Brent crude slid 67 cents to $118 per barrel on the ICE Futures exchange. SDI 11 File Title AT Plan will just delay lifting the debt ceiling Lifting the debt ceiling after default will still cause a recession. Becker, 6/28 (Bernie, 2011, http://thehill.com/blogs/on-the-money/budget/168799-key-economist-failure-to-raise- debt-ceiling-will-cause-serious-damage-, “Key economist: Failure to raise debt ceiling will cause serious damage”, jld) The economist Mark Zandi is cautiously optimistic about the economy — as long as policymakers come together on a deal to raise the debt ceiling. Zandi said Tuesday that he expected the pace of economic growth to quicken throughout the year, rising from the current clip of roughly 2 percent to nearly 4 percent by year’s end. But, the economist added, if Congress fails to raise the $14.3 trillion debt ceiling by the Aug. 2 deadline, his forecast would be “blown out of the water.” “Even if Congress and the administration reverses themselves days later I think the damage will have been serious and we'll probably be thrown into a recession,” SDI 11 File Title AT Obama can lift the debt ceiling unilaterally Obama can’t raise the debt ceiling himself. Banta 7/23/11 (Frank, “U.S. debt ceiling – stupid is as stupid does”, Times Herald, http://www.times-herald.com/opinion/U-S-- debt-ceiling----stupid-is-as-stupid-does--1763451, FJR) The Constitution assigns responsibility for spending to the Congress. Obama acts as if he has the authority to dictate his choices on the American people, but the Constitution gives him no such authority. The president has no authority to set the debt ceiling, and Congress has no authority to delegate that responsibility to anyone. Experience demonstrates that raising the debt ceiling doesn't solve America's spending problem. It only makes it worse. Mr. President, stop creating irrational fear. Congress, you must stop spending. You must eliminate wasteful, unfunded programs and policies. You must do it now. SDI 11 File Title AT It won’t get done by Aug. 2 We really have until at least August 8 or the latest August 10. James 7/26 (7/26/2011, Frank - NPR, “Report: U.S. Could Have Few Days Past Aug. 2 Deadline On Debt Ceiling”, http://www.npr.org/blogs/itsallpolitics/2011/07/26/138699489/report-u-s-could-have-few-days-past-aug-2-on-debt- ceiling-deadline, DFerris) For months, the world has been focused on the Aug. 2 deadline for the U.S. to have a new and higher debt ceiling in place to stave off Defaultmageddon. The U.S. Treasury, however, could actually have a few more days before hitting the wall, thanks to higher-than-forecast tax revenues. An excerpt from an article by Zachary Goldfarb of the Washington Post: But several new reports — from UBS, Barclays and Wells Fargo — have cast doubt on that estimate. Analysts have said that daily tax receipts have been higher than anticipated and that the Treasury has quite a bit of cash on hand. As of Friday, according to the Treasury, the government had $85 billion in cash. UBS estimates that the government will run out of money to pay all bills starting no sooner than Aug. 8. Barclays suggests Aug. 10. Wells Fargo Securities said the government might have to cut back on some spending but could pay most of its bill through August. Congress will have a few days past August 2 to get the debt ceiling lifted. Korte et al 7/26 (7/26/2011, Gregory, Jacki Kucinich, and David Jackson – USA Today News, “Obama, Boehner take cases on debt limit to nation”, http://www.usatoday.com/news/washington/2011-07-25-boehner-reid-debt-tax-hikes_n.htm, DFerris) Deadline on debt debate may be later than expected House Speaker John Boehner said he tried to work with Obama, but the president "would not take yes for an answer." Comparison of debt-reduction plans Boehner plan • No tax increases. • Increases the federal debt ceiling by up to $1 trillion coupled with $1.2 trillion in spending cuts in discretionary programs over 10 years. • Requires a second vote to raise the debt ceiling in 2012. • Caps future spending. Failure to remain below caps would trigger automatic across-the-board spending cuts. • Requires a vote on a balanced budget amendment after Oct. 1 but before the end of the year. • Creates joint congressional committee charged with determining at least $1.8 trillion in spending cuts in entitlement programs, such as Medicare and Social Security, over 10 years. The House and Senate would vote for proposal on an up-and-down basis with no amendments. If passed, the president would be authorized to seek a $1.6 trillion increase in the debt ceiling. Reid plan • No tax increases. • Raises debt ceiling by $2.5 trillion through 2012. • $1.2 trillion in spending cuts over 10 years. • $100 billion in savings that include reduced fraud and abuse in mandatory programs, changes Fannie Mae and Freddie Mac, sales of the radio spectrum and changes in agricultural programs. • $1 trillion in savings from winding down the wars in Iraq and Afghanistan. • $400 billion in interest savings. • Creates joint congressional committee to find future savings. The recommendations would receive an up-or-down vote by the end of 2011. Unlike Boehner’s plan, the increase in debt ceiling is not contingent on approval of this committee’s proposal. Sources: House Speaker; Senate Majority Leader "The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today," Boehner said. With a House vote scheduled for Wednesday on the Boehner plan and no timetable in the slower- paced Senate, few days would be left to reconcile the two before the government faces the prospect of default. SDI 11 File Title AT Spending cuts will hurt the military Existential risks are overclaimed the need for these weapons systems is exaggerated. Lira 7/24/11 Press TV has interviewed Lira, economic blogger on LiraSPG.com, to discuss with him the economic crisis in the United States. What follows is a rough transcript of the interview. (Gonzalo Sun Jul 24, 2011 7:8AM GMT http://www.presstv.ir/detail/190494.html, Press TV.com “US behemoth military pointless”, CJD) They cost several hundred million dollars a year to operate, and yet they are meeting a military challenge that no longer exists because the whole rationale of the intercontinental ballistic missiles was to give a reply strike in the case of China or the Soviet Union carrying out a surprise first strike against the United States. Now, the likelihood of either Russia or China today