Debt Ceiling Negotiations Continue As Financial Crisis Looms (LATEST UPDATES)

WASHINGTON -- With the United States government set to begin defaulting on its loans on Aug. 2, lawmakers are working to cut a deal to shrink the deficit by making major spending cuts and, possibly, raising revenues.

The Treasury hit its debt limit -- set by Congress at $14.29 trillion -- on May 16, but is using "extraordinary measures" to avoid default until early August. Although Congress could vote to raise the debt ceiling without preconditions, many lawmakers have said they will not approve an increase to the debt limit unless there is a plan to deal with the deficit over the long term.

In addition to major spending cuts, the House GOP also has pushed for major changes to Medicare, including those laid out in Rep. Paul Ryan's (R-Wisc.) 2012 budget proposal, to be as part of a final debt ceiling deal. Although Senate Majority Leader Harry Reid (D-Nev.) said in June that Medicare cuts are off the table, Democrats signaled they would allow for some changes to the insurance program provided they be on the delivery-side as opposed to the beneficiary side.

House Speaker John Boehner has said House will not approve a bill that includes tax increases, a component that Democrats have insisted should be on the table, whether it be individual rate increases or other revenue raisers.

On June 23, House Majority Leader Eric Cantor and Senate Minority Whip Jon Kyl, who were representing Republicans in debt deal negotiations with Vice President Joe Biden, pulled out of the bipartisan talks, leaving them, ostensibly, to the president and Boehner.

Check back here for the latest developments.