The way things are shaping up, the Aug. 2 deadline when the White House says it will run out of money to pay its bills will arrive without a debt ceiling deal. Even if a temporary pact is achieve to allow budget negotiations to continue, the U.S. debt may still be downgraded by one or more rating agencies.

Showing signs of a deteriorating political stagnation, very little happened over the weekend to show that politicians are trying to overcome their bitter partisan feuding. When White House budget director Jacob Lew uses the word “Armaggedon” in three different talk shows Sunday, he’s not exaggerating.

After there were scant signs of real advance on Saturday and Sunday on negotiations to raise the federal borrowing limit, Senate leaders are planning this week to unveil a back-up plan that would force and guarantee more budget wrangling for the entire remainder of the year.

Washington is giving every indication that it’s lost in the woods just two weeks before the Aug. 2 deadline for Congress to increase the US$14.29 trillion borrowing authority. In the Sunday talk shows, Lew insisted that a default could lead to a financial crisis that would send interest rates rising and drive up the cost of credit for all ordinary citizens.

Meantime, Senate officials worked through the weekend to iron out details of the back up plan by Senate Majority Leader Harry Reid of Nevada and Senate Minority Leader Mitch McConnell of Kentucky, the most vivible leaders who hope by mid-week to introduce the bill to give the president new powers to raise the debt limit. It would postpone resolution of the government’s long-term fiscal challenges by creating a special new committee of Congress to draft a plan to reduce the federal budget deficit.

As I’ve noted before, the committee idea is hardly popular among negotiators. Setting up yet another panel to tackle the deficit-reduction problem has met with eye-rolling skepticism in some quarters and with firm opposition among conservative Republicans.

Congressman Jim Jordan of Ohio, head of the Republican Study Committee, a large caucus of conservative members, called the proposal a “cop out.” “The American people sent us here to make big tough choices,” Jordan said on Fox News Sunday. “They didn't send us here to set up a commission and give the president veto power.”

But before the Senate plan is finalized and readied for unveiling, the House should approve a bill Tuesday embodying conservatives’ favored budget policies. The bill would cut government spending by US$2.4 trillion over 10 years, set stringent caps on future spending and raise the government's debt limit on condition that Congress separately passes a constitutional amendment mandating a balanced budget. The Senate is expected to reject the bill midweek.

So what’s next? With those largely symbolic votes behind them, lawmakers will head into the endgame of the struggle that has dominated Capitol Hill for months. The two sides have been trying to come up with a deficit-reduction package that Republicans and some Democrats say must be approved before the debt ceiling can be increased.

Treasury Secretary Tim Geithner warns that after Aug. 2, the government will run out of cash to meet its financial obligations, such as Social Security benefits and supplier payments. Both Standard & Poor’s and Moody’s have warned they could take the unprecedented step of downgrading the U.S. credit rating if the debt ceiling isn’t raised soon.

What is not clear, however, is what would happen if legislators come up, as seems increasingly likely, with only a temporary band-aid.

Democrats and Republicans seem intent on reducing the budget deficit by close to US$4 trillion over 10 years, but efforts to craft such a “big deal” have fallen through mostly because of the impasse over raising taxes. Democrats want to include tax increases; Republicans do not.

The newest Senate compromise would build on a McConnell proposal to allow Obama to raise the debt ceiling by US$2.5 trillion in three increments over the next year. It would be linked to a Reid proposal to set up a bipartisan, House-Senate committee to devise a deficit-cutting plan—probably by the end of 2011, certainly before the 2012 elections.

According to the Wall Street Journal, the committee's findings would be brought to a House and Senate vote. However, the bill is not expected to set a specific numerical target for shrinking the deficit. Many Republicans oppose the idea because they believe it doesn’t go far enough to cut the deficit. “The McConnell plan is more of Washington not taking responsibility,” said Sen. Tom Coburn, the Oklahoma Republican, Sunday on CBS’s “Face the Nation.”

Clearly, the scenario that pops up cuts dangerously close to the Aug. 2 deadline. White House officials insist that a framework must be completed by Friday to give lawmakers enough time to pass a debt-ceiling increase by then, but oddsmakers say it won’t happen.

rmena@eleconomista.com.mx