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Debt impasse headed for showdown

WASHINGTON — President Barack Obama and House Speaker John A. Boehner escalated their battle over the national debt on Monday, pressing their arguments in a pair of urgently scheduled prime-time television addresses as Congress remained at a loss over how to keep the United States from defaulting next week for the first time.

The challenge facing any plan for reducing the debt was underscored when a new Republican proposal to raise the ceiling on federal borrowing was met Monday with misgivings by some conservatives and skepticism by many GOP freshmen, calling into question whether Boehner, R-Ohio, could even get his own caucus to back his approach.

As Boehner tried to rally support for his two-step plan to cut $3 trillion in spending, Senate Majority Leader Harry M. Reid, D-Nev., offered a strikingly similar proposal for increasing the debt limit before the Aug. 2 deadline. The two leaders, however, remained bitterly divided over Boehner's demand to hold another vote next year to further expand the government's borrowing authority.

With financial markets warily watching the Capitol Hill drama, Obama used his 15-minute address from the White House to urge "shared sacrifice" in tackling the debt, calling for deep cuts in federal spending to be coupled with higher taxes on the wealthy and on large corporations.

Boehner countered with a shorter speech from the Capitol, in which he blamed the fiscal crisis on Washington's spending and urged deep cuts to cure it. He said Reid's plan lacks the kind of real spending cuts needed for the government to operate within its means.

The government has exceeded its $14.3 trillion debt limit, and Treasury Secretary Timothy F. Geithner has said that without action by Aug. 2, the government will not be able to pay its bills. Credit-rating firms warned that they could downgrade the U.S. debt, which could spur higher interest rates and cause aftershocks in global markets.

Absent an agreement between Boehner and Reid, the House and the Senate are headed for a high-wire act this week.

Neither leader was certain that he could rally the votes to win. With few House Democrats expected to support his approach, Boehner would need the support of an overwhelming majority of his 240-member conference.

But those hopes were dampened Monday by conservative critiques of the plan, highlighted by Rep. Jim Jordan of Ohio, who leads a conservative caucus of more than 170 GOP members. Jordan is one of 39 House Republicans who has insisted that the debt ceiling be increased only in return for Congress sending to the states a constitutional amendment requiring a balanced budget.

Reid's measure faces its own problems, because Republicans criticize some of his savings as accounting tricks. So Reid continued private talks with Senate Republicans in an effort to modify Boehner's package to make it more palatable to Obama, who has said he would veto any proposal that provided only a short-term increase in the debt ceiling.

The speeches ended an intense day in Washington. Anxiety hung over several closed-door party caucuses across the Capitol.

After a 75-minute briefing Monday afternoon, rank-and-file Republicans exited a basement room at the Capitol with mixed reviews of Boehner's approach. He can count on a core group of at least 100 longtime GOP members, lawmakers said.

Many Republicans, particularly among the 87 freshmen, said they need more time to process the complex details of a proposal that would set up a handful of votes over the next six months.

Asked if his plan could win enough Republican votes, Boehner shrugged and deferred to House Majority Whip Kevin McCarthy.

"We ask all Democrats that want to join with us to put this House on the right path, that they could join with us on this bill," McCarthy said.

Democrats, in turn, are urging Republicans to back Reid's approach, saying GOP members have previously supported every item in the package. Reid said his proposal represents the only option for pushing a debt-limit increase through Congress — and getting it signed by the president.

"This isn't a game of chicken. This is a game of reality," Reid told reporters. "We're about to go over a cliff."

Competing plans in Congress

Here is a comparison of the latest deficit reduction plans being crafted in the House and Senate. Votes may take place as early as Wednesday.

House Republicans

. The plan: a two-stage deficit reduction plan that would allow the $14.3 trillion federal debt limit to rise immediately by about $1 trillion in exchange for $1.2 trillion in spending cuts. A new 12-member committee evenly divided between Democrats and Republicans would be assigned the job of finding an additional $1.8 trillion in savings. The panel would have special privileges to bring legislation before the House and Senate, and its proposal would not be subjected to amendment or Senate filibuster. If the plan passed, the president could seek another $1.6 trillion increase in the debt limit based on the new committee's proposal.

. Democrats' objections: Senate Majority Leader Harry Reid said that Republicans were essentially trying to embarrass President Barack Obama in the middle of the 2012 election year by forcing another debt-limit showdown. He said Democrats would not go along with any plan that does not guarantee a debt-limit increase through next year.

Senate Democrats

. The plan: a $2.7 trillion menu of spending cuts and an increase in the debt limit though 2012. Over the next 10 years, it would cut $1.2 trillion from federal agency budgets and wring savings from recurring programs like agriculture subsidies. Like some earlier Republican plans, the proposal also counts about $1 trillion in savings from winding down combat operations in Iraq and Afghanistan — a point objected to by House Republicans who consider such savings as budget trickery since they would occur regardless.

. Republican objections: Boehner told reporters, "The plan is full of gimmicks," and makes no "real changes in the spending structure of our government, and it doesn't deal with the biggest drivers of our deficit and our debt, and that would be entitlement programs."

New York Times

Markets react

The Dow Jones falls 88.36 points as negotiations continue. Business, 5B

Debt impasse headed for showdown 07/25/11 [Last modified: Tuesday, July 26, 2011 12:20am]
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