No debt deal yet: GOP, Democrats ready rival plans

BEN FELLER

DAVID ESPO

Asso­ci­ated Press

WASHINGTON — With bipar­ti­san talks stalled, House Repub­li­cans and Sen­ate Democ­rats read­ied rival debt-limit emer­gency fall­back plans in hopes of reas­sur­ing world finan­cial mar­kets on Mon­day the U.S. gov­ern­ment will avoid an unprece­dented default in barely a week.

House Speaker John Boehner sum­moned rank-and-file con­ser­v­a­tive law­mak­ers in a Sunday-afternoon con­fer­ence call to be ready for com­pro­mise that is “going to require some of you to make some sacrifices.”

He said the new leg­is­la­tion, expected to be unveiled as early as Mon­day morn­ing, would cut fed­eral spend­ing, raise the government’s bor­row­ing author­ity and be able to clear both houses of Con­gress, accord­ing to one offi­cial famil­iar with his remarks on the call.

Offi­cials said that plan was likely to pro­vide for an imme­di­ate increase in the debt limit of $1 tril­lion, while mak­ing some­what larger cuts in fed­eral spend­ing. Addi­tional spend­ing reduc­tions and greater bor­row­ing author­ity would depend on future action by Con­gress — a two-step process that Obama has ruled out.

Across the Capi­tol, Sen­ate Demo­c­ra­tic leader Harry Reid worked on an alter­na­tive to cut spend­ing by $2.7 tril­lion and increase the debt limit by $2.4 tril­lion — enough to sat­isfy Obama’s demand that the cur­rent cri­sis not recur before the 2012 elections.

Reid said the plan “meets Repub­li­cans’ two main cri­te­ria” — spend­ing cuts greater in size than the increase in bor­row­ing author­ity and no new revenue.

The events unfolded in a cri­sis atmos­phere — in a swel­ter­ing city swarm­ing with sum­mer­time tourists — a lit­tle more than a week before an Aug. 2 dead­line for action by Con­gress to raise the government’s $14.3 tril­lion debt limit.

With­out action by that date, the Trea­sury will be unable to pay all its bills, pos­si­bly trig­ger­ing a default that could have severe con­se­quences for the U.S. econ­omy and the world’s, too.

Offi­cials — and many stock­hold­ers — were hold­ing their breath to see how the uncer­tain sit­u­a­tion would affect finan­cial mar­kets in the U.S. and around the world as they opened after the week­end of cri­sis nego­ti­a­tions. Early results from Asian mar­kets showed no major swings.

Obama spoke with Boehner by phone dur­ing the day, then met with Reid and House Demo­c­ra­tic leader Nancy Pelosi at the White House.

At the same time, sev­eral offi­cials said lead­er­ship aides spent Sun­day try­ing to pro­duce a com­pro­mise that could quickly clear both houses.

One offi­cial, speak­ing on con­di­tion of anonymity, por­trayed the Democ­rats’ White House meet­ing as an unsuc­cess­ful attempt to per­suade Obama to accept a two-step he has said he won’t agree to.

There were numer­ous sug­ges­tions of progress — both Boehner and Reid now sup­port plans with­out imme­di­ate increases in gov­ern­ment rev­enue — but no announced compromise.

Sim­i­larly, the pre­cise ele­ments of the rival fall­back plans were sketchy.

Boehner’s revised mea­sure would fall far short of a House-passed bill that was rejected in the Sen­ate late last week.

It had called for rais­ing the debt limit on con­di­tion of $6 tril­lion in spend­ing cuts and con­gres­sional approval of a con­sti­tu­tional bal­anced bud­get amend­ment for state ratification.

Reid’s office declined to pro­vide any details of his alter­na­tive, except to say it would cut $2.7 tril­lion in spend­ing over a decade with­out any tax increases.

Any sum that large would require either cuts to ben­e­fit pro­grams that aides said Reid pre­ferred to leave untouched, or sav­ings from the Pen­ta­gon, pos­si­bly by assum­ing the end of the wars in Iraq and Afghanistan.

It appeared the White House was largely con­signed to a spectator’s role.

Asked what the administration’s plan was to avoid default, Trea­sury Sec­re­tary Tim­o­thy Gei­th­ner said, “Our plan is to get Con­gress to raise the debt ceil­ing on time.”

The state of play veered between bipar­ti­san­ship and brinkman­ship on an issue of immense eco­nomic consequences.

Despite hours of com­pro­mise talks in the Capi­tol, law­mak­ers’ aides had so far been unable to agree on a two-step plan that would sat­isfy Obama’s demand for a large enough increase in the debt limit to tide the Trea­sury over until after the 2012 elections.

White House Chief of Staff Bill Daley said any­thing short of that would be a gim­mick and prompt the world to say: “These peo­ple just can’t get their act together.”

Inter­viewed on Fox, Boehner said, “I would pre­fer to have a bipar­ti­san approach to solve this prob­lem. If that is not pos­si­ble, I and my Repub­li­can col­leagues in the House are pre­pared to move on our own.”

White House and con­gres­sional lead­ers talked past each other on the Sun­day TV shows as nego­ti­a­tions unfolded in secrecy.

“There will be a two-stage process. It’s just not phys­i­cally pos­si­ble to do all of this in one step,” Boehner said. “I know the pres­i­dent is wor­ried about his next elec­tion. But, my God, shouldn’t he be wor­ried about the country?”

With an eye on the finan­cial mar­kets, Gei­th­ner insisted anew the United States would not default.

“It’s just unthink­able,” Gei­th­ner said. “We never do that. It’s not going to happen.”

The debt deal-making has con­sumed Wash­ing­ton for weeks and has put on dis­play a gov­ern­ment that at times risks utter dysfunction.

Even after talks about between Obama and Boehner broke down in spec­tac­u­lar fash­ion Fri­day, Gei­th­ner said the two men were still negotiating.

He also sug­gested the ambi­tious frame­work the two lead­ers had dis­cussed, tar­get­ing a deficit reduc­tion of $4 tril­lion, remained under consideration.

“I don’t know. It may be pretty hard to put Humpty Dumpty back together again,” Boehner said of that grand plan. “But my last offer is still out there. I have never taken my last offer off of the table and they never agreed to my last offer.”

Under any sce­nario, Washington’s lead­ers have run them­selves almost out of time.

Daley said, in fact, the con­se­quences are already tak­ing hold.

“I don’t think there’s any ques­tion there’s been enor­mous dam­age done to our cred­it­wor­thi­ness around the world,” Daley said.

Boehner appeared on “Fox News Sun­day.” Gei­th­ner was on Fox, ABC’s “This Week” and CNN’s “State of the Union.” Daley and Coburn spoke on NBC’s “Meet the Press,” and Daley also appeared on CBS’ “Face the Nation.”

Posted by AP News on Jul 25 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.