With House Majority Leader Eric Cantor dropping out of discussions, negotiations on a deal to raise the debt ceiling are looking tenuous. For most of the week, Cantor had expressed optimism about the meetings, which have been led by Vice President Joe Biden since early May. But in a statement Thursday, Cantor said tax increases were the sticking point. “The Democrats continue to insist that any deal must include tax increases,” he said. “Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue.”
The pressure now sits with House Speaker John Boehner and President Obama, who are expected to take over negotiations. But with the looming August 2 deadline to raise the debt limit or risk default, will a compromise be reached?
As U.S. News reporter Alex Parker notes, the standoff could simply be dramatic brinkmanship “to help sell the final deal to disillusioned Republican rank-and-file members” who may not be happy with a compromise, especially if it raises any taxes.
But the delay has credit rating agencies like Moody’s Investors Service losing confidence. The agency reported on June 2 that if there is no progress toward increasing the debt ceiling in the “coming weeks,” it will likely consider downgrading the U.S. government’s credit rating. “A credible agreement on substantial deficit reduction would support a continued stable outlook,” the announcement reads. “Lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating.” [See a slide show of 6 consequences if the debt ceiling is not raised.]
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