Today’s Headlines – July 22, 2011

Good Morning and Happy Friday! Even as the debt talks continue, some news outlets explore the impact of this uncertainty on Medicare, Medicaid and state budgets.

The Associated Press: Amid Debt Talks, House Budget Plan Faces Senate The Senate is moving to cast away a budget cutting plan passed by the Republican-controlled House, clearing the way for increasingly urgent government talks over raising the nation’s debt ceiling. President Barack Obama and House Speaker John Boehner searched once more for an ambitious $4 trillion grand bargain, but officials said wide differences remained. Less than two weeks from an Aug. 2 deadline that could precipitate a first-ever government default, the continuing Obama-Boehner talks kept alive the possibility of substantial deficit reduction that would combine cuts in spending on major benefit programs like Medicare and Medicaid and revenue increases through a broad overhaul of the tax code (7/22).

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The New York Times: Boehner And Obama Nearing Deal On Cuts And Taxes President Obama and the Republican House speaker, John A. Boehner, once again struggled against resistance from their respective parties on Thursday as they tried to shape a sweeping deficit-reduction agreement that could avert a government default in less than two weeks. … But the president and Mr. Boehner were moving ahead with their plan, aides said, trying to agree on matters like how much new revenue would be raised, how much would go to deficit reduction, how much to lower tax rates and, perhaps most critical, how to enforce the requirement for new tax revenue through painful consequences for both parties should they be unable to overhaul the tax code in 2012. The White House wants a trigger that would raise taxes on the wealthy; Mr. Boehner wants the potential penalty for inaction to include repeal of the Obama health care law’s mandate that all individuals purchase health insurance after 2014 (Hulse and Calmes, 7/21).

The Wall Street Journal: Obama And Boehner Advance Toward Deal To Cut Deficit With prospects of a government default looming in early August, leaders on both sides denied Thursday that a deal was close. But the White House provided an outline of the deal to Democratic congressional leaders, aides said. It’s unclear where $3 trillion in spending would be cut. But among recently discussed ideas are an array of cuts to federal programs, raising the Medicare eligibility age to 67, and relying on a different formula that would slow cost-of-living increases to Social Security and Medicare beneficiaries (Bendavid, Lee and Hook, 7/22).

The Washington Post: Debt-Limit Talks: As Obama, Boehner Rush To Strike Deal, Democrats Are Left Fuming President Obama and House Speaker John A. Boehner rushed Thursday to strike agreement on a far-reaching plan to reduce the national debt but faced a revolt from Democrats furious that the accord appeared to include no immediate provision to raise taxes. With 12 days left until the Treasury begins to run short of cash, Obama and Boehner (R-Ohio) were still pursuing the most ambitious plan to restrain the national debt in at least 20 years. Talks focused on sharp cuts in agency spending and politically painful changes to cherished health and retirement programs aimed at saving roughly $3 trillion over the next decade (Montgomery and Kane, 7/21).

Los Angeles Times: Democrats Erupt Over Latest Plan On Debt Ceiling The White House briefed Democratic leaders on a possible $3-trillion deficit-reduction deal, the latest in a rapid-fire series of proposals aimed at winning congressional approval for an increase in the nation’s $14.3-trillion borrowing limit before Aug. 2. That’s when the government is expected to run short of funds and risk defaulting on its debt. An early version of the plan would lock in cuts in spending and social programs, as Republicans want, but appeared to defer decisions on increasing tax revenues until 2012 (Mascaro and Parsons, 7/22).

The Washington Post: Debt Talks Bring Tensions Between Democrats, Obama To Surface With more concerns than details, Democrats lashed out, saying that deep cuts to federal agency budgets and entitlements were too steep a price to pay. They questioned whether Obama shared their core values, and they sought reassurance — at a hastily arranged evening meeting at the White House that lasted nearly two hours — that the final legislative package would be the balanced approach that the president had promised (Kane, 7/21).

Politico: For Medicare And Medicaid, Debt Default Means Uncertainty A default scenario is so unthinkable that not too many people have thought about what happens to Medicare and Medicaid if a deal isn’t reached. One longtime Washington health hand said he had not contemplated the overall picture of what happens after Aug. 2 without a deal because, “I think it’s unlikely, but it’s also kind of [too] horrible” to think about (Feder, 7/21).

The New York Times: Debt Ceiling Uncertainty Puts States At Risk The federal debt ceiling debate is already complicating life for state and local governments. Maryland is postponing a bond sale that had been scheduled for Friday, after the state was warned that its credit rating would probably be lowered in the event of a federal downgrade. California, which typically issues short-term bonds at this time of year, is working to arrange bank loans instead, citing the market uncertainty. And state officials across the nation are trying to figure out what will happen to the federal payments they rely on for everything from Medicaid to unemployment to highway construction if a deal is not reached to raise the debt ceiling by the Aug. 2 deadline (Cooper, 7/21).