evening here in the nation's capital. just to underline the peril facing the united states economy, and the american people, democratic officials familiar with the president's speech expect him to say the country right now is, quote, in imminent threat of default. with only about one week left for democrats and republicans to agree on a deal to raise the debt ceiling. in a speech earlier today, the president alluded to the bitter political grid lock between both sides. >> are we a nation that asks only the middle class and the poor to bear the burden? after they've seen their jobs disappear and their incomes decline over a decade? are we a people who break the promises we've made to seniors or the disabled and leave them to fend for themselves? that's not who we are. we are better than that. we're a people who look out for one another. we're a people who believe in shared sacrifice. because we know that we rise or fall as one nation. >> congressional leaders from both parties unveiled duly last ditch plans that would trays ceiling. harry reid's plan calling for what he says would be $2.7 trillion in cuts with no sbilment or tax changes. the house speaker john boehner's plan would require two separate votes. one this year, one next year to raise the debt ceiling. something democrats including the president have flatly rejected. we're monitoring all angles of this dramatic story. let's to go capitol hill first where our congressional correspondent kate baldwin is standing by. set the scene. what's the very latest? >> reporter: fascinating developments. the top republican in the house, the top democrat in the senate unveiling dueling plans. what they think will be a solution to this debt ceiling crisis. pretty much within a half-hour of each other and this is what it boils down to. in order to raise the debt ceiling, house speaker john boehner's plan calls for two votes. first a vote on $1.2 trillion in cuts that would raise the debt ceiling through early next year. and then a second vote on $1.8 trillion in cuts that would raise the debt ceiling to 2013. that's not guaranteed. that can only happen if congress approves those additional cuts. and that's where democrats stand opposed. that's where they say no way them don't want a second vote to happen early next year because they believe that it risks us returning right back to where we are now. which is deadlocked. that's why senator majority leader harry reid calls for raising the debt ceiling in one vote. . 2.7 trillion to raise the debt ceiling, all the way to 2013. that does not include cuts to entitlement benefits. it does not include new revenues and it could also have the possibility of new additional cuts to be part of that package coming out next year. if you need any further evidence of just how far apart these two sides are, listen to how they reacted to each other today. first listen to john boehner criticizing harry reid's plan. >> i believe that the plan is full of gimmicks. we're not making any real changes in the spending structure of our government. and it doesn't deal with the biggest drivers of our deficit and our debt. that would be entitlement program. >> republicans' short term plan is a nonstarter in the senate and in the white house. and certainly the democrats in the house agree wholeheartedly with us. a short term agreement risks many of the same dire consequences that would be triggered by the default itself. >> now, as you very well know, the fact of the matter is part of this debt ceiling debate comes with a heavy dose of election year politics. democrats accusing republicans of only wanting to drag this debate. these votes into the campaign season and republicans accusing democrats in the white house of only wanting to get it out of the way so the president can focus only on his election campaign. wolf? >> stand by for a few moments. i want to bring in our chief white house correspondent. jessica, this is going to be one of the most important speeches the president of the united states delivers, given the enormous economic stakes involved. >> you can't overstate the stakes for the economy. the president will make that point tonight. as you say, he is going to say that there is an imminent threat of default that the nation faces. the congress is at a point of stalemate. that he is not, we're not expecting him to propose a compromise between the reid and the boehner plans. beyond that i'm told from the white house that he is going to say the consequences are enormous. that he has done what he can to break this stalemate. to create compromise. that essentially, the options are clear. so sort of what is stopping us from taking one? and that he is going to quote president reagan, and they're saying this. in the words of former president reagan, failure to do los angeles do, quote, incalculable damage. >> to the nation. >> then the value could go down, inflation could go up. there is a dire situation that could affect millions of people in america and it could affect people all over the world. >> absolutely right. i'm talking to senior policy make here's are increasingly worried that a deal will not get done by next week. which means there is an increasing likelihood that we will be get downgraded by these ratings agency. the sense of pessimism is growing in this town at this moment. >> i want to welcome in cnn's newest anchor. she is joining us from new york. you've covered the markets for a long time. so far, it is an important phrase, so far the markets here in the united states, around the world, really haven't moved too quickly on this. is it your sense, erin, that all of us should be bracing for some sort of market collapse, if you will, if they don't get this deal done soon? >> it is interesting. it is clear. the markets around the world expect there to be a deal. talking to a lot of investors including the biggest bond managers in the world. they to a tee