Obama warns GOP leaders: 'Don't call my bluff'

WASHINGTON — President Barack Obama bluntly told Republican congressional leaders Wednesday they must compromise quickly if the government is to avoid an unprecedented default, adding, "Don't call my bluff" by passing a short-term debt limit increase he has threatened to veto.

The presidential warning, directed at House Majority Leader Eric Cantor, R-Va., marked an acrimonious end to a two-hour negotiating session at the White House that produced no evident progress toward a compromise.

Another round of talks is set for Thursday.

With a threatened default less than three weeks away, Moody's Investors Service announced it was reviewing the U.S. bond rating for a possible downgrade, and the Treasury said the annual deficit was on a pace to exceed $1 trillion for the third year in a row.

With the negotiations at a seeming standstill, Republicans drew a warning of a different sort, from an unlikely source — the party's Senate leader, Sen. Mitch McConnell of Kentucky.

In an interview with radio talk-show host Laura Ingraham, McConnell warned fellow conservatives that failure to raise the debt limit would probably ensure Obama's re-election in 2012.

Republicans, many of them elected with the support of tea party activists in 2010, are demanding deep spending cuts as the price for allowing a debt limit increase to pass. But negotiations have bogged down over Obama's demand for tax increases that GOP lawmakers say they won't accept.

McConnell predicted that if Congress fails to act, Obama will argue "that Republicans are making the economy worse and try to convince the public, maybe with some merit, if people start not getting their Social Security checks and military families start getting letters saying their service people overseas don't get paid."

"You know, it's an argument he has a good chance of winning, and all of a sudden we (Republicans) have co-ownership of a bad economy," McConnell said. "That is a very bad positioning going into an election."

McConnell said his first choice was to reach a good compromise with Obama.

Short of that, "my second obligation is to my party ... to prevent them from being sucked into a horrible position politically that would allow the president probably to get re-elected because we didn't handle this difficult situation correctly."

With bipartisan talks scheduled to resume on Thursday, two Democratic officials quoted Obama as telling Republicans, "Enough is enough. We have to be willing to compromise. It shouldn't be about positioning and politics and I'll see you all tomorrow."

Talking with reporters at the Capitol after he left the White House, Cantor said the president had backed away from spending cuts agreed to earlier because of pressure from Democrats in Congress. He said the two sides were far from agreement on a $2.4 trillion package of deficit cuts that would allow the Treasury to borrow through the next election.

As a result, the Virginian said he had reversed his own position, and was now willing to ask the House to approve a smaller increase, with a second installment before the 2012 election.

"He got very agitated seemingly and said he had sat here long enough and that no other president, Ronald Reagan wouldn't sit here like this," Cantor said of the president.

Cantor quoted Obama as saying the talks had reached the point that something's got to give," and demanded Republicans either jettison their demand for deficit cuts at least equal to the size of the debt limit or drop their opposition to tax increases.

"And he said to me, 'Eric, don't call my bluff.' He said, 'I'm going to the American people with this.'"