WASHINGTON (CNN) -- Democratic and Republican congressional leaders unveiled separate deficit reduction plans Monday as top officials scrambled to bridge a cavernous partisan divide and raise the federal government's debt ceiling before an unprecedented -- and potentially devastating -- national default.
Both plans provide a path to raise the debt ceiling through the end of 2012, but differ sharply in terms of their requirements for future congressional action and both tax and spending reform requirements.
President Obama is scheduled to deliver remarks on the state of the negotiations at 9 p.m. ET, according to White House press secretary Jay Carney.
If Congress fails to raise the $14.3 trillion debt limit by Aug. 2, Americans could face rising interest rates and a declining dollar, among other problems. As the cost of borrowing rises, individual mortgages, car loans and student loans could become significantly more expensive.
Officials also warn that, without an increase in the debt limit, the federal government will not be able to pay all its bills next month.
To defuse the crisis, Senate Majority Leader Harry Reid outlined a blueprint calling for roughly $2.7 trillion in spending cuts over the next decade while raising the debt limit by $2.4 trillion -- an amount sufficient to fund the government through next year's election.
Reid's plan would not require any new tax hikes and would not mandate any reforms to Medicare, Medicaid and Social Security, politically popular entitlement programs that are facing skyrocketing growth in costs.
Specifically, Reid's plan includes $1.2 trillion in savings from various domestic and defense programs, along with $1 trillion in savings from winding down the wars in Iraq and Afghanistan. It also generates $400 billion in interest savings on the debt, and another $40 billion by rooting out waste, fraud and abuse.
Reid's proposal would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed a Senate vote with no amendments by the end of the year.
Obama immediately endorsed the Reid plan. Carney called it "responsible compromise ... that should receive the support of both parties."
But House Speaker John Boehner argued Reid's plan is "full of gimmicks."
The package doesn't include serious structural reforms, and "doesn't deal with the biggest drivers of our deficits and debt, and that's entitlement programs," Boehner said.
For his part, Boehner, outlined a plan requiring two separate votes. The first would approve approximately $1.2 trillion in spending cuts over the next decade while raising the debt ceiling through the end of 2011, two GOP leadership aides told CNN. Any failure on the part of Congress to enact the mandated spending reductions would trigger automatic across-the-board budget cuts.
The second vote would raise the debt limit through 2012, but only if Congress approves a series of major tax reforms and entitlement changes outlined by a bipartisan committee composed of Senate and House members.
The proposed structural changes -- a focal point of intense ideological conflict in Washington -- would have to generate between $1.6 trillion and $1.8 trillion in savings, according to a House Republican aide familiar with the package.
Boehner's plan, while allowing a total debt ceiling increase of roughly $2.6 trillion, would also require both a House and Senate vote on a balanced budget amendment to the Constitution between Oct. 1 and the end of the year.
This plan is "less than perfect," Boehner said, but "reflects bipartisan negotiations" conducted with Senate Democrats over the weekend.
"Time is running short," Boehner said. "I think it would be irresponsible for the president to veto (this) legislation because it's a common-sense plan and would help us avoid default."
Democrats are vehemently opposed to the idea of holding more than one vote to raise the debt limit through the 2012 election, arguing that such a requirement is politically unrealistic and could prove to be economically destabilizing. Republicans want to lock in long-term tax and spending changes, and argue that Obama is trying to avoid politically tough decisions in a presidential election year.
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