En español | Less than two days before the United States potentially defaulted on its financial obligations, President Obama and congressional leaders reached a deal to increase the debt ceiling by $2.4 trillion in return for budget cuts of at least $2.4 trillion over 10 years.
Congress still has to approve the measure, with votes in both chambers expected Monday.
See also: What cuts would you make?
Here's a review of the myriad proposals for raising the debt ceiling:
The bipartisan deal would raise the debt ceiling in two stages. The first would be offset by budget cuts. The first cuts are not expected to have an affect on Social Security, Medicare or Medicaid. Possible offsets being discussed for the second increase include:
- Budget cuts hammered out by a new bipartisan congressional committee.
- Defense cuts and non-defense cuts, possibly affecting Medicare providers.
- Preserves the formula for calculating the annual Social Security benefit.
Rival plans — the GOP plan passed by the House on Friday and the Democratic plan the Senate is expected to take up this weekend — aim to break the stalemate with less ambitious budget cuts than included in earlier proposals. Neither would overhaul Social Security, Medicare or Medicaid for now or increase taxes.
Both plans would create a bipartisan panel to identify future budget cuts, with entitlements on the table in the GOP plan. AARP has endorsed the Democratic plan.
Obama's "grand bargain" unveiled in early July gave way to the Gang of Six plan a week later. Both plans proposed new formulas for calculating annual cost-of-living increases for Social Security benefits, much to the disappointment of AARP. And there have been hints, with few specifics, about Medicare reform as well.
Here's what the debt ceiling crisis could mean for you if Congress doesn't approve the new agreement by Aug. 2:
- Regular Social Security checks could be jeopardized. AARP sent a letter to the president insisting that Social Security payments should "continue to be made regardless of Congressional action to raise the debt ceiling."
- The impact a default would have on Medicare and Medicaid has gotten less attention, perhaps because the ramifications are too far-reaching to gauge. Politico.com reported widespread uncertainty last week.
- Economic experts have predicted financial calamity from a potential default. That's especially daunting for boomers still trying to recoup retirement savings lost to the 2008 stock market collapse and recession. Many financial experts recommend sitting tight with your retirement investments.