Policy Priorities

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BUDGET WATCH: THIS WEEK...

July 8, 2011

President Obama Meets with Congressional Leaders to Negotiate Debt Limit Increase

President Obama met with Democratic and Republican leadership Thursday in his latest attempt to strike an agreement on deficit reduction between the two parties before the nation defaults on its bills. Reportedly, he presented three options, with "low", "medium" and "large" deficit reduction packages. The president is said to favor the largest of the three, a package with $4 trillion in savings over 10 years, using a combination of program cuts and tax reform. Congressional and administration staff will work through the weekend to try to make progress towards agreement, and will reconvene at the White House on Sunday.

House leadership announced today that the House of Representatives has cancelled the recess that had been scheduled for the week of July 18th. They will remain in session to try to reach agreement by July 22nd, the date by which Congress and the administration much come to an agreement in order to pass legislation in advance of the August 2nd date on which the nation would default.

Both chambers of Congress are expected to vote the week of July 18th on a “balanced budget” amendment to the Constitution that would require the federal government to balance its budget each year. By requiring total government spending to be just 18 percent of the nation's gross domestic product (GDP), the amendment would virtually eviscerate the government’s ability to respond to the needs of a larger, increasingly aging population, or be flexible in response to economic recessions or natural disasters. No matter how the economy is performing, the amendment would impose a very high bar to raise taxes, while it would be relative simple to cut spending, ensuring that important services such as health care and education would continue to weaken and serve fewer children and families over time. Experts estimate that to meet the requirements imposed by the balanced budget amendment, Medicaid, SNAP/food stamps and Social Security would be cut in half in 10 years, while other programs that provide basic assistance to children and other vulnerable populations would be cut by 70 percent over the same period.

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