President Barack Obama, House Republicans and Senate leaders Mitch McConnell, R-Ky., and Harry Reid, D-Nev., have competing ideas about how to handle the need to increase the government's borrowing limit and cut the budget. Highlights include:
The president has proposed three separate plans:
_ A large-scale measure cutting $4 trillion from the deficit over 10 years through more than $1 trillion in cuts to Cabinet agency operating budgets, $1 trillion or more in new tax revenues through a comprehensive tax code overhaul, curbs to the growth of Medicare, Medicaid and Social Security and cuts to farm subsidies, federal retiree pensions, and many other programs.
_A medium-size deal of approximately $2 trillion in deficit cuts, including largely identical cuts to agency operating budgets. But no cuts to Social Security and smaller changes to Medicare. Tax increases would be in the $400 billion range, including limits on tax deductions for the wealthy and tax breaks for oil and gas companies.
_A smaller deal in the $1.5 trillion to $1.7 trillion range, mostly comprised of agency operating budget cuts in the $1 trillion range. Modest Medicare cuts, if any, and no tax increases.
House Republicans would increase the debt limit but make it contingent on passage of immediate spending cuts, imposing spending caps on the federal budget _ exempting Social Security, Medicare and veterans' benefits _ enforced by the threat of automatic spending cuts across the budget, and adoption by Congress of a constitutional amendment requiring a balanced federal budget. Critics say the plan can't work because passing a balanced budget amendment requires a two-thirds vote by both the House and Senate.
McConnell and Reid are working on a hybrid plan that's increasingly seen as likely to form the basis of a final compromise. It would combine a McConnell-drafted measure that would give Obama authority to order a debt limit increase, a Reid plan to establish a special panel to recommend deficit cuts, and a smaller, consensus package of spending cuts in the $1.5 trillion or so range over 10 years, mostly taken from the agency budgets passed by Congress each year.
The McConnell debt increase plan would give Obama the power to order an increase in the debt limit of up to $2.5 trillion over the coming year unless both House and Senate vote by two-thirds margins to deny him. Obama would also have to offer spending cuts, but they would have to go through the normal legislative process.
It would work as follows:
_Obama would first order a debt limit increase of $700 billion, along with a proposal to cut spending by a greater amount. Some $100 billion in new debt authorization would take effect immediately to avoid a default on Aug. 2.
_Congress would have 15 days to reject the request. If a resolution of disapproval were passed, Obama would likely veto it, and if his veto were upheld, the debt limit increase would go into effect. It takes two-thirds of both the House and the Senate to override a veto.
_Obama would be permitted to order two additional debt limit increases of $900 billion in the fall of 2011 and in the summer of 2012, along with commensurate spending cut proposals.
Reid's half of the plan would create a special panel of lawmakers, evenly divided between Democrats and Republicans, that would be given a sweeping mandate to scrub the budget and tax code for deficit savings and recommend a deficit-cutting plan for guaranteed votes in House and Senate. Details are still being worked out, but unlike Obama's deficit commission, the panel would not require a supermajority vote to issue recommendations.