think this will be resolved. there is no one around the world looking at this with glee. three quarters, 75% -- sorry, top rated debt in the world is linked to the u.s. government. this is not insignificant for anyone. in terms of a catastrophic drop, i don't think you'll get a huge surge in interest rates. if we don't get a deal. the reason for that is that it takes a little time. we've got seven to ten days where the government could issue ious and things like that. there will be insome long term damage. the biggest bond manager in the country thinks we could get a quarter of a percentage point to a half percentage point. that's significant because taxpayers to have pay those down the line and it trickles all the way down to mortgages, cars and things like that. >> there have been a lot of plans out there. we've heard $2 trillion, $4 trillion, $3 trillion in cuts. does it really make much difference which plan eventually gets worked out as far as market reaction is concerned? >> interesting answer to that. what i was thinking about today, in one sense, no. it doesn't matter which plan. a big investor think both plans are really band-aid plans and none of them deal significantly with what i like to call the big three. medicare, medicaid and social security. in the short material, either deal will probably be enough. really interesting this afternoon, when i was talking to an investor who had met with the ratings agency at standard & poors talking about the downgrade. could it raise interest rates the same way a potential default could. they said the boehner plan probably wouldn't hit the hurried tol prevent a downgrade. even if that was reached, you could still get a downgrade. it is unsure whether that would happen. the reid plan, even though a lot of the parts of that are seen by many as gimmicks, probably would pass that hurdle and you wouldn't get that immediate downgrade. that's an interesting distinction. >> stand by for a moment. i want to bring back kate and jessica. there is a harry reid plan and a john boehner plan. given the stakes involved, why not have these two gentlemen sit down together and sort of reach a compromise? i'll meet you halfway here. you meet me halfway there. let's get it resolved. we'll post the legislation. get it passed in the senate and the house and the president will sign it, in this krand this crie averted. >> that's what they were trying to work toward this weekend. all weekend long we were here. negotiations were happening behind closed doors. there was some indication that they had, there was some agreement toward a framework. we were hearing about hints of progress. come sunday there was a stalemate as it was described to me. and it was over this second vote in the boehner proposal that would happen early next year them could not come to an agreement. democrats could not get comfortable that there would be any certainty that they would be able to raise the debt ceiling without raising this deadlock. i will till, at the same time, they're clearly not agreeing right now. they're coming out with these dueling plans. my colleague is roaming the hall and talking to senators. he is hearing from both sides, they stay conversations are still happening behind closed doors to try to reach some kind of a compromise. to try to gap the differences that are happening. there seems to be an acknowledgement. while these plans won't get very far in the opposing chamber, there is some acknowledgement that they do need to find some way to reach a compromise. and it looks like they're trying to deep lines of communication open. >> they have to resolve this. jessica yellin, it is interesting, the president will deliver his speech from the east room of the white house. exactly two minutes after the president is done, the speaker john bain her deliver his speech to the american people from capitol hill. it is sort of unusual. the state of the union, they have the opposition party response. but this is pretty extraordinary on the way this is unfolding right now. i wonder if the white house was fully sensitive to the fact boehner would ask for the television networks for a time immediately following the president. >> it has been a tricky relationship. i'm constantly assured that they have a good communication between the two of them when they do speak. the problem is that they, right now, have very differing interests at the moment. because john bainer is having problem getting the votes. the problem is how to trays debt ceiling next year in a way that does not create a fight a second time. it is my understanding that democrats would be fine with a second vote next year as long as it does not have to come in this confrontation. if it could just an vote of disapproval on the debt ceiling, they could go for a second vote. that's the kind of compromise solution folks might be looking for later in this week. >> those three votes of resolutions were envisaged in the harry reid-mitch mcconnell proposal that is not going anywhere. >> allegedly dead. we'll see if it has any life. don't go too far away. erin burnett is staying wuxs we're happy that she is part of the cnn team. we're awaiting the president of the united states. the speaker of the house. you will hear and see their speeches live here on cnn and cnn international. we're also taking a closer look at the choices about what to cut in spending. what would you cut? 