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'It's decision time' on deficit, Obama says

WASHINGTON — President Barack Obama prepared Thursday to bring bipartisan talks over the debt to a close, as Senate leaders worked across party lines to craft an alternative strategy to raise the nation's $14.3 trillion debt limit and avert a government default.

"It's decision time," Obama told congressional leaders after meeting at the White House for a fifth straight day. Obama gave Republicans until early Saturday to tell him whether any of three options for trimming the federal budget would win GOP support.

"We need concrete plans to move this forward," he said.

A breakthrough in the White House talks looked unlikely, however, leaving the Senate framework as the chief option for raising the debt limit before Aug. 2, when the Treasury will be unable to pay its bills without additional borrowing authority.

That deadline grew more urgent Thursday, as China, the U.S. government's largest foreign creditor, called on U.S. policymakers to take action to protect the interests of investors. Federal Reserve Board Chairman Ben Bernanke warned that failure to raise the debt ceiling would amount to "a self-inflicted wound" that would cause "a very severe financial shock" to the global economy. And Treasury Secretary Timothy Geithner told lawmakers that they are running out of time.

"We've looked at all available options, and we have no way to give Congress more time to solve this problem," Geithner told reporters after meeting behind closed doors with Senate Democrats. "The eyes of the country are on us, and the eyes of the world are on us, and we need to make sure that we stand together and send a definitive signal that we are going to take the steps necessary to avoid default."

The ticking clock brought a day of high political drama on Capitol Hill, as lawmakers grew increasingly nervous about the lack of movement in the House. Many conservative Republicans continued to deny claims of impending calamity, and Democrats unleashed an unusually harsh attack against the man they view as the biggest impediment to compromise, House Majority Leader Eric Cantor, R-Va.

Senate Majority Leader Harry Reid, D-Nev., said Cantor "shouldn't even be at the table" in the White House talks, where Cantor has eclipsed House Speaker John Boehner, R-Ohio, as the voice of the GOP in demanding unprecedented spending cuts while rejecting Democratic calls for fresh tax revenue.

Reid accused Cantor of fueling the "irresponsible voices in the Republican Party" who continue to view default as a legitimate option for restraining the size of government.

Boehner and Cantor went out of their way Thursday to present a unified front. Boehner slung his arm around Cantor's shoulders during a televised news conference, telling reporters that "we have been in this fight together."

"Listen, we're in the foxhole," Boehner said. "This is not easy."

Still, clear differences were apparent between the two GOP leaders. While Cantor dismissed the strategy emerging in the Senate as unworkable, Boehner on Thursday opened the door wide to that approach, saying, "I think it's worth keeping on the table."

Details of the Senate approach were sketchy. Reid confirmed, however, that one of the options under discussion is what Senate Minority Leader Mitch McConnell, R-Ky., has called "Plan B": an elaborate legal framework to raise the debt limit by $2.5 trillion that would place the entire political burden for the unpopular move on Obama.

Separately, House leaders are pursuing an amendment to the Constitution that would require Congress to balance the budget. With a vote expected next week, House GOP aides said the vote could go a long way toward soothing conservative angst over the debt limit, even if it doesn't pass.

Before bringing talks to a close Thursday, Obama gave Republicans three options: the far-reaching $4 trillion deal that includes taxes and cuts to entitlement programs; a $2 trillion package that would require each side to give only a little; and a "much smaller" package that would include no tax increases and no cuts to entitlement programs — and do much less to solve the nation's financial problems.

Two questions about the debt

How much of the $14.3 trillion outstanding U.S. debt does China hold?

The U.S. government owes itself $4.6 trillion, mostly borrowed from Social Security revenues. The remaining $9.7 trillion is owed to investors in Treasury securities — banks, pension funds, individual investors, state and local governments and foreign investors and governments. Nearly half of that — $4.5 trillion — is held by foreigners including China with $1.15 trillion and Japan with $907 billion.

How did the debt grow from $5.8 trillion in 2001 to its current $14.3 trillion?

The biggest contributors to the nearly $9 trillion increase over a decade, from largest to smallest, were:

• 2001 and 2003 tax cuts under President George W. Bush: $1.6 trillion.

• Additional interest costs: $1.4 trillion.

• Wars in Iraq and Afghanistan: $1.3 trillion.

• Economic stimulus package under Obama: $800 billion.

• 2010 tax cuts, a compromise by Obama and Republicans that extended jobless benefits and cut payroll taxes: $400 billion.

• 2003 creation of Medicare's prescription drug benefit: $300 billion.

• 2008 financial industry bailout: $200 billion.

• Hundreds of billions less in revenue than expected since the Great Recession began in December 2007.

• Other spending increases in domestic, farm and defense programs, adding lesser amounts.

Associated Press

'It's decision time' on deficit, Obama says 07/14/11 [Last modified: Thursday, July 14, 2011 11:09pm]
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