“The House speaker, John A. Boehner, and the Senate majority leader, Harry Reid, were preparing separate backup plans to raise the nation’s debt ceiling on Sunday after they and the White House were unable to form a bipartisan plan that would end an increasingly grim standoff over the federal budget,” the New York Times writes. “The dueling plans emerged after Mr. Boehner walked away from negotiations with the White House on Friday, leading to a frustrating weekend of talks in heat-scorched Washington. The leaders of both parties variously negotiated together over the phone, talked separately, conferred with their caucuses and tried to plot an end to the debt crisis that would assure the capital markets around the world that America would meet its debt obligations.”
The sticking points with Reid’s plan: It gets part of its savings by assuming the end of the Afghanistan and Iraq wars. The Washington Post: "[P]eople familiar with the months-long search for a debt-reduction compromise said that hitting such a large target without raising taxes or cutting entitlement programs would probably require Reid to rely heavily on savings from ending the wars in Iraq and Afghanistan — a figure budget analysts said could easily amount to more than $1 trillion over the next decade. Counting money not spent on wars that the nation is already planning to end is widely viewed as a budget gimmick, and House GOP leaders have been reluctant to include it as savings.”
More: “But it has a political advantage because it was included in the budget blueprint House Republicans adopted this spring. And Democratic sources said the option may look more attractive as the clock ticks down to Aug. 2, when Treasury officials say they will run out of money to pay all of the government’s bills.”
How the market is viewing all of this: “U.S. stock futures dropped while gold hit a record high on Monday, as President Barack Obama and Congress failed to reach a deal to allow an increase in the nation's debt ceiling, raising worries that the U.S. might default on its sovereign debt,” the Wall Street Journal says.
Elizabeth Drew in the New York Review of Books: “Someday people will look back and wonder, What were they thinking? Why, in the midst of a stalled recovery, with the economy fragile and job creation slowing to a trickle, did the nation’s leaders decide that the thing to do—in order to raise the debt limit, normally a routine matter—was to spend less money, making job creation all the more difficult? Many experts on the economy believe that the President has it backward: that focusing on growth and jobs is more urgent in the near term than cutting the deficit, even if such expenditures require borrowing. But that would go against Obama’s new self-portrait as a fiscally responsible centrist.”