Amid debt talks, House budget plan faces Senate

By Jim Kuhnhenn

Associated Press

Published: Friday, July 22 2011 7:49 a.m. MDT

WASHINGTON — The Senate is moving to cast away House Republicans' budget-cutting plan Friday, clearing the way for increasingly urgent talks over raising the nation's debt limit. President Barack Obama and House Speaker John Boehner searched once more for an ambitious $4 trillion grand bargain, but officials said wide differences remained.

Less than two weeks from an Aug. 2 deadline that could precipitate a first-ever government default, the continuing Obama-Boehner talks kept alive the possibility of substantial deficit reduction that would combine cuts in spending on major benefit programs like Medicare and Medicaid and revenue increases through a broad overhaul of the tax code.

"We have the opportunity to do something big and meaningful," Obama declared in a newspaper opinion piece. Later Friday, the president was taking his case to the public again in a town hall-style meeting. From the Capitol, Boehner said House Republicans were prepared to compromise and prodded Obama: "The ball continues to be in the president's court."

Entering a Friday morning meeting of House Republicans, Majority Whip Kevin McCarthy, R-Calif., was asked what the leadership's message to GOP members would be. "We all stick together," he said.

Even as Republicans contended with the demands of tea party-backed House members, worry was shifting to how to keep Democrats in line if a compromise is reached between Boehner and Obama.

Talk of a deal prompted a spasm of distress among Senate Democrats worried that Obama would agree to immediate cuts but put off steps to increase tax revenues that the president has said are key to any agreement. The White House immediately sought to tamp down talk of an impending deal.

Democratic officials familiar with the talks said both the cuts to benefit programs such as Medicare and a tax overhaul are too complicated to undertake quickly and would have to wait up to a year to negotiate. The officials, however, said any agreement would have to have strict requirements that would guarantee Congress had to act.

First, however, the Democratic-controlled Senate on Friday planned to dispense with a House-passed measure that would raise the debt limit by $2.4 trillion on the condition that Congress sends a constitutional balanced budget amendment to the states for ratification and approves trillions in long-term spending cuts.

Senate Majority Leader Harry Reid, D-Nev., said the legislation "doesn't have one chance in a million of passing the Senate," and privately senior Republicans in both houses were anticipating its defeat.

That left bargaining for a bipartisan compromise as the only alternative. Negotiations were proceeding on multiple fronts as officials searched for the clearest path to avoid a potentially devastating default. Each path faced sizable hurdles.

One short-term plan under discussion by some House Republicans would cut spending by $1 trillion or more immediately and raise the debt ceiling by a similar amount, permitting the government to borrow into early 2012. But Obama has insisted on an increase that lasts into 2013, past next year's elections. That would require raising the debt ceiling by about $2.4 trillion.

White House spokesman Jay Carney said Thursday that Obama remains "unalterably opposed" to debt limit extensions in the order of six months, nine months or one year. "His premise is that we have to raise the debt ceiling for an extended period of time into 2013 regardless," Carney said.

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