Now that President Barack Obama is playing a direct role in negotiations with Congressional leaders to provide a short-term increase in the federal debt limit accompanied by a longer-term deficit reduction plan, he is reportedly seeking a deal on a much larger scale than had previously been discussed. The original target was about $2.4 trillion in deficit reduction over the next 10 years, which is equivalent to the size of the short-term debt limit increase. The President, however, is now reportedly pushing for around $4 trillion in deficit reduction.
So far it is unclear where the additional reductions will come from. Democratic negotiators have consistently advocated for revenue enhancements to make up a considerable portion of the deficit reduction package, but there has been resistance to this idea from the Republican side. Republican leaders have said that any revenue brought in through the closure of tax loopholes and tax breaks should be used to reduce other tax burdens rather than to be used for deficit reduction. Where entitlements stand is also up in the air at this point, but if the agreement is in the neighborhood of $4 trillion instead of $2.4 trillion, then it seems almost certain that entitlements will be cut further.
Negotiations are expected to continue all week as the clock is ticking. The August 2nd deadline the Treasury Department has identified is now just a few weeks away.