carrying out a wide scale nuclear attack on the United States, or Europe is infinitesimal, not to say wholly unlikely. I mean [it is] akin to winning the lottery three times in a row. And yet we still have these incredibly expensive pieces of equipment, and now the United States is currently having this game of chicken between the White House and the Congress about the debt ceiling. Now, if these weapon systems were canceled, you would go a whole long way to clearing out that incredible deficit that the United States has with the USD 1.6 trillion for fiscal year 2011, 2012, 2013 and 2014. Now why isn't this done? Well, because it seems to me that the political leadership in the United States has forgotten its purpose, it has forgotten what it is about, and the people as well, and the American people have become so paranoid about protection and safety that they demand a needless standard of safety that simply cannot be achieved. Press TV: I don't really get it because in American mythology we have heroes like Chuck Yeager, the man who broke the sound barrier. And if you have seen the movie “The Right Stuff”, Chuck Yeager straps himself to a rocket engine taking extraordinary risk to achieve his dream of breaking the sound barrier. He didn't ask the government, and the municipality, and the local government to guarantee that there won't be any accidents, he took risks and this has been the whole point of the United States, [i.e.] it rewards risk takers. But now, post-9/11, they are making it impossible for people to even take risks. Therefore, the result is predictable; you end up in this slothful bureaucratic nightmare of boring people who always talk about these existential threats that don't exist. Now, you mentioned the wasted money on this weapons system that has a low probability of ever being used . Not only is there a low probability of using these weapons, the fact is that in the currency war, that the US is now engaged in, they are losing and they are not doing anything to defend themselves against the onslaught of incoming ballistic financial weapons of mass destruction that is killing the economy right now. SDI 11 File Title 2nc independent link – out of control spending crashes economy Decreased federal spending key to avoiding economic crash Tanner 7/11 (Michael D. Tanner, “What the Debt Ceiling Really Means” The Politico, July 11, 2011.) But, eventually, the debt ceiling is going to be increased and government operations will return to more or less normal. The real fiscal Armageddon that this country faces comes not from a delay in raising the debt ceiling, but from out-of-control federal spending and government debt. If a little pain now helps solve that problem for the long term, it may well be worth it SDI 11 File Title DA turns the case Default destroys economy and heg Feller, associated press white house correspondent, 7/24 (Ben, 7/24/11 http://www.boston.com/business/articles/2011/07/24/leaders_seek_debt_deal_before_asian_markets_open/ “Boehner: GOP ready to act alone on debt deal” ctc) A default could cause catastrophic damage to the standing and the economy of the United States. Daley said, in fact, the consequences are already taking hold. "I don't think there's any question there's been enormous damage done to our credit-worthiness around the world," Daley said. Boehner appeared on "Fox News Sunday." Geithner was on Fox, ABC's "This Week" and CNN's "State of the Union." Daley and Coburn spoke on NBC's "Meet the Press," and Daley also appeared on CBS' "Face the Nation." SDI 11 File Title Key players to lifting debt ceiling Obama, Boehner, Reid, Pelosi and McConnel all have to be on board. Fram, 7/25 (Alan, Associated Press, 2011, http://www.klkntv.com/story/15138824/boehner-preparing-to-move-on- debt-limit, “Boehner, Reid preparing to move on debt limit”, jld) Reid called Boehner's proposal "a nonstarter in the Senate and with the president" because it would permit only a short-term increase of the sort that has already been rejected by Democrats. Boehner's office rejected that description. Reid, D-Nev., said Sunday that Boehner's proposal "would not provide the certainty the markets are looking for and risks many of the same dire economic consequences that would be triggered by default itself." After meeting at the White House Sunday evening with Obama and House Democratic Leader Nancy Pelosi, D-Calif., Reid said he was crafting his own new $2.7 trillion package of spending cuts that would also push the government's borrowing authority through next year, a timeline that Obama and top Democrats are demanding. It would do so without any new revenues, Reid said, thus meeting GOP demands for no new taxes. But Reid's plan was already being privately rejected by Republicans concerned that the cuts it contains would prove illusory. Sen. Chuck Schumer, the No. 3 Democrat in the Senate leadership, said Monday one difficult reality is that no debt-crisis solution can be successful unless it has the support of five top players: Obama, Boehner, Reid, Pelosi and Senate Minority Leader Mitch McConnell. But Schumer also said he thought Reid's proposal had the best chance of succeeding. Pelosi needed to pass debt ceiling Oliphant 7-21 (James, “She's b-a-a-c-k! GOP may need Nancy Pelosi to pass debt-ceiling deal” http://articles.latimes.com/2011/jul/21/news/la-pn-pelosi-debt-20110721, 7-21-11 SPT) At times she has looked to be an afterthought, a relic of a bygone era. Republicans haven’t bothered to court her. And the White House, at times, has appeared to ignore her. But now they’re going to need Nancy Pelosi. As the clock ticks down toward a possible government default, it appears to be less and less likely that a package can be crafted that will appease the large bloc of House conservatives who either oppose raising the debt ceiling on principle or won’t vote to hike it without massive cuts in federal spending. That means that Pelosi, the former speaker who presides over a shrunken Democratic minority in the House, likely will come into play. SDI 11 File Title AFF Answers SDI 11 File Title AT DA Politics Debt Ceiling 2ac No deal – gop won’t raise taxes and Pelosi doesn’t want to help Boehner. Guardian, 7/26 -- Antle is associate editor of the American Spectator, a contributing editor of the American Conservative; he has appeared in the Washington Examiner, Politico, the National Review and more. [7/26/2011, James Antle: “US debt ceiling