Debt talks to steal Senate’s recess

Lawmakers make deal a priority, but no concessions yet

By Alan Fram
Associated Press / July 1, 2011

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WASHINGTON - The Senate canceled its planned July Fourth recess yesterday, but partisan divisions remained razor-sharp as the clock ticked on efforts to strike a deal to avoid a government default and trim huge federal deficits.

A day after President Obama accused congressional leaders of procrastinating over the impasse, Senate majority leader Harry Reid, Democrat of Nevada, announced that the chamber would meet beginning Tuesday. The Republican-run House is not in session this week but had already been scheduled to be at work next week.

Despite the Senate’s schedule change, there was no indication the two sides had progressed in resolving their chief disagreement. Democrats insist that a deficit-cutting package of deep spending cuts also include higher taxes for the wealthiest Americans and fewer tax breaks for oil companies. Republicans say any such agreement would be defeated in Congress, a point Senate minority leader Mitch McConnell, Republican of Kentucky, made anew when he invited Obama to meet with GOP lawmakers at the Capitol yesterday.

“That way he can hear directly from Republicans why what he’s proposing won’t pass,’’ McConnell said on the Senate floor. “And we can start talking about what’s actually possible.’’

McConnell’s invitation seemed almost like a taunt, because well before he spoke, the White House had announced that Obama was heading to Philadelphia to attend Democratic fund-raising events.

White House spokesman Jay Carney defended Obama’s decision to attend the fund-raisers, saying, “We can walk and chew gum at the same time.’’ He also said McConnell had merely “invited the president to hear what would not pass. That’s not a conversation worth having.’’

The Obama administration has warned that if the government’s $14.3 trillion borrowing limit is not raised by Aug. 2, the nation will face its first default ever, potentially throwing world financial markets into turmoil, raising interest rates, and threatening the economic recovery.

Many congressional Republicans indicate they’re unconvinced that such scenarios would occur.

One Democratic official familiar with the debt talks said the real deadline for reaching a bipartisan agreement on the debt and deficit reduction is mid-July, in order to give congressional leaders time to win votes and put final details of a deal into shape. The official spoke on condition of anonymity to reveal details of private negotiations.

Increasing the current borrowing limit by about $2.4 trillion would carry the government until the end of 2012 - thereby avoiding another congressional vote on the issue until after the next presidential and congressional elections. Republicans have insisted on coupling any extension with at least an equal amount of budget savings.

Obama has said that in bipartisan talks, negotiators have found more than $1 trillion in potential spending cuts over the coming decade, including reductions favored by both sides.

The Democratic official said yesterday that of those cuts, roughly $200 billion would come mainly from savings from Medicaid and Medicare, the federal health insurance programs for the poor and elderly.

The White House is also proposing about $400 billion in higher tax revenues. Republicans want no tax increases and deeper spending cuts than Democrats have proposed.