'Very close' to a debt deal, Senate's top Republican tells CNN

STORY HIGHLIGHTS

• NEW: $3 trillion deal would include $2.4 trillion increase in debt ceiling, GOP source says
• NEW: The mood is "relief that we won't default," Schumer says
• The deal under negotiation would extend the debt limit through 2012
• Congress must raise the $14.3 trillion debt ceiling by Tuesday or risk default

What will it take to find a solution to the U.S. debt crisis? Wolf Blitzer and Don Lemon break down the hurdles and options in "GET IT DONE -- Countdown to Debt Crisis," a CNN special report Sunday night at 9 ET on CNN.

Washington (CNN) -- Democrats and Republicans are "very close" to reaching a $3 trillion deal on the debt limit, Senate Minority Leader Mitch McConnell told CNN's "State of the Union" on Sunday.
"We had a very good day yesterday," the Kentucky Republican said, adding that the two sides "made dramatic progress."
With the deadline to reach a debt ceiling agreement just two days away, congressional leaders and the White House are mulling parts of a tentative deal that would extend the debt limit through next year.
A Republican source close to the negotiations told CNN the goal is $3 trillion in savings, and that the deal would include a $2.4 trillion increase in the debt ceiling.

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Just hours before, two other sources familiar with the negotiations had told CNN late Saturday night that the framework for the emerging deal called for up to $2.8 trillion in total deficit reduction over the next decade.
The plan, parts of which are still being negotiated by the White House and bipartisan congressional leaders, would allow the debt ceiling to be raised by enough to last at least through the end of 2012.
The debt limit would be increased in two stages, both of which would occur automatically -- a key Democratic demand that would prevent a repeat of the current crisis before the next election.
Sen. Charles Schumer, D-New York, told "State of the Union" that the mood on Capitol Hill is "relief that we won't default."
While nothing is definite yet because there is no final agreement, "default is a lot less of a possibility now than it was a day ago," he said, adding that "leaders are talking in a constructive way."
The agreement includes upfront spending cuts in the range of roughly $1 trillion, the sources said Saturday night. A special congressional committee would recommend additional spending reductions of up to $1.8 trillion no later than Thanksgiving.
"I think I can pretty confidently say" that the current plan under discussion will provide a debt ceiling increase to avoid default, McConnell said Sunday.
McConnell added that he is "very very close to being able ... to recommend to my members that this is something that they ought to support."
The deal will not include tax increases, he said.
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If Congress fails to approve the recommended cuts by late December, automatic, across-the-board cuts -- including both defense and Medicare -- would take effect.
News of a possible deal came shortly after the Senate delayed consideration of Majority Leader Harry Reid's debt ceiling proposal late Saturday night, pushing back a key procedural vote by 12 hours.
The vote to stop debate and end a GOP filibuster on the plan will now take place at 1 p.m. ET Sunday.
Reid, D-Nevada, said he was asking for a delay to provide additional time for negotiations underway at the White House.
There are "many elements to be finalized" and still "a distance to go," Reid said. "We should give everyone as much room as possible to do their work."
Reid's announcement capped a day of sharp partisan voting in the House and extended talks behind closed doors between congressional and administration officials. Concern continued to grow that Congress will fail to raise the nation's debt ceiling in time to avoid a potentially devastating national default this week.
Earlier Saturday, the Republican-controlled House rejected Reid's plan -- partisan payback for the Democratic-controlled Senate's rejection of GOP House Speaker John Boehner's plan Friday night.
House members rejected Reid's plan in a 173-246 vote. Most Democrats supported the measure; every Republican voted against it.
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One Democratic source cited concern among congressional Democrats that Obama could be close to cutting a deal with Republicans at their expense.
If Congress fails to raise the current $14.3 trillion debt ceiling by Tuesday, Americans could face rising interest rates and a declining dollar, among other problems.
Some financial experts have warned of a downgrade of America's triple-A credit rating and a potential stock market plunge. The Dow Jones Industrial Average dropped for a sixth straight day on Friday.
Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. Obama recently indicated he can't guarantee Social Security checks will be mailed out on time.

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RELATED TOPICS

• National Debt
• U.S. House of Representatives
• U.S. Senate
• Harry Reid
• John Boehner

For their part, Republicans continued to trumpet Boehner's proposal. The measure cleared the House Friday, but only after a one-day delay during which the speaker was forced to round up support from wary tea party conservatives. Boehner's deal with conservatives -- which added a provision requiring congressional approval of a balanced budget amendment to the Constitution in order to raise the debt limit next year -- was sharply criticized by Democrats, who called it a political nonstarter.
Democratic leaders vehemently object not only to the balanced budget amendment, but also the GOP's insistence that a second debt ceiling vote be held before the next election. They argue that reaching bipartisan agreement on another debt ceiling hike during an election year could be nearly impossible, and that short-term extensions of the limit could further destabilize the economy.
Leaders of both parties now agree that any deal to raise the debt ceiling should include long-term spending reductions to help control spiraling deficits. But they have differed on both the timetable and requirements tied to certain cuts.
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Both the Reid and Boehner plans suffered setbacks last week when the nonpartisan Congressional Budget Office released reports concluding that they fell short of their stated deficit reduction goals.
Boehner's plan, which has since been revised, proposed generating a total of $917 billion in savings while initially raising the debt ceiling by $900 billion. The speaker has pledged to match any debt ceiling hike with dollar-for-dollar spending cuts.
His plan, however, would require a second vote by Congress to raise the debt ceiling by a combined $2.5 trillion -- enough to last through the end of 2012. It would create a special congressional committee to recommend additional savings of $1.6 trillion or more.
Any failure on the part of Congress to enact mandated spending reductions or abide by new spending caps would trigger automatic across-the-board budget cuts.
The plan, as amended Friday, also calls for congressional passage of a balanced budget amendment before the second vote to raise the debt ceiling, which would likely be required at some point during the winter.
As for Reid's plan, a revised version he proposed Friday would reduce deficits over the next decade by $2.4 trillion and raise the debt ceiling by a similar amount. It includes $1 trillion in savings based on the planned U.S. withdrawals from military engagements in Afghanistan and Iraq.
Reid's plan also would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed by a Senate vote with no amendments by the end of the year.
In addition, it incorporates a process based on a proposal by McConnell that would give Obama the authority to raise the debt ceiling in two steps while providing Congress the opportunity to vote its disapproval.
Among other things, Reid has stressed that his plan meets the key GOP demand for no additional taxes. Boehner, however, argued last week that Reid's plan fails to tackle popular entitlement programs such as Medicare, which are among the biggest drivers of the debt.
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A recent CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.

According to the poll, the public is sharply divided along partisan lines; Democrats and independents are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a major crisis for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.