Lawmakers recently averted a government shutdown by agreeing on a continuing budget for fiscal year 2011, but they are already prepping for another showdown over Federal spending.
The government is rapidly approaching its statutory borrowing limit, which means that lawmakers must raise the debt ceiling in order to prevent the United States Treasury from defaulting on its loans. Matthew Zames, managing director at JPMorgan Chase, recently wrote a letter to Treasury Secretary Timothy Geithner, warning that a failure to raise the debt ceiling could trigger another "catastrophic financial crisis."
House Republicans are preparing a package of massive spending reductions to accompany a bill to raise the borrowing limit. One of the cuts involves reducing government staffing, calling for one hire for every two officials who retire, according to The Huffington Post.
A GOP aide told the media outlet that the proposed cuts in mandatory spending would be in line with Representative Paul Ryan's (R-Wis.) long-term budget plan, which lays out $6.2 trillion in cuts over the next 10 years.
Senate Majority Leader Harry Reid (D-Nev.) said that the "full faith and credit" of the U.S. would be compromised if the nation defaults on its debt, CNN reported. Due to the severity of the situation, Reid said that he is not "drawing any lines in the sand" about what should or should not be included in a package to raise the debt ceiling.