crisis: Why Republicans won't compromise”. http://www.guardian.co.uk/commentisfree/cifamerica/2011/jul/26/us-debt-ceiling-crisis-republicans, XJADX] Most House Republicans have taken a pledge not to raise taxes Obama may want more revenues on the table, but most Republicans ruled that out even before they won their elections. Higher marginal tax rates at any income level simply cannot pass the House. The votes are not there. Moreover, the taxpayer protection pledge demands that Republicans swear off closing tax loopholes unless they are matched dollar-for-dollar by offsetting rate cuts. That means even clever ways of finding revenue by broadening the tax base are difficult to accomplish. Even conservatives like Senator Tom Coburn have failed to gain much traction when arguing otherwise. A deal relying mainly on Democratic votes is probably not on First of all, it isn't clear that Nancy Pelosi's caucus would want to bail out Boehner in this fashion, even if they could. Secondly, Boehner's speakership would be imperiled by such a deal. House majority leader Eric Cantor, who has showed signs he might want to try out that speaker's gavel, would surely rally the GOP troops against it. When you consider all these factors, one thing becomes clear. Obama may be frustrated, but it is Boehner who truly has the tougher task. Obama doesn’t need Congress; he can raise the debt ceiling on his own Carney 7/25 (7/25/2011, John, “Obama Can Raise the Debt Ceiling on His Own”, http://www.cnbc.com/id/43881701, DFerris) If the U.S. defaults on its obligations in early August, it will be because the President chose not to exercise his power to raise the debt ceiling on his own. The President has it within his power to order the Treasury Department to issue new bonds to fund current obligations, even if those issuances exceed the debt ceiling [cnbc explains] . “When Abraham Lincoln suspended habeas corpus during the Civil War, he said that it was necessary to violate one law, lest all the laws but one fall into ruin,” legal academics Eric Posner and Adrian Vermeule have argued in a New York Times Op-Ed. “So too here: the president may need to violate the debt ceiling to prevent a catastrophe—whether a default on the debt or an enormous reduction in federal spending, which would throw the country back into recession.” Their argument doesn’t rest on any contentious reading of the 14th Amendment. Rather it rests on the primacy of the presidency in our contemporary constitutional order. The constitution did originally set up a system characterized by executive primacy. The legislative branch came first in the original constitutional order. It exercised all the most important powers, including the powers to raise taxes, borrow money and declare war. The presidency was put into the position of executing the policies declared by the Congress. Not passing the debt ceiling will not lead to the collapse of the economy The American Thinker 7/24 (“Debt Ceiling’s Impact is Overrated”, The American Thinker, 7/24/11, http://www.americanthinker.com/2011/07/debt_ceilings_impact_is_overrated.html, FJR) The government's debt ceiling has been the focus of heated debate in Washington, as many economists, politicians, and pundits buy into the notion that the debt ceiling must be raised to avoid economic disaster. The reality is that many potential catastrophes have been threatening the U.S. for years now, as a consequence of our growing debt. Treating our unhealthy fiscal state with more debt may stave off withdrawal symptoms for a while, but the underlying addiction to spending remains, and grows worse by the day. Despite the fact that a debt ceiling increase only provides temporary, superficial respite, many of those who favor such a move give too much weight to the impact of the debt ceiling. In a recent op-ed in the Washington Post, Virginia Senator Mark Warner argues, "Failing to raise the debt ceiling will increase interest rates, gut consumer confidence, and drag down business investment and job creation." The notion that changing an artificial construct like the debt ceiling will have such a massive impact on real economic conditions comes from viewing the economy in the abstract. Rather, the economy is comprised of people who engage in millions of exchanges every day. Because the economy is not an abstraction but is very real, it is unlikely that an arbitrary debt limit would dramatically affect real economic conditions. SDI 11 File Title Debt ceiling not key to world economy – regulations, gas prices and European debt crisis are. Reuters 5/20/11 (Capitol Hill, “Not raising debt limit hurts America”, http://www.capitolhillblue.com/node/40913, FJR) growth in the short- and long-run was the most important issue, not the United Even so, Goolsbee said that economic States’ massive deficit or the debt limit. Speaking at the Council on Foreign Relations, Goolsbee said it was time to focus on getting to a point where the government is no longer taking a major role in stimulating the economy but rather is finding ways to help the private sector lead the recovery. That includes shifting to policies such as streamlining the regulatory system and encouraging start-up businesses. “That’s the only sustainable job creation we’re going to have. The only sustainable growth we’re going to have is going to come from the private sector,” said Goolsbee. The beginnings of the recovery have been broad-based and have a healthy trajectory, Goolsbee said, though he noted there was still a long way to go before the conditions for growth were in place. The economy also faces some headwinds, including high gasoline prices and uncertainty surrounding the euro zone’s sovereign debt crisis. Data earlier on Thursday suggested the economy is still on a moderate growth path as the number of Americans filing new claims for jobless benefits fell last week, but regional factory activity unexpectedly slumped in May. SDI 11 File Title Debt ceiling won’t be lifted No deal – gop won’t allow tax increases, dems won’t allow deep cuts in spending. New York Daily News 7/25/11 ( Lazarowitz, “Stocks slip as debt ceiling deal hangs in balance and threat of US default looms”, http://www.nydailynews.com/news/national/2011/07/25/2011-07- 25_stocks_slip_as_debt_ceiling_deal_hangs_in_balance_and_threat_of_us_default_looms.html, FJR) . After weeks of wrangling among congressional leaders, the situation seemed to worsen over the