In less than two weeks, the Obama administration says the federal government will run out of money to pay its bills unless Congress raises the nation's self-imposed $14.3 trillion borrowing limit. President Obama is still pushing for a big bipartisan deal — and, despite a White House denial, may be getting close to achieving it — but liberal Democrats object to proposed deep spending cuts, while conservative Republicans say tax hikes are unacceptable. With time running out and economic disaster looming, how might this drama end? Here, six possibilities:
1. A short-term fix
House Republican leaders are floating the idea of a short-term debt ceiling hike so the government won't default on its debt. But they insist Democrats must bend and accept deeper spending cuts than they want, say Carrie Budoff Brown and Jake Sherman at Politico. President Obama had long rejected temporary solutions, insisting on a long-term deal to put the issue to rest until after the 2012 elections. But with the Aug. 2 deadline getting perilously close, he now says he'd be open to a short-term extension of a few days — but only if Democrats and Republicans had already reached a broader deficit-cutting deal, and simply needed the extra time to move it through Congress.
2. A "grand bargain"
President Obama is trying to "cajole or shame Republican leaders into going along with a $4 trillion 'grand bargain,'" says Eric Pianin at The Fiscal Times. The plan would slash government spending, reduce Social Security and Medicare benefits, cut defense spending, and raise some taxes. "We have these high-minded pronouncements about how we've got to get control of the deficit and how we owe it to our children and our grandchildren," Obama said this week. "Well, let's step up. Let's do it."
3. The "Gang of Six" plan
The Senate's bipartisan "Gang of Six" put forward a compromise on Tuesday that some have called "a potential breakthrough," says Gail Russell Chaddock at The Christian Monitor. It aims to "strike a middle ground between spending cuts and revenue increases," and would cut deficits by $3.7 trillion over 10 years. The five-page draft, which was based on the recommendations of the president's bipartisan deficit commission, calls for slashing discretionary spending by $500 billion over the next decade, and eliminating tax breaks, using the extra revenue to bring down income tax rates and reduce the deficit.
4. Mitch McConnell's fall-back plan
With resistance to a "grand bargain" still intense, Senate Minority Leader Mitch McConnell is pitching a last resort that would put off a real resolution until next year. The Senate's top Republican wants to let President Obama raise the debt ceiling incrementally, without the approval of GOP politicians, forcing the president to shoulder the political burden of raising the debt ceiling several times before next year's election.
5. A House GOP victory
House Republicans threw down the gauntlet by passing their "cut, cap, and balance" plan, which calls for deep budget cuts and a hard cap on future spending. Senate Majority Leader Harry Reid says it doesn't have "one chance in a million to pass the Senate." But if House conservatives put a plan the Senate can live with on the table — something that "could easily be fused" with McConnell's fall-back plan — they'll be in the driver's seat "if there is an impasse and the hour is getting late," says Chris Stirewalt at Fox News. Obama and Democratic senators might just panic and cave, as they "face the real possibility of the fiscal abyss."
6. No deal
Tea Party conservatives are "the most vociferous about not ceding ground on revenue increases," says Chaddock at The Christian Science Monitor, "so they want to ensure there is a fallback plan that avoids a full default" if we hit the debt ceiling. Call it "default lite." The first step is passing a law requiring the government to pay the interest on the national debt first. Then comes the military and other essential services. As the money runs thin, Congress will have to decide what to cover — Social Security? Medicare? Veterans' benefits? — with whatever revenue is left. Even in this scenario, the U.S. might still face a credit downgrade, says Federal Reserve Chairman Ben Bernanke, because even though we won't be defaulting on our debt, we'll be "defaulting on our obligations to citizens."