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Debt talks grind on, clock ticks toward default

Debt talks grind on, clock ticks toward default

With budget talks between President Barack Obama and his Republican rivals at a frustrating standstill, the Senate's Republican leader offered a backup plan to avert a potentially calamitous government default threatened by Aug. 2.
Senate Minority leader Mitch McConnell on Tuesday launched a long-shot proposal to hand Obama sweeping new powers to push through an increase in the government's debt limit without the approval of a bitterly divided Congress.
Lawmakers return to the White House for another negotiating session Wednesday. A two-hour session Tuesday produced no progress after a day of poisonous exchanges between Democrats and Republicans.
McConnell said he didn't see a path to an agreement so long as Democrats insist on revenue increases. Instead, he offered a backup plan that would, in effect, guarantee Obama's requests for new government borrowing authority unless Congress musters veto-proof two-thirds majorities to deny him.
McConnell's plan immediately ran into stiff opposition among small government, anti-tax tea party conservatives and seemed unlikely to pass the House of Representatives, but neither the White House nor House Speaker John Boehner dismissed it out of hand.
"I think everybody agrees there needs to be a backup plan if we can't come to an agreement," Boehner said in a Fox News Channel interview Tuesday afternoon. "And frankly, I think Mitch has done good work."
Under McConnell's proposal, Obama could request _ and likely secure _ increases of up to $2.5 trillion in the government's borrowing authority in three separate installments over the coming year as long as he simultaneously proposed spending cuts of greater size.
The debt limit increases would take effect unless blocked by Congress under special rules that would require speedy action _ and even then Obama could exercise his authority to veto such legislation. But the president's spending would have no guarantee of receiving a vote.
"The American people elected (McConnell) to serve as a check on Obama's appetite for out-of-control spending, not to write him a blank check to continue the binge," said conservative activist Brett Bozell. "It's these sort of shenanigans that got Republicans thrown out of power in 2006."
McConnell made his proposal public a few hours before Obama presided over his third meeting in as many days with congressional leaders searching for a way to avoid a default and a possible global financial crisis.
Democratic officials who participated in the session said Obama did not reject McConnell's idea, but said it's not his preferred approach. A statement issued later by press secretary Jay Carney said the president "continues to believe that our focus must remain on seizing this unique opportunity to come to agreement on significant, balanced deficit reduction."
McConnell's plan was hatched out of frustration that Congress and Obama are deadlocked as the clock ticks toward an Aug. 2 deadline for a market-rattling default on U.S. obligations.
"I had hoped all year long that the opportunity presented by his request of us to raise the debt ceiling would generate a bipartisan agreement that would begin to get our house in order," McConnell said. "I still hope it will. But we're certainly not going to send a signal to the markets and the American people that default is an option."
Republicans are demanding $2 trillion-plus in budget cuts as the price for a commensurate increase in the government's ability to continue to borrow more than 40 cents of every dollar it spends. Both Republicans and Obama see the politically toxic debt limit vote as a way to seize an opportunity to cut future deficits _ a move that would seem to be to the political benefit of both sides.
But Republican refusals to consider devoting any new revenue from closing tax loopholes _ like those enjoyed by oil and gas companies _ to cutting the deficit has led Democrats to withhold further spending cuts beyond a handful tentatively agreed to during several weeks of talks led by Vice President Joe Biden in May and June. For their part, Republicans say the White House is offering minuscule spending cuts in the near term and is pulling back from some tentative agreements on topics like requiring federal workers to contribute more to their pensions.
Obama himself upped the stakes Tuesday, telling CBS News anchor Scott Pelley that more than $20 billion in Social Security checks could be held up if the debt ceiling isn't raised by Aug. 2.
"I can't guarantee that the checks will go out Aug. 3 if we haven't resolved this," Obama said. "There may simply not be the money in the coffers to do it."
Congress could raise the debt limit without making any cuts as it has done frequently in the past regardless of which party was in control. But this time, the Republican-controlled House, which includes dozens of new lawmakers supported by the tea party movement, is insisting on major spending cuts to bring down the huge federal deficit as a condition for raising the $14.3 trillion debt limit.
Negotiators have grown testy in recent days as Obama and Democrats pushed for higher tax revenue as part of the deal, a line Republicans say they will not cross.
Given the reaction from other Republicans, it seemed unlikely that McConnell's proposal could show the White House and congressional leaders of both parties a way out of a deadlock that Obama and others said threatened calamitous results for an economy still struggling to recover from the worst recession in decades.
Reductions as large as $2.5 trillion would almost certainly affect domestic programs seen as important by Democratic constituencies and by rank-and-file lawmakers, possibly including Medicare and Medicaid, the government-funded program which provide health care coverage for the elderly and poor.
Any such proposals could also be used by Republicans in the 2012 congressional and presidential election campaign, if only to blunt attacks made by Democrats.
The government reached its current $14.3 trillion borrowing limit several weeks ago, and Treasury officials have been relying on accounting maneuvers to continue to pay the nation's bills without additional borrowing.
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Associated Press writers Andrew Taylor, Laurie Kellman, Ben Feller, Julie Pace and Erica Werner contributed to this report.


Updated : 2021-06-17 17:47 GMT+08:00