weekend after House Speaker John Boehner broke off talks with President Barack Obama. Republicans are railing against tax hikes as a way to rein in the U.S. deficit, while Democrats are against deep cuts to social programs, and both sides still seem far apart. Strong earnings results from Corporate America have been underpinning the market, but investors are on edge with Moody's and Standard & Poor's threatening to cut ratings on U.S. debt. A downgrade might send interest rates shooting higher , which some economists fear could hamstring an already limping U.S. economic recovery. Debt Ceiling won’t pass Harnden 7/25 (Toby, “US parties no closer to debt deal as default fears grow”, http://www.telegraph.co.uk/finance/financialcrisis/8660880/US-parties-no-closer-to-debt-deal-as-default-fears- grow.html, 7/25/11, sjl) Democrats and Republicans were drawing up separate budget plans on Monday amid growing rancour and rising fears the US could fail to raise the federal debt ceiling and go into default. After weeks of discussion, partisan rhetoric and accusations of bad faith, the two sides appeared as far apart as ever as the August 2 deadline for Congress to raise America's self-imposed $14.3 trillion (£8.8 trillion) borrowing limit approached. No deal now Gorsegner 7-25 (Michael, Staff reporter, “Debt ceiling debate continues; What no deal means for your wallet”, FOX, http://www.fox43.com/news/wpmt-amnews-debt-ceiling-affect-wallet,0,5557228.story, DJ) "Today is just very very difficult, to get Republicans and Democrats to sit down together and have serious conversations about these complex problems. But it's absolutely necessary now particularly," said Senator Saxby Chambliss, (R) Georgia. Later today, Congressman Tim Holden, (D) Pennsylvania's 17th District, is holding a news conference at his Harrisburg office to update people on where the talks stand. As of last night, the two sides were still far apart. Republicans vow only to raise the debt ceiling if budget cuts are made. Democrats wanting a raise of the ceiling and much smaller cuts. Won’t pass – Medicare and tax increases. Feller, associated press white house correspondent, 7/24 (Ben, 7/24/11 http://www.boston.com/business/articles/2011/07/24/leaders_seek_debt_deal_before_asian_markets_open/ “Boehner: GOP ready to act alone on debt deal” ctc) Even after talks about between Obama and Boehner broke down in spectacular fashion Friday, Geithner said the two men were still negotiating. He also suggested the ambitious framework the two leaders had discussed, targeting a deficit reduction of $4 trillion, remained under consideration. "I don't know. It may be pretty hard to put Humpty Dumpty back together again," Boehner said of that grand plan. "But my last offer is still out there. I have never taken my last offer off of the table and they never agreed to my last offer." That last offer included $800 billion in new tax revenues as part of a broad reform that would lower tax rates. Obama wanted $400 billion more in tax revenue for deficit reduction to help balance out the spending cuts, he said. Or, if not that, a reduction in some of the proposed cuts being discussed to entitlement programs such as Medicare. The talks halted primarily over that issue and over how to ensure that both parties kept their reform promises in the months ahead. SDI 11 File Title No deal now CBS 7-25 (“Boehner, Reid work on partisan debt plans”, CBS News, http://www.cbsnews.com/stories/2011/07/25/earlyshow/main20082828.shtml, DJ) (CBS News) This morning the U.S. is another day closer to a potential default, and there is still no deal on raising the nation's debt ceiling. On Friday House Speaker John Boehner said he was abandoning talks with the White House to focus on what he thought could be a deal that he could reach with congressional leaders. After a weekend of intense back-and-forth, we are now told that those talks have stalled, too, reports CBS News Congressional correspondent Nancy Cordes. Senate Majority Leader Harry Reid confirmed the impasse in a written statement Sunday night. "Talks broke down over Republicans' continued insistence on a short-term raise of the debt ceiling," he said, "which is something that President Obama, Leader Pelosi and I have been clear we would not support." No deal—sides are too far apart. CBS News, 7/24 (July 24, 2011, http://www.cbsnews.com/8301-503544_162-20082697-503544.html, “As deadline looms, Congress scrambles for debt limit deal”, ky) Despite ongoing efforts by congressional leaders to hammer out a deal on Sunday for raising the debt ceiling, all indications suggest that the two parties remain far apart on a viable bipartisan agreement just hours before the opening of the Asian financial markets. House Speaker John Boehner, who abandoned debt negotiations with the president on Friday, says he is working on the framework for a new deficit reduction proposal, which he hopes to unveil on Sunday. But his proposal is expected to include a two-part plan, with two debt limit increases - and Democrats have repeatedly vowed to fight a short-term package. Nevertheless, Boehner pledged on Sunday to move forward with a his proposal regardless of Democratic opposition. "The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that's possible," he said in an appearance on "Fox News Sunday." "If that's not possible, I and my Republican colleagues in the House are prepared to move on our own." Won’t pass—no bipartisan support Cordes ‘11 (July 24th, Nancy, http://www.cbsnews.com/stories/2011/07/24/eveningnews/main20082723.shtml, “A bipartisan debt deal just about impossible now”,VJ) "I would prefer to have a bipartisan approach to solve this problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own," Boehner said on "Fox News Sunday." Boehner says a Republican bill would likely involve two steps: A short term extension of the debt ceiling accompanied by a package of spending cuts; Then, later, another extension in six months or so after Congress can identify more cuts. On CBS' "Face the Nation," Arizona Senator Jon Kyl said that would satisfy the Republican aim of offsetting any increase in the debt ceiling with equal or greater cuts in spending. "If we can reduce spending by a trillion dollars, then we extend the debt ceiling a trillion dollars worth and that would take it at least through the end of the year," Kyl said. However, the president warned on Friday he would veto that approach. He