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White House, Congressional Leaders Reach Deal on Debt Ceiling

What it could mean for Social Security and Medicare

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?

President Barack Obama with House Speaker John Boehner of Ohio

Photo by: AP

House Speaker John Boehner and President Barack Obama talk about the debt.

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: