July 24, 2011
By JENNIFER STEINHAUER and HELENE COOPER, NY TIMES
WASHINGTON — The House speaker, John A. Boehner, and the Senate majority leader, Harry Reid, were preparing separate backup plans to raise the nation’s debt ceiling on Sunday after they and the White House were unable to form a bipartisan plan that would end an increasingly grim standoff over the federal budget.
The dueling plans emerged after Mr. Boehner walked away from negotiations with the White House on Friday, leading to a frustrating weekend of talks in heat-scorched Washington. The leaders of both parties variously negotiated together over the phone, talked separately, conferred with their caucuses and tried to plot an end to the debt crisis that would assure the capital markets around the world that America would meet its debt obligations.
As the Aug. 2 deadline for lifting the debt ceiling nears, warnings are growing that the nation’s economy may be damaged by the protracted stalemate. A downgrade of the nation’s credit rating, which could raise the cost of borrowing, seemed more likely, deal or no deal.
Mr. Reid, the Senate’s top Democrat, was trying on Sunday to cobble together a plan to raise the government’s debt limit by $2.4 trillion through the 2012 elections, with spending cuts of about $2.7 trillion that would not touch any of the entitlement programs that are dear to Democrats or raise taxes, which is anathema to Republicans.
President Obama could endorse such a plan, even though it would fall far short of the ambitious goal of deficit reduction and entitlement changes that he says are necessary to shore up the nation’s finances.
At the White House on Sunday evening, Mr. Obama spent about an hour meeting in the Oval Office to try to hash out details of the Democratic proposal with Mr. Reid and the House Democratic leader, Nancy Pelosi. The two emerged from the meeting with nothing to say to the throngs of reporters who had been encamped there for the third consecutive weekend, awaiting an agreement on the debt ceiling.
But administration and Congressional officials said that during the meeting, Mr. Obama and the Democratic leaders had resolved to hold firm against any short-term agreement that did not raise the debt ceiling beyond next year’s presidential elections.
“You see how hard this is right now,” one administration official said Sunday night. “Can you imagine going through this again in six months?”
That means, officials say, that Mr. Reid’s proposal may gather steam as the only viable alternative that is palatable to the administration.
The contours of Mr. Boehner’s backup plan were not entirely clear, but it seemed likely to take the form of a two-step process, with about $1 trillion in cuts, an amount the Republicans said was sufficient to clear the way for a debt limit increase through year’s end. That would be followed by future cuts guided by a new legislative commission that would consider a broader range of trims, program overhauls and revenue increases.
“The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that’s possible,” Mr. Boehner said in a “Fox News Sunday” interview. “If that’s not possible, I and my Republican colleagues in the House are prepared to move on our own.”
In a conference call with Republican lawmakers that lasted over an hour on Sunday night, Mr. Boehner said he was seeking “a vehicle that can pass in both houses,” according to someone on the call, who added that Mr. Boehner had made an emotional appeal to his fellow Republicans to stick together. “If we’re divided,” he said, “our leverage gets minimized.”
One freshman lawmaker on the call described Mr. Boehner as sounding weary and said many Republicans were focused on some version of a balanced budget amendment, which was already passed by the House as part of broader legislation but then rejected by the Senate.
For the White House, the Reid proposal represents a Hail Mary pass that is meant to, at the very least, avoid putting the country through a repeat of the debt ceiling negotiations next year, an election year.
Even if Mr. Boehner loses Tea Party members and other conservative Republicans in Congress, the administration hope is that enough House Democrats would vote for the Senate plan that it would offset the loss of conservative Republican votes.
The White House remained largely on the sidelines over the weekend as lawmakers set out with their own plans. While the White House remains adamantly opposed to a two-step deal that does not extend the debt ceiling beyond next year’s elections, administration officials expect that the Senate would modify Mr. Boehner’s proposal.
While a modified plan might fail to gain the support of the more right-leaning and Tea Party-influenced House members, it could win enough Democratic votes to pass if it is blessed by Mr. Reid. However, if Mr. Boehner were to reject Senate modifications and go with a deal that would pass muster with his Republican conference, the Senate would have to offer a rebuttal, as the clock ticks.
The dueling plans were a departure from the so-called grand bargain that Mr. Obama had been pushing, which would have included trillions of dollars in budget and entitlement cuts over the next 10 years along with the elimination of tax loopholes and possibly the addition of new taxes.
The impasse has set the tone for the 2012 presidential race, with the debate growing rancorous and the two parties’ visions for the country at odds.
The enormous deficit challenges have been clearly articulated to voters, as the parties seek unified control of Congress, where the Republicans are the majority in the House and the Democrats in the Senate. Mr. Obama will veto any debt legislation unless it extends the ability of the nation to borrow into 2013, the White House chief of staff, William M. Daley, said on Sunday.
Mr. Daley, appearing on the NBC News program “Meet the Press,” said that world markets and the American economy would not tolerate continued doubts brought on by periodic fights over the debt ceiling. “The president believes that we must get this uncertainty out of the system,” Mr. Daley said.
Minutes after Mr. Daley promised a veto, Senator Tom Coburn, Republican of Oklahoma, said on the same program that Mr. Daley’s remarks were “a ridiculous position, because that’s what he’s going to get presented with.”
Meanwhile, Treasury Secretary Timothy F. Geithner suggested that there was still hope for a grand bargain.
“They are talking again,” Mr. Geithner said in an appearance on “This Week” on ABC. “They’ve been in touch throughout this time.”
Both Mr. Geithner and Mr. Daley said they believed Congress would figure out a way to avoid default.
“The leaders of Congress have said unequivocally that we will meet our obligations,” Mr. Geithner said.
Mr. Daley acknowledged, however, that both sides were still at the brink.
“We are now getting to a point where markets around the world will question whether the political system can come together and compromise for the good of the country,” Mr. Daley said.