has called for a one-time, $2.4 trillion increase in the debt ceiling. "We have to extend this debt ceiling through the next election, into 2013," Mr. Obama said. Treasury Secretary Timothy Geithner argued today that anything less would inject too much uncertainty into a weak economy. "We can't adopt an approach that leaves the threat of default hanging over the country for another six months or so. That would be deeply irresponsible to do," Geithner said on ABC's "This Week." Both sides blame the other for dragging the economy to the brink over raising the debt ceiling, a typically uneventful affair Congress has successfully carried out more than 70 times. Democratic Illinois Senator Dick Durbin expressed frustration at the debt talks impasse, saying on "Face the Nation": "I would just say to Speaker Boehner, the president negotiated with you in good faith, twice, and you walked away from it. At some point the speaker has to accept the responsibility beyond his caucus to this nation." Democratic sources say the two sides have reached an impasse and Senate Majority Leader Harry Reid has begun preparing his own plan. Any hopes the president and the Speaker will reunite for further talks are all but over. Boehner said Sunday evening that the path forward does not include an agreement between him and the president. Won’t pass – Democrats will demand tax increases and won’t allow Social Security or Medicare cuts. Montogomery and Kane 7/21/11 SDI 11 File Title (Lori, Paul; Washington Post, “Obama: GOP leaders said to discuss new debt ceiling”, http://www.washingtonpost.com/politics/obama-gop-leaders-said-to-discuss-new-debt- plan/2011/07/21/gIQAT81BSI_story.html?hpid=z1, HH) President Obama and House Speaker John A. Boehner rushed Thursday to strike agreement on a far-reaching plan to reduce the national debt but faced a revolt from Democrats furious that the accord appeared to include no immediate provision to raise taxes. With 12 days left until the Treasury begins to run short of cash, Obama and Boehner (R- Ohio) were still pursuing the most ambitious plan to restrain the national debt in at least 20 years. Talks focused on sharp cuts in agency spending and politically painful changes to cherished health and retirement programs aimed at saving roughly $3 trillion over the next decade. More savings would be generated through an overhaul of the tax code that would lower personal and corporate income tax rates while eliminating or reducing an array of popular tax breaks, such as the deduction for home mortgage interest. But the talks envisioned no specific tax increases as part of legislation to lift the debt limit, and the tax rewrite would be postponed until next year. Democrats reacted with outrage as word filtered to Capitol Hill, saying the emerging agreement appeared to violate their pledge not to cut Social Security and Medicare benefits as well as Obama’s promise not to make deep cuts in programs for the poor without extracting some tax concessions from the rich. When “we heard these reports of these mega-trillion-dollar cuts with no revenues, it was like Mount Vesuvius. . . . Many of us were volcanic,” said Sen. Barbara A. Mikulski (D-Md.). White House budget director Jacob J. Lew denied that a deal without taxes was in the works. “We’ve been clear revenues have to be part of any agreement,” he told reporters. Won’t pass—bipartisanship Madison 7/24/11 (Lucy, CBS News, “Daley: GOP wants “their way or the highway” on debt”, HH) (CBS News) White House Chief of Staff William Daley said Sunday that Republicans only want it "their way or the highway" when it comes to making a deal on raising the debt limit - despite what he described as Democrats' "serious commitment" to coming up with a bipartisan plan. In an appearance on CBS' "Face the Nation," Daley contended that President Obama and leaders in Congress had been "extremely close" to a deal on Friday night, but that House Speaker John Boehner had abandoned negotiations rather than urge his party to agree to the bipartisan plan. "The truth is, we were probably 85 percent there," Daley told CBS' Bob Schieffer. "There were different options on different items. Much of it related to what would be the best strategy to get the needed votes to pass this, because it was going to be very hard for Democrats with the amount of entitlement cuts...And at the same time, the Speaker was going to have to go to caucus and say, 'There is a need for revenue to solve our problem.' And that's where the breakdown happened." "Speaker Boehner...walked away twice from a deal with the president which would have finally begun a serious attempt to cut spending," Daley added. Boehner abandoned the negotiations Friday after accusing the president of having "moved the goal posts" by increasing the amount of revenue sought for deficit reduction by $400 billion. Now Boehner says he hopes to introduce a framework for a deal on the debt limit later on Sunday. That framework would likely include a two-part plan with two debt limit increases. Leading Democrats, however, have vowed to vote against a short-term debt limit, and such a proposal is unlikely to pass in the Senate. Daley argued that Republicans - unlike Democrats - were not committed to a bipartisan solution. Debt ceiling won’t pass Klein and Matthews 7/23 (7/23/2011, The Washington Post, “Too late for a debt deal?”, http://www.bendbulletin.com/article/20110723/NEWS0107/107230362/, DFerris) House Speaker John Boehner abandoned talks with the White House on Friday over a landmark debt-reduction deal, throwing into chaos efforts to raise the legal limit on government borrowing just 11 days before the U.S. Treasury is due to run out of cash. Facing the specter of the government’s first default, a furious President Barack Obama summoned congressional leaders to the White House for an emergency morning meeting. Five proposals are in the works to avoid default — though some aren’t likely to pass, and others won’t even get as far as a vote. Read on for a synopsis of the deals that Congress is considering to raise the debt limit, ranked (as of Friday night) from most to least likely. SDI 11 File Title Debt Ceiling will not pass Senate and house disagreement blocking all other bills Allen & Raju 7/20 (Jonothan & Manu, Politico journalists with extensive experience and Allen has a degree from Maryland, “Debt ceiling talks see Senate, House GOP go separate