As the August 2 debt-ceiling deadline set by Treasury Secretary Timothy Geithner and other financial officials approaches, it will be now incumbent upon President Barack Obama, House Speaker John Boehner (R-OH) and Senate Majority Leader Harry Reid (D-NV) to negotiate a final agreement that will address an increase in the country's borrowing capacity, slash spending in the federal budget and reduce the overall federal deficit over the next 10 years.
Until now, the debt ceiling and budget negotiations have been conducted by Vice President Joe Biden, House Majority Leader Eric Cantor (R-VA) and Senate Minority Whip John Kyl (R-AZ) with the president, Boehner and Reid keeping an eye on the progress of the talks from a safe political distance.
The bird's eye view ended last week when Cantor said he would no longer participate in the negotiations, even after sending signals earlier in the week that he was committed to pressing forward with group. He said the talks finally stalled over disagreements about raising taxes. The group had agreed in principle to slash over $1 trillion in federal government spending but came to the impasse when Democrats countered that such severe cuts needed to be paired with some $400 billion in higher taxes. Democrats advocated capping tax deductions claimed by households making more than $500,000 per year at 10 percent of their adjusted gross income, but Cantor and other Republicans disagreed. Kyl then decided to exit from the talks.
"Each side came into these talks with certain orders, and as it stands the Democrats continue to insist that any deal must include tax increases. There is not support in the House for a tax increase, and I don't believe now is the time to raise taxes in light of our current economic situation. Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue. I believe it is time for the president to speak clearly and resolve the tax issue. Once resolved, we have a blueprint to move forward to trillions of spending cuts and binding mechanisms to change the way things are done around here," Cantor said in released statement.
Senate Minority Leader Mitch McConnell (R-KY) echoed Cantor's sentiment in a speech on the Senate floor, saying "For weeks, lawmakers have worked around the clock to hammer out a plan that would help us avert a crisis we all know is coming. So it's worth asking: where in the world has President Obama been for the last month? What does he propose? What is he willing to do to reduce the debt and avoid the crisis that is building on his watch?"
Cantor's and Kyl's political maneuvering made it impossible for the leaders to remain above the fray. The next few weeks will be a trying political test for the president, who has received a considerable amount of criticism of late regarding his handling of the nation's economy.
A recent Gallup poll showed the president's approval rating had decreased to 45 percent while his disapproval number climbed to 48 percent. A poll conducted by The Hill revealed that 48 percent of likely voters think President Obama has hurt the nation's economy, while 48 percent believed he has aided it.
Further complicating matters is the presence of House Minority Leader Nancy Pelosi (D-CA). Still smarting from not being included in negotiations to extend tax cuts enacted during President George Bush's administration and to pass a stop-gap piece of legislation that included $38.5 billion in cuts in April, it is widely expected that the former Speaker will outright demand a seat at the negotiating table-and with good reason. Pelosi knows that Boehner will need House Democrats in order to pass any compromise in the GOP dominated body. Conventional wisdom suggests she will call for increasing revenues by closing sweetheart tax breaks for large corporations.
"You cannot achieve what you set out to do if you say it's just about cutting. It has to be about increasing the revenue stream as well," Pelosi said in an appearance on CNN's "State of the Union."
The president's deft political touch will need to be on full display over the coming weeks. Federal Reserve Chairman Ben Bernanke has warned members of Congress that the economic consequences of failing to raise the debt ceiling would be enormous. He said inaction would quickly send the value of the dollar downward and would cripple the nation's credit rating, causing the cost of borrowing money to soar.