WASHINGTON — President Barack Obama and congressional leaders pushed ahead with deficit-reduction talks as some lawmakers in both parties expressed skepticism about a fallback plan by Sen. Mitch McConnell to raise the debt ceiling.
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The bipartisan negotiating group, which met for the fourth-straight day at the White House, was focusing on a narrow group of spending cuts — identified during seven weeks of talks led by Vice President Joe Biden — to work out at least a $2 trillion debt-cutting plan, said a Republican aide who spoke on condition of anonymity.
Those talks ended after a little more than two hours, when Obama and House Majority Leader Eric Cantor, R-Va., disagreed over the length of the proposed debt-ceiling increase. Cantor had been urging a short-term extension that would require Congress to vote a second time on the unpopular measure before the 2012 election. The president lectured about the need to drop political posturing, saying several times, “Enough is enough,” according to Democratic officials with knowledge of the meeting.
“The president told me, ‘Eric, don’t call my bluff. You know I’m going to take this to the American people,’” Cantor said. “He then walked out.”
But as he left, Obama added, “I’ll see you tomorrow.”
Obama is considering summoning congressional leaders to the presidential retreat in Camp David, Md., this weekend, two people familiar with the matter said.
The slow progress, as the Treasury Department’s stated Aug. 2 deadline for raising the borrowing limit to avert a U.S. default inches closer, prompted McConnell, R-Ky., to propose Tuesday a “lastchoice” plan that would give Obama unilateral power to raise the national debt ceiling.
“If everything else fails and everybody’s great ideas don’t come to pass, and it’s the day before Aug. 2, something has to be done,” said Sen. Jon Kyl of Arizona, the chamber’s second-ranking Republican. “Somebody has to have a plan for that eventuality, and that’s what Sen. McConnell has put out there.”
Kyl held two fingers half an inch apart when asked Wednesday how much the two parties’ proposed spending cuts overlap. The White House has warned for months that a default resulting from a failure to raise the $14.3 trillion debt limit would be a catastrophe for the economy.
MOODY’S REVIEWING RATING
In a sign of concern within the financial community, the U.S. had its triple-A credit rating placed on review for possible downgrade by Moody’s Investors Service, which cited the “rising possibility” that the debt limit won’t be increased on a timely basis.
“There is a small but rising risk of a short-lived default,” Moody’s said.
A downgrade would raise interest rates on U.S. Treasury bonds, increasing the interest paid by U.S. taxpayers. It would also push up rates for mortgages, car loans and other debts, which are linked to Treasury rates.
House Speaker John Boehner, R-Ohio, said Wednesday that “what happens if the debt limit is not increased is a ‘crapshoot’ — no one knows, and we don’t want to find out,” according to his spokesman, Michael Steel.
Default “destroys your brand and would give the president an opportunity to blame Republicans for a bad economy,” McConnell told radio host Laura Ingraham on Wednesday. He also predicted that with the two sides at an impasse on how best to reduce the deficit, there would be no Republican support in the House or Senate for raising the debt ceiling. “I’ll bet there won’t be a single Republican vote” for it, he said.
The White House has said the impasse must be broken by July 22 to leave enough time to approve the legislation, but according to Cantor, Obama said the group must choose “by Friday which way we’re going.”
At the Capitol, rank-andfile lawmakers advanced their own fallback measures in case the bipartisan compromise talks fail.
One version, written by Sen. Bill Nelson, D-Fla., was designed to ensure that Social Security recipients receive their checks in the event of a default, mandating that the program’s obligations no longer count against the overall debt limit. Another, unveiled by Republican Reps. Steve King of Iowa, Louie Gohmert of Texas and Michele Bachmann of Minnesota, would give priority to paychecks for members of the armed forces.
“Currently, there is not a single debt limit proposal that can pass the House of Representatives,” Cantor said in a written statement. He said efforts should focus on “what we can agree upon” rather than Democratic demands for raising taxes or GOP calls to repeal the yearold health-care bill. McConnell’s proposal would let the president increase the limit in three steps unless Congress disapproved by a two-thirds majority — a near impossibility, given the number of Democrats in both the House and Senate — while Obama would also be required to offer spending reductions. It would let the president raise the debt limit while putting the onus on him and congressional Democrats to cut spending.