ways”, Politico.com, http://www.politico.com/news/stories/0711/59525.html, 7/20/11) Earlier this year, Senate Republicans mostly marched in lock step with their House counterparts, but lately they’ve been following their own beat — a change that leaves the House GOP isolated. Close friends of Speaker John Boehner (R-Ohio) say they sympathize with the difficulty he faces pleasing his rank-and-file members and working to strike a deal. “I think John is in a very tough position,” said Sen. Saxby Chambliss (R-Ga.), a frequent dinner companion of Boehner’s and co-author of the Gang of Six plan. “Politics being what it is today and people staking out positions like they’ve staked out — it’s making it very, very tough on all of us.” The fractures among Republicans — mirrored by those among Democrats — aren’t all along the divide between the chambers. Each caucus has its own set of divisions. Senate Republican divisions were laid bare at a closed-door lunch of the conservative Steering Committee on Wednesday, where lawmakers aired a wide range of views on how they should proceed after a Senate vote on the House’s Cut, Cap and Balance bill fails, attendees later said. No resolution was reached No deal now – Senate isn’t even taking votes Addington 7/22 (David S., On Dick Cheney’s Counsel, “Abdication: Senate Votes to Do Nothing Unless It Can Hike Taxes for the President”,http://blog.heritage.org/2011/07/22/abdication-senate-votes-to-do-nothing-unless-it-can-hike-taxes-for- the-president, 7/22/11) Now that the Senate has voted to do nothing to address the overspending crisis, conservatives must keep the liberals’ feet to the fire and not let them put off yet again finding a solution to federal overspending and overborrowing. Congress should not raise the debt limit without getting spending under control. Earlier this week, the House of Representatives passed the Cut, Cap and Balance Act, to get federal spending under control and balance the budget. That legislation passed with 234 votes in the House. The House is a legislative body, and it has legislated. The House has done its job. In contrast, the Senate is a legislative body that has failed to do its job. So far, the Senate has come up with lots of bad plans, but no votes. The Senate plans that have cropped up in the last week — the McConnell-Reid “Just Borrow More” Plan, the Coburn Plan with its tax hikes, and the Gang-of-Six Plan with its tax hikes — have among them exactly zero votes, because the Senate has not voted on any of them. SDI 11 File Title No impact No impact to not passing debt ceiling. Milner, The Globe and Mail: Economy Lab, 7-25 (Brian, 2011, “U.S. Debt Showdown: What happens on Aug. 3?”, http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/us-debt-showdown- what-happens-on-aug-3/article2108983/, Google News, JMK) As the clock ticks inexorably toward the deadline set by the Obama administration for raising the debt ceiling, collars are tightening in Washington, capital markets are becoming more volatile than usual and pundits of all political stripes are ratcheting up the hyperbole. To hear some of them tell it, the financial world as we know it will come crashing down if there is no debt deal by Aug. 2. In fact, it will be over if there is no political solution by Wednesday, because the deep thinkers in Congress will need a few days to pass the necessary legislation. There is no question that Washington needs to fix this ridiculous problem of its own making. Nor is there any doubt that neither the Republicans nor Democrats will emerge from this fiasco looking better in the eyes of an already deeply cynical electorate, regardless of the outcome. Until this past weekend, the markets were fairly sanguine about the whole debt limit contretemps. Investors kept piling into U.S. Treasuries and assets, in large part, because there really isn’t any place else for risk-averse major institutional investors to go, once they have had their fill of gold, Swiss francs and Canadian bonds. But after the latest Republican antics and tough talk from the White House about vetoing any short-term debt solution, it is far less certain that insaner heads in Congress will be overruled. The administration never should have tied the ceiling issue to a vastly more complex two-year deal on the deficit, but that horse has already left the barn. Now, the administration has to live with a short-term fix for the immediate problem; and the more reasonable voices in the Republican ranks need to persuade the Tea Party types that compromise is an essential part of the political game. But let’s say both sides continue playing what Warren Buffet calls a dangerous game of Russian roulette until it’s too late to meet the deadline. The U.S. will not be destitute on Aug. 3. Nor is it likely to miss a single payment to bondholders. Existing tax revenues will cover more than half the government's expenses of about $3.8-trillion (U.S.), including its most pressing obligations – from interest on the debt to social security, Medicare and military expenditures. The Federal Reserve can also dip into its hoard of about $2.6-trillion worth of Treasury bonds and other securities on its balance sheet to absorb whatever extra money the Treasury has to print. And the Treasury itself holds billions worth of mortgage-backed securities from Fannie Mae and Freddie Mac, as well as close to $400-billion in gold that it could sell or swap with the Fed. Well before it needs to tap such emergency sources, the government could start shutting down departments and services and shelving transfer payments to the states on a temporary basis. Maybe closing a few offices in key congressional districts would get the politicians off their high horses and back to the negotiating table, where they belong. No impact - - even if debt ceiling isn’t passed nothing bad will happen Marotta 25 (7/25/2011, David, “Hitting the debt ceiling isn’t the end of the world”, http://www.dakotavoice.com/2011/07/hitting-the-debt-ceiling-is-not-the-end-of-the-world/, DFerris) The Obama administration has been claiming that failure to raise the debt ceiling would be the end of the world. We are all tired of failed apocalyptic predictions. Perhaps all that will end is politics as usual. In 2006 Senator Obama voted against raising the debt ceiling. He said, “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.” The speed at which we have increased our debt in the last few years is frightening. The