Backup plan to raise debt limit is in the works

Senate leaders, Obama in talks on deal

President Obama conducted a meeting with the congressional leadership yesterday in Washington. President Obama conducted a meeting with the congressional leadership yesterday in Washington. (Jason Reed/Reuters)
By Lori Montgomery and Paul Kane
Washington Post / July 15, 2011

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WASHINGTON - President Obama prepared yesterday to bring bipartisan talks over the debt to a close, as Senate leaders worked across party lines to craft an alternative strategy to raise the nation’s $14.3 trillion debt limit and avert a government default.

“It’s decision time,’’ Obama told congressional leaders after meeting at the White House for a fifth straight day. Obama gave Republicans until early tomorrow to tell him whether any of three options for trimming the federal budget would win GOP support.

“We need concrete plans to move this forward,’’ he said.

A breakthrough in the White House talks looked unlikely, however, leaving the Senate framework as the chief option for raising the debt limit before Aug. 2, when the Treasury will be unable to pay its bills without additional borrowing authority.

That deadline loomed ever larger yesterday, as China, the US government’s largest foreign creditor, called on US policy makers to take action to protect the interests of investors. Federal Reserve Board chairman Ben Bernanke warned that failure to raise the debt ceiling would amount to “a self-inflicted wound’’ that would cause “a very severe financial shock’’ to the global economy. And Treasury Secretary Timothy Geithner told lawmakers that they are running out of time.

“We’ve looked at all available options, and we have no way to give Congress more time to solve this problem,’’ Geithner said after meeting behind closed doors with Senate Democrats. “The eyes of the country are on us, and the eyes of the world are on us, and we need to make sure that we stand together and send a definitive signal that we are going to take the steps necessary to avoid default.’’

The ticking clock spawned a day of high political drama on Capitol Hill, as lawmakers grew increasingly nervous about the lack of movement in the House. Many conservative Republicans continued to deny claims of impending calamity, and Democrats unleashed an unusually harsh and personal attack against the man they view as the biggest impediment to compromise, House majority leader Eric Cantor, Republican of Virginia.

Senate majority leader Harry Reid, Democrat of Nevada, said Cantor “shouldn’t even be at the table’’ in the White House talks, where Cantor has eclipsed House Speaker John Boehner, Republican of Ohio, as the voice of the GOP in demanding unprecedented spending cuts while rejecting Democratic calls for fresh tax revenue.

Boehner and Cantor went out of their way yesterday to present a unified front. Boehner slung his arm around Cantor’s shoulders during a televised news conference, telling reporters that “we have been in this fight together.’’

Still, clear differences were apparent between the two GOP leaders. While Cantor dismissed the strategy emerging in the Senate as unworkable, Boehner yesterday opened the door wide to that approach, saying, “I think it’s worth keeping on the table.’’

Details of the Senate approach were sketchy. Reid said he is working with the White House and minority leader Mitch McConnell of Kentucky, on “a number of different alternatives’’ for pushing a debt limit increase quickly through the Senate and the more hostile House.

Reid said one of the options under discussion is what McConnell has called “Plan B’’: an elaborate legal framework to raise the debt limit by $2.5 trillion that would place the entire political burden for the unpopular move on Obama.

Unveiled earlier this week, McConnell’s plan included no mechanism to force the sharp spending cuts that Republicans have demanded in exchange for voting to lift the debt limit. But in a sign of the unusual political times, Democrats said they were reluctant to go along with that proposal and are pressing to add roughly $1.5 trillion in cuts to government agencies to the measure.