July 25, 2011 / 1:47 PM / 7 years ago

Snapshot: Developments in debt talks

WASHINGTON (Reuters) - Here is what is happening Monday as lawmakers try to close in on a deal to raise the $14.3 trillion debt limit by August 2 and avoid a credit default:

* The Democratic-led Senate and Republican-led House of Representatives plan to consider rival plans to reduce the deficit and raise the debt ceiling. Votes may come as early as Wednesday.

* President Barack Obama says in a speech before a Hispanic group that both parties have the responsibility to come together on the issue. He says he is willing to reduce spending, but that alone is not enough to close the deficit gap.

* House Speaker John Boehner, the top Republican in the House, offers a two-step plan to force spending cuts. A $1 trillion hike in the debt limit would be paired with $1.2 trillion in spending cuts. A second debt limit increase, to continue borrowing authority through 2012, would be linked to a tax code overhaul and spending cuts for Medicare and Medicaid health programs for the elderly and poor as well as other benefit programs. Federal spending caps would be put in place and Congress would be required to vote on a balanced budget amendment to the U.S. Constitution.

* Boehner plans to hold a news conference on his proposal at 4 p.m. EDT.

* Senate Majority Leader Harry Reid offers a competing plan to raise the debt ceiling by $2.7 trillion, enough to cover the country’s borrowing needs through the November 2012 elections. That would be paired with an equal amount of spending cuts over 10 years. The Social Security retirement program, Medicare and Medicaid would be left untouched and there would be no tax increases, a key Republican demand. A congressional panel would be established to find further spending cuts.

* Reid says in a Senate speech that a “short-term solution, is no solution at all.”

* House Democrats plan to discuss the rival plans at a closed-door session scheduled for 5:30 p.m. EDT.

* Investors are watching developments in Washington closely. U.S. stock indices dip in muted reaction to the debt-limit impasse. But the dollar falls to a record low against the Swiss franc and gold hits a new high.

* U.S. Secretary of State Hillary Clinton, in Hong Kong, seeks to reassure Asia that U.S. lawmakers will reach agreement and avoid a U.S. credit default. Asian investors hold $3 trillion in U.S. government debt. China and Japan hold the bulk of that debt. Clinton says she is “confident” U.S. lawmakers will avoid default.

Reporting by Donna Smith; Editing by Paul Simao

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