Obama administration added more to the debt in its first two years than the Bush administration did in its entire eight years. This is clearly a failure of leadership. Just because we reach the debt ceiling doesn’t mean we have to default on our debt obligations. What it means is that the decision of what gets spent and what doesn’t will be squarely on the administration. Reaching the debt ceiling only means the money being spent must not be greater than the money coming in. In other words, we can’t be adding to our debt. It is like members of a family mired in credit card debt who have reached their $10,000 credit limit. They are not allowed to deficit spend by charging any more on their card. But they still have salaries coming in. They still are obligated to pay the interest on their debt. And after paying that interest they still have money left over without defaulting on their debt. It won’t be a catastrophe. It will be forced austerity. The federal government collects about $200 billion every month. Interest on the debt costs less than 10% of that amount. The government could service the debt and still have over $180 billion to spend on essential services. The administration has the discretion to decide what is essential without consulting Congress. SDI 11 File Title No impact from not passing Debt Ceiling Tanner 7/11 (Michael D. Tanner, “What the Debt Ceiling Really Means” The Politico, July 11, 2011.) The clock is slowly ticking toward Aug. 2, the date on which the U.S. faces "fiscal Armageddon" — according to the Obama administration — unless Congress agrees to raise the debt ceiling. But would we? The Obama administration, as well as much of the media and many economists, tend to equate failure to raise the debt limit with default. That's not precisely true. The Treasury Department estimates that the federal government will collect a bit more than $203 billion in taxes during August — roughly $36 billion just in the first three days. But, during August, the federal government is expected to spend $307 billion. That is why we have a problem. If the government is not able to borrow more money after Aug. 2, spending will have to be reduced to the amount of revenue that the government has. That would require roughly a 44 percent cut in federal spending. The real fiscal Armageddon that this country faces comes not from a delay in raising the debt ceiling, but from out-of-control federal spending and government debt. This will almost certainly hurt. But it's not the same as default. During August, interest payments on the federal debt will total roughly $29 billion, meaning that there will be sufficient revenue to meet our obligations to creditors. If the Obama administration is truly worried that we might not do so, they could always support legislation by Sen. Pat Toomey (R-Penn.) that would require the Treasury Department to pay our creditors first. In addition, some $467 billion in government bonds is expected to come due during August, and will have to be rolled over. Though this rollover requires Treasury to enter the debt markets to purchase new securities, it is not technically "new" debt, and so does not run afoul of the debt limit. The concern is that the U.S. would end up having to pay higher interest rates on this rolled over debt. That's not a trivial concern: A 1 percent increase in interest rates could cost taxpayers more than $100 billion per year. Still, we should keep that in perspective — it's less than the amount that the government expects to borrow this month. And that is sort of worst case scenario. In 1979, the federal government actually did briefly default on its debt as the result of a debt ceiling impasse (as well as technical problems). That resulted in just a 60-basis-point increase in interest rates. If we are really worried about a hike in interest rates, what about the hike we can expect if we fail to get federal borrowing under control? Both our deficit and total liabilities are already higher as a percentage of gross domestic product than Greece — or any of the other failing welfare states of Europe. Despite this, creditors have been willing to lend us money at very low interest rates, simply because they trust the U.S. economy over the long-term. If we don't get our budgetary house in order, however, that won't be the case forever. Eventually, we will have to hike interest rates to ensure that the Chinese and others keep buying our bonds. Former Federal Reserve governor Lawrence Lindsey estimates that if interest rates simply return to their historic average, it is likely to cost taxpayers $420 billion in higher payments in 2014, and $700 billion by 2020. The $100 billion or so that we might have to pay if we miss the debt ceiling looks good by comparison. And what about that 44 percent cut in spending? That would require the federal government to cut spending all the way back to what it spent in 2003 — a year not notable for mass starvation and economic collapse. In fact, the revenue we will collect in August would more than cover Social Security payments, Medicare and military salaries, in addition to interest payments on the debt. Obviously, the longer the impasse goes on, the more the inability to borrow will hurt. We will face a super version of the government shutdowns that we've endured before. But, eventually, the debt ceiling is going to be increased and government operations will return to more or less normal. The real fiscal Armageddon that this country faces comes not from a delay in raising the debt ceiling, but from out-of-control federal spending and government debt. If a little pain now helps solve that problem for the long term, it may well be worth it SDI 11 File Title Uniqueness overwhelms the link Debt Ceiling will Pass republicans want to avoid backlash Allen & Raju 7/20 (Jonothan & Manu, Politico journalists with extensive experience and Allen has a degree from Maryland, “Debt ceiling talks see Senate, House GOP go separate ways”, Politico.com, http://www.politico.com/news/stories/0711/59525.html, 7/20/11) Senate Minority Leader Mitch McConnell (R-Ky.) has been warning his troops that a default could “destroy” the Republican brand and ultimately lead to a second term for Obama. Debt Ceiling will pass no matter what Johnson ‘11 (John, 4/12, journalist, http://www.newser.com/story/116230/ignore-the-rhetoric-debt-ceiling-will-be-raised.html, Ignore the Rhetoric: Debt Ceiling Will Be