–House Speaker Wants $900B Debt Hike Now, $1.6T Later W/Offsetting Cuts
–Sen. Reid: Crafting Proposal to Hike Debt By $2.4 Trillion Now
–House Democrats, GOP Meet Separately Monday To Ponder Way Forward
–Fed’s Hoenig To Testify Tuesday Afternoon to House Panel On Mon Policy
–Hill’s Two Tax Panels To Hold Hearings On Tax Reform

By John Shaw

WASHINGTON (MNI) – After months of tough negotiating and aggressive
posturing by the White House and congressional leaders over a formula to
increase the statutory debt ceiling, one huge question looms over
Washington.

How does this end?

As of now, there are few convincing answers to this question.

House Speaker John Boehner continues to press for a two phase debt
ceiling hike, with the first installment being a $900 billion increase
that would be approved before Aug. 2 and a second hike of about $1.6
trillion occurring early next year.

Boehner is insisting each debt ceiling increase be accompanied by
spending cuts of equal or greater size.

Boehner will meet with House Republicans Monday afternoon to assess
his debt limit strategy and outline his plan while House Minority Leader
Nancy Pelosi is meeting with her caucus early Monday evening.

It seems likely that Boehner will bring his debt hike plan to the
floor of the House this week where it is likely to be approved on a
party line vote. No Democrats are expected to vote for his plan and
Boehner may have to struggle to get the most conservative faction in his
caucus to support it.

The other central player in the Capitol Hill debt limit drama is
Senate Majority Leader Harry Reid.

Reid and Pelosi met Sunday evening with President Obama and issued
statements reaffirming their opposition to a short-term debt ceiling
increase.

Reid said he is working on his own package to raise the debt
ceiling by $2.5 trillion with spending cuts of about $2.7 trillion. Reid
is likely to propose securing more than $1 trillion from unspecified
savings in discretionary programs and claiming large savings from the
winding down of the wars in Afghanistan and Iraq. These savings have
also been used in Republican budget plans but the GOP has also urged
substantial savings in entitlement programs.

Reid is likely to offer his plan this week but it is unclear what
kind of reception it will receive from either Senate Democrats or
Republicans.

The U.S. has already reached its $14.29 trillion debt ceiling.
Treasury Secretary Timothy Geithner has said Congress must pass
legislation increasing the debt ceiling by August 2.

While the debt limit saga continues, Congress will try to do other
business this week.

Thomas Hoenig, president of the Kansas City Federal Reserve Bank,
will testify Tuesday at 2 p.m. on how monetary policy affects the
economy to the House Financial Services Committee’s monetary policy
subcommittee.

The Senate Finance Committee will hold a hearing Tuesday morning at
10 a.m. on the best way to achieve deficit reduction and a hearing
Wednesday at 10 a.m. on how tax reform would affect economic growth and
job creation.

The Senate Finance panel will also hold a confirmation hearing
Thursday at 10 a.m. for Janice Eberly to be assistant secretary of the
Treasury.

The House Ways and Means Committee will hold a hearing Tuesday at
10 a.m. on alternative tax systems.

The Joint Economic Committee will hold a hearing Wednesday at 10
am. on restraining federal spending.

The House may take up the Interior-Environment spending bill for
the 2012 fiscal year.

The Senate will consider some judicial nominations and possibly
Reid’s debt limit bill.

** Market News International Washington Bureau: (202) 371-2121 **

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