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>> that is the big question for everybody out there. you're hitting the nail on the head. this is about hard numbers and how you make hard decisions. imagine you have a credit card. you're paying for everything at your house. you have all your plans and suddenly the bank says, you have hit the limit and we're not raising it. and you've already planned the next month. last year, 2010, august, this is how much we had incoming. this is how much we spent. that was our excess amount that we spent above it. we had to borrow. this year, same thing. $134 billion. so if we get into this month, and we do not have any additional, we only can operate on what we have. so what you have to do is make your choices. look at this. if we pay the interest. we said that's important. let's say this is the republican plan them want to pay the interest. they have to pay social security and medicare. these are huge. they have to watch the number over here. let's play the defense vendors. veterans affairs. we cover that. maybe we'll add military active duty pay and how about federal salaries. right there, already, we're over the line. that's above what we have if we can't borrow anymore. and look at all the things unpaid. same thing happens on the other part of the equation for the democrats. if they were to say that they want think to pay certain things. social security, medicaid, medicare, they go to hud program, unemployment insurance, education funding and they're over. and they haven't covered military active duty pay or federal salaries. there are only so many ways you can chop up all this money and this is precisely how this problem can wind up at your doorstep at home, beyond all of the debating going on here. >> and as we've been saying, it would have real, real consequences on the american people. tom, thanks very much. let's assess further what's going on with our chief political analyst gloria who is here, also our senior political analyst david gergen. i never thought i would hear democratic official, david, say, and the president is expected to say this tonight. we'll see if he actually does say it. that the country, the united states of america, is in imminent threat of default. right now, unless a deal is reached very soon. did you ever think you would hear that from a president? >> you're right. every time a president in the past that i can remember has gone on the air in an emergency situation, it is because somebody else is doing something to us. and this situation, it is a self-inflicted wound. it is something we're doing to ourselves. i think that's one of the reasons why so many american are disgusted looking at this. basically, i think people were less interested in speeches than they are in solutions. let's get this done. >> the american people are frustrated. they're angry. if you believe the poll, they're angrier, i guess, a little bit at the republicans than the democrats. more at the republicans than the president. is that what you've seen? >> right. i don't think it looks good for president obama but it certainly looks better than it does for the republicans dwex some polls at cnn this week. we asked whether the president has acted responsibly in these talks on the debt ceiling. you see the numbers here. yes, 52. no, 46. okay. so majority think he has acted responsibly but not by a wide margin. when we asked the same question about republicans, have republicans acted responsibly in these talks. yes, 33%, no, 63%. it is very clear, the president has made his argument. made use of the bully pulpit. that's why we're seeing him putting the pressure on republicans. talking about how important this is to the country. in the end, wolf, if we default, i think you could have, and david and i were talking about this earlier. you could have a very large anti-incumbent election. >> you can have a very large group of people who say, i don't like the democrats i don't recollect like the republicans, i would like a third party to come in and talk some common sense. >> i don't think that's the first reaction. the first reaction is how i am a going to be hurt? and a lot of people are worried they will get hurt. and they will get hurt in the case of a default. even if they lift the debt situation, this has been so prolonged, so messy, there is a good chance our credit rating will go down even if we get -- >> so explain what that means. the credit of the united states has a aaa credit rate forg 70 years. the highest in the world. if it goes down, what would that mean? >> the aaa credit rating tells the world if you buy a bond from the united states furcal lend money. >> a lot of banks hold treasury bills against reserve. it is passed around like cash. if that goes from aaa to aa, it is not as valuable as it was. that mean people won't be willing to pay for bonds so readily. that drives up interest rates. it costs more. >> the same for a country as it is for an individual. if you have a good credit rating and you go to the bank and say i want a mortgage i want a loan. you'll get a better rate. if you have a bad credit rating. >> right. technically, the first auction of these treasuries is august 4th. >> two days. $87 billion. so it would begin almost immediately. and you would really see til pack. what's interesting about the american public is, a couple months ago, most americans when you asked them about raising the debt ceiling, they say, well, about 40% said maybe you have to do it. now that has completely flipped. and people understand the importance of raising the debt ceiling. there are some republican who's believe in the house in particular, who believe that it is not a real date. you want to take that chance? >> and some other republicans especially in the house. here's what i don't understand. if the polls are accurate reflection of the mood out there, why would the speaker john boehner want a second vote next year in this whole issue to come up once again just as the election, everyone is getting ready for a congressional election. >> fundamentally they think the first down payment. the first phase of the boehner plan, they need a second phase and big a chunk of money to be saved in that second phase. from the republican point of view, the only leverage they have is tied to the debt ceiling. it forces the action as we're seeing here. the president didn't want any of this. he wanted a clean d