Raised”, VJ) As the deadline approaches for Congress to decide whether to raise the debt ceiling, brace yourself for fevered debates about how the very fate of the nation is at stake. David Paul Kuhn offers a spoiler alert at Real Clear Politics: "Washington politics is unusually dysfunctional even by Washington standards. But it's not suicidal. The debt ceiling will be raised." Lawmakers have no choice, he writes. If the $14.3 trillion ceiling isn't lifted, the nation will default on its debt for the first time since the Great Depression. Neither party is willing to risk being blamed for that. ("You can't not raise the debt ceiling," the GOP's Paul Ryan said in January.) So expect "verbal brinkmanship" and much huffing and puffing as the May 16 deadline nears. But that ceiling is going up "because it must." SDI 11 File Title Obama bad impact turn – internal links Debt ceiling deal will boost Obama Hardnen 7/21 (Toby, UK newspaper The Telegraph editor, “US debt crisis: Barack Obama and Republicans 'close to deal'”, http://www.telegraph.co.uk/news/worldnews/us-politics/8653369/US-debt-crisis-Barack-Obama-and-Republicans- close-to-deal.html,7/21/11) A deal could be a boost for Mr Obama, who was elected on promises of transforming Washington and ending political gridlock in the American capital. Won’t pass—no bipartisan support Feller and Espo ‘11 (7/24, Ben and David, journalists for Forbes, http://www.forbes.com/feeds/ap/2011/07/24/general-us-debt- showdown_8581918.html, “GOP, Democrats ready rival emergency debt plans”, VJ) WASHINGTON — With bipartisan debt-limit talks deadlocked, House Republicans and Senate Democrats readied rival emergency fallback plans Sunday in hopes of reassuring world financial markets the U.S. government will avoid an unprecedented default. In a conference call, Speaker John Boehner summoned his conservative rank and file to swing behind a "new measure" that could clear both houses of Congress. "It won't be `Cut, Cap and Balance' as we passed it," he said, referring to a measure – killed in the Senate on Friday – that would have required spending cuts of an estimated $6 trillion as well as congressional approval of a constitutional balanced budget amendment for ratification by the states. The new approach is "going to require some of you to make some sacrifices," he added, according to a person familiar with his remarks. Separately, President Barack Obama invited the two top congressional Democrats to a highly unusual White House meeting Sunday evening. One of them, Senate Majority Leader Harry Reid, was at work on a Democratic fallback measure, too. Without congressional action by Aug. 2, the Treasury will be unable to pay all its bills, risking a default that could have severe consequences for the U.S. economy and the world's, too. Details of the rival plans were sketchy. Republican officials said Boehner envisioned an increase in the nation's debt limit by $1 trillion and slightly more than that in federal spending cuts, with the promise of additional progress on both sides of the ledger if Congress could agree. SDI 11 File Title GOP Key GOP will act alone, key to passage Feller, associated press white house correspondent, 7/24 (Ben, 7/24/11 http://www.boston.com/business/articles/2011/07/24/leaders_seek_debt_deal_before_asian_markets_open/ “Boehner: GOP ready to act alone on debt deal” ctc) Scrambling to head off disaster, House Speaker John Boehner on Sunday readied a plan to prevent the first government default in U.S. history and said Republicans would act alone if Democrats didn't go along. The White House said President Barack Obama would veto a plan that failed to extend the nation's borrowing power into 2013 as time for action drew dangerously close. On a day of deepening tension, Boehner hoped to outline at least a framework of a deal by 4 p.m. EDT that could get through a divided Congress and avert panic before Asian financial markets opened hours later. The government is on pace to run out of money to pay its bills unless the debt cap is raised by Aug. 2. Boehner's plan, still under negotiation on Capitol Hill, would likely cut spending by at least $1 trillion and extend the federal borrowing limit by a slightly smaller dollar amount, into 2012. That's intended to get the nation beyond this crisis and snag enough votes from House Republicans who won't raise the debt limit without spending cuts, too. "I would prefer to have a bipartisan approach to solve this problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own," said Boehner, R-Ohio. Lifting debt ceiling is key to investment in Treasury’s The Wall Street Journal 7-24 (Stephen L. Bernard, 7-24-11, “Markets Bracing For Volatility As Debt Ceiling Debate Drags On”, http://online.wsj.com/article/BT-CO-20110724-703402.html”, Rishi Shah) Given that state of play,investors are bracing for a negative reaction in the markets. Any fear that the debt ceiling won't be raised--and thus that a default is possible--could see stocks, commodities, the dollar and long-dated Treasurys fall while safe-haven flows would move to shortest end of the Treasurys curve. Gold, which recently moved above $1,600 an ounce might also benefit, as could safe-haven currencies such as the Japanese yen and the Swiss franc. "The markets will exhibit a fair amount of volatility until the official announcement of a debt deal," said Abdullah Karatash, head of U.S. fixed income credit trading at Natixis in New York. "I expect a volatile trading week with stocks, corporate bonds and Treasurys likely selling off until an official announcement of a deal." Without a comprehensive deal, long-dated Treasurys could bear the brunt of investor concerns as they are directly impacted by the long-term fiscal health of the country. Traders would likely shift out of them into the perceived safety of cash and short-dated Treasurys. "Long-end Treasury yields are liable to jump as increased default concerns cause players to seek safety from what until now had been the ultimate financial safe-haven," said John Canavan, market analyst at Stone and McCarthy Research Associates in Princeton, N.J. If no deal is reached, yields on 30-year bonds could jump to around 4.40% to 4.45% Monday from their Friday close of 4.259%, Canavan predicted. The 10-year note yield could spike to around 3.10% from 2.964%, Canavan said. Treasury yields move inversely to their prices.
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