Politicians Close in on Debt Ceiling Deal in Washington; Iowa Prepares for Default if Agreement Can't be Reached

Update: 8:56 p.m.

Apparently a deal has been struck between the President and the leaders of both parties in congress. All that remains now are the votes. (via CNN)

Two days before the deadline for a possible U.S. government default, President Barack Obama and congressional leaders reached agreement Sunday on a legislative package that would extend the federal debt ceiling while cutting spending and guaranteeing further deficit-reduction steps.

Earlier Today

As of Sunday afternoon, lawmakers in Washington D.C. say they are very close to reaching an agreement that they can pass to raise the debt ceiling. (via the Huffington Post)

WASHINGTON — White House and congressional negotiators sought to reassure the nation that they would beat a Tuesday deadline for averting the first federal default in history.

Senate Republican leader Mitch McConnell said negotiators were "very close" to sealing a deal that would cut spending by some $3 trillion over the next decade while raising the debt ceiling through 2012 in a two-stage process. The Treasury says it will not be able to meet all its debt obligations if Congress does not act by Tuesday.

Not meeting its debt obligations by Aug. 2, would mean the treasury department would have to choose which obligations to pay for without fully paying others. This would mean potentially not providing full federal funding for things like social security payments or payments to military personnel, as the government pays its debtors off first.

In the worst case scenario that the government were to default, the state of Iowa is already prepared to survive without federal money for a little while. (via the Associated Press)

"We're probably OK for about a 30-day time period," said David Roederer, director of the Iowa Department of Management. "Our first big payment is school aid, which goes out in September, so we've got a little bit of leeway." 

But Roederer and others said the consequences for the state of a federal default are enormous because the state gets just over $6 billion in federal money. Roughly half of that money pays for Medicaid, a health care program for the poor and elderly. 

Iowa Senator Tom Harkin told reporters on Thurday that he believes the President should evoke the 14th Amendment to pay the country's debts if an agreement cannnot be reached by Congress. He argued the same from the floor of the Senate on Saturday. (from Salon.com)

"If the Congress through inaction, through inaction or action, tries to destroy or alter those obligations I believe it is incumbent on the chief executive to exercise his authority to make sure the full faith and credit of the United States is not jeopardized,” Iowa’s Tom Harkin said. “The president should use his authority to do so." 

Meanwhile, a rally in Iowa City about the debt ceiling has been scheduled for 4:00 p.m. in Iowa City near U.S. Rep. Dave Loebsack's, sponsored by the Iowa Citizens for Community Improvement.