J. Scott Applewhite, Associated Press
WASHINGTON — The political fight to keep the United States out of default on its financial obligations turned Wednesday to a resurrected bipartisan plan in the Senate, the broad outlines of the deal supported by President Barack Obama because it meets his conditions of spending cuts combined with increased tax revenue.
Democratic leaders in Congress were invited to the White House for talks with Obama Wednesday afternoon, a day after conservative tea party-backed Republicans in the House of Representatives passed largely symbolic legislation that would slash the U.S. debt and make additional borrowing contingent on passage of a constitutional balanced budget amendment.
That legislation faced almost certain defeat in the Democrat-controlled Senate, and Obama has vowed to veto it should it ever reach his desk.
Before the House could vote or even fully debate its bill, Obama moved to undercut it when he marched into the White House press room to laud an unexpectedly rejuvenated bipartisan Senate plan — that cuts spending and raises taxes — as "broadly consistent" with his ideas for cutting the nation's debt. He held out hope it would provide an opening for both houses of Congress to raise the debt ceiling.
The plan by the Senate's so-called bipartisan Gang of Six is far too complicated and contentious to advance before an Aug. 2 deadline to avoid a default that Treasury Secretary Timothy Geithner and other experts warn would rattle markets, drive up interest rates and threaten to take the country back into a recession. But its authors clearly hope that it could serve as a template for a "grand bargain" later in the year that could erase perhaps $4 trillion from the debt over the coming decade.
Unless Congress agrees to increase the federal borrowing limit beyond the current cap of $14.3 trillion, the administration will be unable to pay all the government's bills. That would leave the Obama administration with the hard choices of whether to make payments to holders of Treasury bonds or send out checks to retirees relying on Social Security, the government-run pension plan.
Speaking on the Senate floor Wednesday, Democratic leader Harry Reid said he was confident Obama and congressional negotiators could avoid a government default, but the Senate still needed to hear from the House.
"We have a plan to go forward over here so I await word from the Speaker," said Reid, who also mentioned that he spoke to Obama Tuesday night.
The alternative Senate plan languished for months but returned to the fore when Republican Sen. Tom Coburn rejoined the group this week. It would seek an immediate $500 billion "down payment" on cutting the deficit as the starting point toward slashing indebtedness by slightly less than $4 trillion over the coming decade. That action would be finalized in a second piece of legislation.
The Gang of Six — three senators from each party — briefed other senators on the group's plan after a seemingly quixotic quest that took months, drew disdain at times from the leaders of both parties and appeared near failure more than once.
The plan as described Tuesday was almost certain to upset the core constituencies of both parties.
Liberal Democrats oppose efforts to make major cuts in cherished social programs. The Senate plan includes steps to slow the growth of Social Security, the federal pension plan for retirees, and to cut at least $500 billion from Medicare and Medicaid, the federal programs that subsidize health care for the elderly and poor.
The plan would also raise revenues by about $1 trillion over 10 years through a major overhaul of the tax code, challenging Republican Party orthodoxy that has held sway for two decades.
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