With less than a month left before the US Treasury grinds to a halt and be unable to honor debt obligation unless the $14.3 trillion ceiling on debt is increased, there is a sliver of hope with a top US Republican saying on Sunday that they could go for a 'mini deal' with the administration to avert a crisis.
Senator John Cornyn of Texas, a top Republican, said on 'Fox News Sunday' that the Republicans could accept a shorter-term agreement on debt reduction and spending cuts, in order to pass legislation to raise debt limit.
According to Cornyn, the preferred option is to get a long-term deal to cut spending, but if it was not possible, the better way would be to accept a short-term deal and avert a crisis.
“The problem with a mini-deal is we have a maxi problem ... We’ll take the savings we can get now, and we will re-litigate this as we get closer to the election, he said.
The Treasury Department has said the government will not be able to meet obligations beyond August 2 if legal debt ceiling isn’t raised by then.
The Republicans and the Democrats have been in an extended deadlock for weeks in a row. The Republicans say the government should first commit to massive spending cuts and vouch for fiscal prudence before raising the debt ceiling.
Some economists support this line, saying that a default will instantaneously solve the debt crisis inasmuch as it neutralizes the government's ability to raise funds to fill the revenue-spending gap.
However, this is quite a radical line of thinking and many experts have pooh-poohed this proposition.
The Democrats aver that the republican opponents are endangering the country’s credit rating by refusing to raise the debt limit. President Barack Obama warned that the failure of the Congress to pass legislation approving a further lifting of the U.S. government debt ceiling, and the resultant debt default, will herald a worse global economic meltdown than the one the world is recovering from currently.
It is not clear if Senator Cornyn's idea of a short-term deal to avert a default will be get broader Republican sanction. Bloomberg reported that a spokesman for House Speaker John Boehner declined to comment on the idea of a short-term agreement.
“The speaker has always said that the time is now and our goal is to get the largest possible spending cuts,” a spokesman for Boehner said.