President Barack Obama's insistence that Congress solve the nation's debt crisis through the 2012 elections emerged as a key sticking point as Democrats and Republicans urgently pieced together competing plans Monday to prevent a first-ever government default next week.
House Speaker John Boehner forged ahead with a plan to raise the current $14.3 trillion debt ceiling by about $1 trillion, along with commensurate spending cuts.
That would require lawmakers to go through the painful process again next spring with an even larger debt and deficit package.
With little more than a week before an Aug. 2 deadline, Obama canceled fundraising appearances Monday.
In the Senate, Majority Leader Harry Reid was set to reveal a $2.7 trillion package of spending cuts to accompany a debt hike big enough to avoid another vote before 2013.
Both the Dow Jones and Standard & Poor's 500 were down only slightly in early trading Monday on Wall Street, an indication that investors believe a default will be avoided.
Boehner was set to meet with his chamber's Republicans to discuss his plan in detail. Aides described it as a two-step process, with an immediate $1.2 trillion in cuts and spending caps coupled with a $900 billion debt ceiling increase.
A new congressional panel would be charged with producing nearly $2 trillion in additional cuts and another increase in the debt ceiling to be voted on next year and a second increase in the debt limit would have to be voted on next year, conditioned on congressional approval of the additional cuts.
GOP officials said Democrat Reid warmed to the idea in private talks on Sunday.
But after meeting with Obama Sunday evening, Reid instead called Boehner's proposal "a nonstarter in the Senate and with the president" because it would permit only a short-term increase of the sort that has already been rejected by Democrats.
Boehner's office rejected that description.
Reid, D-Nev., said Sunday that Boehner's proposal "would not provide the certainty the markets are looking for and risks many of the same dire economic consequences that would be triggered by default itself." Instead, Reid plans Monday to unveil his own new $2.7 trillion package of spending cuts that would also push the government's borrowing authority through next year, a timeline that Obama and top Democrats are demanding.
It would do so without any new revenues, Reid said, thus meeting GOP demands for no new taxes, and Pelosi said Reid's plan also avoided touching Medicare, Medicaid and Social Security.
But Reid's plan was already being privately rejected by Republicans concerned that the cuts it contains would prove illusory, particularly $1 trillion or so in savings claimed by troop cuts in Iraq and Afghanistan over the coming decade.
Reid counters that House Republicans claimed the same savings windfall when they passed their budget earlier this year.
Sen. Chuck Schumer, the No. 3 Democrat in the Senate leadership, said Monday one difficult reality is that no debt-crisis solution can be successful unless it has the support of five top players: Obama, Boehner, Reid, Pelosi and Senate Minority Leader Mitch McConnell.
But Schumer also said he thought Reid's proposal had the best chance of succeeding.
The competing plans were emerging after debt talks between Obama and Boehner on an ambitious $4 trillion package of spending cuts and revenue increases—the so-called "grand bargain"—collapsed spectacularly when Boehner walked out Friday.
The speaker at the time accused Obama of moving the goalposts with demands for more taxes.
The White House disputed that, but the focus of the talks has now largely moved from the White House to Capitol Hill.
The drama seemed certain to play out in nail-biting fashion, and it consumed Washington, as Obama canceled planned appearances at two Democratic fundraisers Monday night in Washington.
He has barely ventured from the White House all month, and additional fundraising trips have also been canceled or postponed.
If the government's authority to borrow money isn't renewed by Aug. 2—its current $14.3 trillion limit having been reached—it won't have cash to pay all its bills.
The administration and many others say that scenario would risk a first-ever federal default, with higher interest rates and other devastating effects cascading through the entire economy.
Both Boehner and Reid were hoping that by presenting their competing plans, they would demonstrate a seriousness that could prevent the world's financial markets from panicking and punishing the U.S. by demanding higher interest rates for the huge amounts of cash it must constantly borrow.
Speaking to the U.S. Chamber of Commerce in Hong Kong early Monday, Secretary of State Hillary Rodham Clinton tried to reassure financial markets that America's economy is sound and that a deal on the debt limit would be reached.
In a conference call with his colleagues on Sunday, Boehner said that his new plan "is gonna require some of you to make some sacrifices." "If we stand together as a team, our leverage is maximized, and they have to deal with us.
If we're divided, our leverage gets minimized," Boehner said, according to excerpts the speaker's office distributed to Republican offices.
"I would prefer to have a bipartisan approach to solve this problem," Boehner said on Fox News Sunday.
"If that is not possible, I and my Republican colleagues in the House are prepared to move on our own." Administration officials took to the airwaves on Sunday to make their case, with White House chief of staff William Daley saying Obama would veto a bill that didn't extend the borrowing limit into 2013.
"The president believes that we must get this uncertainty in order, to help the American economy and help the American people," Daley said on NBC's "Meet the Press." Treasury Secretary Timothy Geithner also underscored administration opposition to a short-term extension of the debt ceiling.
Reaching out to investors, he said on CNN's "State of the Union" that a U.S. default was unthinkable, saying, "We never do that.
It's not going to happen." Schumer was interviewed Monday on MSBNC.
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