Rival plans ensnarl Congress over debt ceiling

    WASHINGTON (AP) ? One week from a potentially debilitating debt crisis, Democrats and Republicans clashed Tuesday over rival plans to slash spending and increase the nation’s borrowing ability despite President Barack Obama’s endgame appeal for compromise. Financial markets registered their nervousness with the stalemate.

    House Speaker John Boehner, R-Ohio, pushed ahead with his two-step plan, a short-term bill to cut spending about $1.2 billion and extend the debt ceiling for about six months that could come to a vote on Wednesday. House GOP leaders scheduled a second vote Thursday on a balanced-budget constitutional amendment long favored by rank-and-file conservatives.

    Amid uncertainty in the House about the spending bill’s prospects, Boehner told reporters, “This was negotiated in a bipartisan manner between both Houses of the Congress. I do think that we are going to have some work to do to get it passed but I think we can do it.”

    In the Senate, Majority Leader Harry Reid, D-Nev., challenged Republicans to back his competing legislation, arguing that the no-taxes, government-cuts proposal was just what they wanted.

    “In short, it’s everything the Republicans have demanded wrapped up in a bow and delivered to their door,” Reid said at the start of the Senate session.

    In a prime-time address Monday, Obama pleaded for compromise and urged Americans to contact their lawmakers.

    “We can’t allow the American people to become collateral damage to Washington’s political warfare,” Obama told the nation.

    Boehner, in a nationally televised rebuttal, said he had given “my all” to work out a deal with Obama.

    “The president would not take yes for an answer,” he said.

    Congressional officials said the House switchboard was near capacity with a high volume of calls and suggested using backup numbers. Unclear was whether the callers echoed Obama’s argument or backed Boehner’s call for his approach.

    In early trading on Wall Street, stocks fell as the financial markets warily watched the bitter standoff.

    The extraordinary back-to-back appeals by Obama and Boehner gave no indication that weeks of brinkmanship and sputtering talks over long-term deficit reductions were on the verge of ending. With an Aug. 2 deadline rapidly closing, Congress and the White House had limited options to avoid a potential government default that could send the already weak economy into a damaging swoon.

    Even as hints of progress seemed hard to find, Gene Sperling, chairman of the president’s Council of Economic Advisers, said this was no time to be engaging in “doomsday scenarios.”

    At the same time, Sperling reiterated Obama’s previous statements threatening to veto legislation with no more than a six-month extension to the debt limit, but he didn’t directly renew the threat when asked about it in a broadcast interview Tuesday morning.

    Both Democrats and Republicans softened previous hardline positions and appeared ready to leave quarrels over entitlement programs and higher tax revenues for later. But continued bickering on Capitol Hill overshadowed any signs of emerging common ground.

    Obama reiterated his call for achieving lower deficits though spending cuts and new tax revenues. But in a notable retreat, he voiced support for a Senate Democratic plan that would reduce deficits by about $2.7 trillion over 10 years only with spending cuts, not with additional revenue.

    The Senate plan, unveiled by Reid, and the proposal announced the same day by Boehner overlap in significant ways. Both identify about $1.2 trillion in spending cuts to the day-to-day operating budgets of government agencies, though Reid’s proposal also counts an extra $1 trillion in savings from winding down wars in Iraq and Afghanistan. Both proposals would create a bipartisan congressional commission to identify further deficit reductions, especially in major health care programs such as Medicare and Medicaid.

    The primary difference between the two is timing. Reid’s proposal would raise the debt ceiling enough so that it wouldn’t have to be reconsidered until 2013, beyond the 2012 elections, as demanded by Obama. The GOP plan would only extend the debt ceiling for about six months.

    For Republicans, the timing provides crucial leverage to force Democrats and the president to cut spending in Medicare, Medicaid and Social Security, expensive benefit programs that Democrats have long protected, despite escalating costs.

    Obama has said he would not sign a short-term extension of the debt ceiling, but on Monday he stopped short of issuing a veto threat. Still, he said, a six-month-long increase in the debt ceiling would allow Republicans to try to force their will once again, demanding “harsh cuts” in program like Medicare and refusing to allow tax increases on the wealthy.

    “Based on what we’ve seen these past few weeks, we know what to expect six months from now,” he said. “Once again, the economy will be held captive unless they get their way.”

    Credit rating agencies such as Moody’s and Standard & Poor’s have threatened to downgrade the United States’ gold-plated AAA rating if Congress and the White House don’t extend the debt ceiling and take steps to bring long-term deficits under control.

    While both plans would increase the debt ceiling, ratings agencies have said a short-term increase such as the one proposed by House Republicans may not be enough to protect the U.S. from a ratings downgrade. What’s more, neither plan offers the larger deficit-reducing assurances that credit ratings have said they need for the U.S. to retain its place as one of the most secure investments in the world.

    Until last week, Boehner had been negotiating with Obama for a deficit reduction package of up to $4 trillion that included spending reductions in Medicare, Medicaid and Social Security and provided for up to $800 billion in new tax revenue over 10 years.

    But Boehner broke off those discussions after Obama asked for an additional $400 billion in tax revenue and after the two sides could not narrow the gap on other provisions.

    “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. That is just not going to happen,” the speaker said.

    In offering his new plan, Boehner had the backing of his top Republican leadership team. But he risked losing some potentially critical Republican votes by scaling back a bigger plan that passed the House and would have cut as much as $6 trillion. That plan failed in the Senate.

    Rep. Jim Jordan of Ohio, one of the leading advocates of legislation that cleared the House last week and died in the Senate, said he could not support Boehner’s new plan.

    Sen. Dick Durbin of Illinois, the No. 2 Democrat in the Senate, said in an interview that he believes first-term House Republicans have adamantly opposed new revenues in a debt-crisis solution because they’re worried about primary challenges in their home districts.

    But Durbin also said in answer to a question that if the Aug. 2 deadline is allowed to pass, the government will find itself with about $170 billion in money to pay bills, but more than $370 billion in payments immediately due.

    Durbin and Sperling were interviewed on MSNBC.


    Associated Press writer Jim Abrams contributed to this report.