Obama “owns the economy” after nearly three years in office, said McConnell. “I refuse to help Barack Obama get re-elected by marching Republicans into a position where we have co-ownership of a bad economy,” he said.
The increases would come in amounts of $700 billion, $900 billion and $900 billion, McConnell said. They would occur over the remainder of Obama’s presidential term, in keeping with the president’s call for an increase in the debt limit that would carry through the 2012 elections.
CRITICS OF PLAN
While the proposal gave some market analysts confidence that the U.S. will avert default, Republicans including Sen. Tom Coburn of Oklahoma and Democrats including Sen. Kent Conrad of North Dakota rejected it as a political hoax that fails to address the debt.
Coburn plans Monday to announce his own plan to save $9 trillion over the next decade.
Leaders from both parties in the House and Senate either offered cautious praise or held back from publicly criticizing the plan.
“It would make it much easier to raise the debt limit, which should reassure markets,” Gus Faucher, director of macroeconomics at Moody’s Analytics in West Chester, Pa., said in response to an e-mail Wednesday.
Conrad, chairman of the Senate Budget Committee, called the McConnell plan “one of the worst ideas I have ever heard.” Any plan that extends the debt limit without doing anything about the debt “is an abdication of responsibility that is stunning,” he said.
Senate Majority Leader Harry Reid, D-Nev., described McConnell’s proposal as “thoughtful and unique,” even as he called on both sides to pull together on a more ambitious deal. House Minority Leader Nancy Pelosi, D-Calif., said the plan by McConnell has some “merit” because it recognizes the debt ceiling must be lifted.
Some GOP senators were embracing the idea. Sen. John McCain of Arizona issued a statement offering his strong support, calling the proposal “a smart, forwardlooking plan to make clear to all Americans that should we get to August 2nd without an agreement, it is President Obama alone — and not Republicans in Congress — who decides whether to raise the debt limit, and owns the economic consequences of any default.”
A Senate Democratic aide said party leaders see the proposal as a possible way to cap discretionary spending for the next two years and to create a joint committee that would draft a plan to cut the debt.
‘MAJOR CRISIS’
Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that a failure by Congress to raise the nation’s $14.3 trillion debt limit would lead to a “major crisis” and throw “shock waves” through the financial system. Bernanke responded to a question at a House Financial Services Committee hearing.
White House spokesman Jay Carney said Wednesday that the McConnell plan “is not the preferred option,” although the administration doesn’t reject it out of hand. The White House would prefer a more comprehensive plan, he said.
“Bigger is better,” Carney said.
The White House also said Wednesday that Obama believes that there’s no need to pass a balanced-budget amendment to the Constitution in order to cut the deficit.
GOP leaders including Boehner and McConnell support such an amendment. Some Republicans say they won’t vote to raise the debt ceiling unless it’s part of the package.
The House is to vote next week on a balanced-budget amendment, but any constitutional amendment would require passage by both houses of Congress and ratification by 38 of the 50 states.
The White House is holding out hope that the president can reach a deficit-reduction deal of $2.5 trillion or larger that includes revenue increases, and they expect other backup proposals between now and Aug. 2, said a Democrat familiar with the negotiations.
Information for this article was contributed from Washington by Heidi Przybyla, Mike Dorning, Roger Runningen, Brian Faler, Julie Hirschfeld Davis, Margaret Talev, James Rowley, Peter Cook, Mark Silva, Hans Nichols and Lisa Lerer; and from New York by John Detrixhe of Bloomberg News; by Andrew Taylor, David Espo, Christopher S. Rugaber, Jim Kuhnhenn, Laurie Kellman and Ben Feller of The Associated Press; by Paul Kane, Lori Montgomery, Zachary A. Goldfarb and Felicia Sonmez of The Washington Post.
Front Section, Pages 1 on 07/14/2011