President Obama and House Speaker John Boehner were excitedly hammering out a "grand bargain" to raise the debt limit, a deal that would have cut $4 trillion from the federal deficit, before Boehner's conservative caucus nixed the deal. A smaller $2.5 trillion plan, crafted in talks led by Vice President Joe Biden, went down in flames in May. As the August 2 default deadline loomed last week, Senate Minority Leader Mitch McConnell proposed a Plan B that would make it easier to raise the limit--and avoid economic catastrophe--but do little about the deficit. Over the weekend, Senate Majority Leader Harry Reid began working with McConnell to make the plan more palatable to lawmakers on both sides. They've got a long way to go.

Under McConnell's original plan, The Washington Post's Alec MacGillis and Lori Montgomery report, "Congress would allow Obama to raise the debt ceiling in three increments totalling $2.5 trillion over the next year. Each time, Congress would vote on a resolution of disapproval, allowing Republicans to blame the increases on Obama." But many lawmakers were unhappy that the Plan B wouldn't cut the deficit. So Reid is working with McConnell to bring in between $1 trillion and $1.5 trillion in spending cuts hammered out in the Biden-led negotiations, The Hill's Alexander Bolton reports.
 
What would those cuts be? Keith Hennessey explains that about $230 billion would come in cuts to health spending--mostly by slowing the rate of Medicare and Medicaid spending growth in payments to health care providers, plus about $8 billion that would affect patients, like "a smidge more means-testing or higher copays." Another $220 billion in cuts to mandatory spending would include higher fees, like on the price of using a part of the broadcast spectrum or property sales. Then about $1 trillion comes from discretionary spending cuts. All saving come over a decade.
 
But many Republicans are still unhappy. Politico's David Rogers reports that even though it's debt limit crunch time, Republicans are "turning right with a vengeance," bringing to the House floor a vote on a balanced budget amendment to the Constitution that has no chance of passing the Senate. The vote also would mandate federal spending be capped at 18 percent of the gross domestic product--it's currently 24 percent--and is "remarkable for its total absence of compromise at this late date," Rogers writes.
 
But Reid Wilson from National Journal reports that GOP leaders are slowly nudging their colleagues away from that position:
Privately, House Republicans have been driving home the message that a failure to increase the debt ceiling would be a disaster. Sources said Boehner has been "aggressive," in one aide's words, in articulating the need to reach a deal. In a presentation to the House Republican Conference on Friday, Jay Powell, a former Under Secretary at the Treasury Department under George H.W. Bush... laid out just what would happen if a deal isn't reached. ...
 
The presentation, according to several sources in the room at the time, was aimed at conveying the seriousness of the moment. ...  But Republican leadership's task is far more complicated than simply convincing their members to vote one way or another. Instead, they must convince those members they are getting a good deal, which, given the slow pace of negotiations, is not a saleable pitch right now.
 
Indeed, Bolton reports that lawmakers expect a Reid-McConnell plan would take two weeks to pass, given expected filibusters.
 
The New Republic's Matthew Zeitlin notes that key conservatives and business leaders have endorsed McConnell's plan, "and yet there is still a sizable section of the Republican caucus that simply will oppose any plausible deal. A split between the business wing of the party and the base is certainly unexpected, but not totally impossible to fathom."
 
The Washington Post's Ezra Klein says the plan "almost ensures that deficit reduction will be an issue in 2013 and beyond." National Review's Rich Lowry, meanwhile, pushes back against the popular notion that "the McConnell option 'puts it all on Obama.'" False, says Lowry: "When you conceive of and support a way for the president to increase the debt ceiling, you are not putting it all on him. Because Republicans have stopping power in the Senate and the majority in the House, there is no way for them to evade ultimate responsibility for what happens."