Obama signals movement on debt fix
U.S. President Barack Obama was meeting Wednesday with senior congressional legislators for budget talks, the White House says.
Obama met first with Democratic leaders and with Republicans later.
White House spokesman Jay Carney also signalled a position shift by Obama in a bid to resolve the impasse, less than two weeks before the deadline when the U.S. could default on its debt.
Plans on the table
There are three plans being considered by legislators for resolving the U.S. debt impasse:
- The "Gang of Six" plan: Named after six senior senators, this bipartisan proposal would cut the deficit by almost $4 trillion over a decade including an immediate 10-year, $500-billion down payment that would come as Congress caps the agency budgets it passes each year. It also requires an additional $500 billion in cost curbs on federal health-care programs, cuts to federal employee pensions, curbs in the growth of military health care and retirement costs, and modest cuts to farm subsidies. Additionally, it would cut the top personal income tax rate from 35 per cent to 29 per cent and reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings and families with children.
- The "Cut, Cap and Balance" plan: This bid by House Republicans would make $111 billion in immediate cuts, cap overall future spending at 18 per cent of the U.S. economy and require both houses of Congress to approve a balanced budget amendment to the Constitution and send it to the states for ratification.
- The Reid-McConnell plan: Originally pitched by Senate Republican leader Mitch McConnell, it would allow U.S. President Barack Obama to order up as much as $2.5 trillion in new debt without approval by Congress, which could only block the administration from issuing new debt if Congress disapproves by a veto-proof two-thirds margin in both House and Senate. In exchange, it would exact smaller spending cuts than the "Cut, Cap and Balance" initiative. For his support, Senate Democratic majority leader Harry Reid wants to add a requirement for a bipartisan panel of 12 legislators to negotiate on a compromise to cut the deficit this year, and a smaller, consensus package of spending cuts in the $1.5-trillion range over 10 years, mostly taken from the agency budgets passed by Congress each year. That package would come up for a vote later this year.
- The "Grand Bargain" plan: The biggest of three put forward by President Obama, calling for spending cuts of $4 trillion over 10 years through reductions in cabinet agency operating budgets, the closing of tax loopholes, curbs on growth in Medicare, Medicaid and Social Security and cuts to farm subsidies and federal pensions. Two smaller-scale compromise possibilities include $2 trillion in deficit cuts, but with no cuts to Social Security and smaller changes to Medicare, or a smaller deal in the $1.5-trillion to $1.7-trillion range, with modest Medicare cuts, if any, and no tax increases.
The administration might be willing to accept a short-term increase in the government's $14.3-trillion US borrowing limit if it includes a comprehensive deal to cut the deficit, the White House said. But the extension would just be for a few days to give legislators time to approve the comprehensive deal, White House spokesman Jay Carney said in a written statement.
At the same time, the leading proposal to resolve the deadlock received mixed reviews.
House minority leader Nancy Pelosi, the top Democrat in the House of Representatives, gave a mildly positive view of a bipartisan plan emerging in the Senate.
"It has some good principles in it," Pelosi told journalists.
But at the same time, a senior Republican, House armed services committee chairman Howard (Buck) McKeon, complained that it would cut defence spending way too much and would unfairly curb military health and retirement benefits.
"This proposal raises serious implications for defence and would not allow us to perform our constitutional responsibility to provide for the safety and security of our country," McKeon wrote in a memo to fellow Republicans on the committee.
The proposal, put together by Senate leaders now known as the "Gang of Six," would cut the deficit by almost $4 trillion over a decade through a mix of spending cuts and new tax revenues.
On Tuesday, Obama and many senators endorsed the plan.
Deadline is Aug. 2
The government has said it will default on Aug. 2 if legislators don't reach a deal to raise the nation's borrowing limit cap.
On Tuesday, the House passed a bill by a vote of 234-190 that would establish a balanced budget constitutional amendment as a condition of any increase in the debt ceiling.
The legislation, dubbed "Cut, Cap and Balance" by supporters, would make an estimated $111 billion in immediate budget reductions and ensure that total spending declined in the future in relation to the overall size of the economy.
It also would require both the House of Representatives and Senate to approve a balanced budget amendment to the Constitution and send it to the states for ratification.
But it was unlikely to pass the Democrat-dominated Senate and also faced a White House veto.
Now that the House has blown off steam, Obama said Tuesday that he wants to "start talking turkey" with top congressional leaders like House Speaker John Boehner, Senate majority leader Harry Reid and Senate Republican head Mitch McConnell.
In the Senate, however, many Republicans warmed to the new bipartisan budget plan, revealing a thawing in their attitudes on raising new tax revenues.
The plan by the "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 shake the markets, drive up interest rates and threaten to take the country back into a recession.
But the plan's authors clearly hope it could serve as a template for a "grand bargain" later in the year that could erase perhaps $4 trillion from the deficit over the coming decade.
Speaking on the Senate floor Wednesday morning, Democratic leader 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," he said, referring to a plan he's working on with Senate Republican leader McConnell to give Obama new powers to obtain an increase in the borrowing cap unless overridden by Congress.
With files from The Associated Press