Gas Prices and Debt to Dominate Congress in May

CNBC

The Congress returns to work on Monday to begin negotiations in earnest on the government's jumbo-sized debt, even as Republicans and Democrats trade blame for soaring gasoline prices.

Tamping down voter anger over rising prices at the pump has emerged as a top priority for the White House. With polls showing higher pump prices undermining Americans' confidence in Obama's economic leadership, Republicans are keen to exploit an issue that could hurt the Democratic president's chances of reelection in 2012.

Prices at the pump are edging toward an all-time record national average of $4.11 a gallon, overshadowing what the White House views as a more pressing problem—raising the level of how much the United States can borrow so that it can continue to pay its bills and avoid defaulting on its debt.

The Republican-led House is expected to vote on expanding offshore oil drilling and speeding up the government approval process, while Senate Majority Leader Harry Reid, a Democrat, plans to introduce legislation ending tax breaks worth billions of dollars for major U.S. oil companies.

But a vastly more difficult fight faces Congress as it stares down two ominous dates—May 16 and July 8—when the government risks defaulting on its debt unless some big solutions are found for government spending and tax policy over the long-term.

"I see it as a three-ring circus with the debt limit the center ring," said American University's Patrick Griffin, a former legislative aide to President Bill Clinton.

The Treasury Department says Washington will breach the congressionally-set $14.3 trillion limit on borrowing by around May 16. By employing extraordinary measures, Treasury Secretary Timothy Geithner will be able to stave off a default, but only until July 8.