WASHINGTON – In a last-minute stab at compromise, Republican congressional leaders and the White House made significant progress Saturday toward a deal to avert a government default, according to officials familiar with the talks.
Under the plan, the nation’s debt limit would rise in two steps by about $2.4 trillion and spending would be cut by a slightly larger amount, these officials said. The first stage – about $1 trillion – would take place immediately and the second later in the year.
Congress would be required to vote on a balanced budget amendment to the Constitution, but none of the debt limit increase would be contingent on its approval.
One official said the two sides had settled on general concepts but added that there were numerous details to be worked out and no assurance of a final agreement.
Still, word of significant progress after weeks of stalemate offered the strongest indication yet that an economy-crippling default might be averted.
The officials who described the talks did so on condition of anonymity.
Without legislation in place by Tuesday, administration officials say the Treasury will run out of funds to pay all the nation’s bills. They say a subsequent default could prove catastrophic for the U.S. economy and send shockwaves around the world.
The president is seeking legislation to raise the government’s $14.3 trillion debt limit by about $2.4 trillion, enough to tide the Treasury over until after the 2012 elections. Over many weeks, he has agreed to Republican demands that deficits be cut – without a requirement for tax increases – in exchange for additional U.S. borrowing authority.
But President Barack Obama has threatened to veto any legislation that would require a second vote in Congress for any additional borrowing authority to take effect, saying that would invite a recurrence of the current crisis in the heat of next year’s election campaigns.
First word of an effort to reach a compromise came at midafternoon from Senate Republican Leader Mitch McConnell and House Speaker John Boehner – Obama’s principal Republican antagonist in a contentious era of divided government.
Senate Majority Leader Harry Reid heatedly denied it on the Senate floor but several hours later said events had changed.
“There are many elements to be finalized … there is still a distance to go,” he said in dramatic late-night remarks on the Senate floor.
“I’m glad to see this move toward cooperation and compromise,” he added.
He said he was optimistic any agreement would not include a short-term extension of the nation’s debt limit – a point on which Obama has insisted.
Officials familiar with the discussions said that while the first-step increase in borrowing authority and cuts in spending would happen at once, the next step would be somewhat more complicated.
The additional increase in borrowing authority would depend on creation of a special committee of lawmakers charged with recommending spending cuts of a slightly larger size. If the panel failed to act, or its proposals were rejected in Congress, automatic spending cuts would take effect to slice spending by slightly more than the second installment’s additional borrowing authority.
White House officials had no immediate comment.
Reid said that at the request of White House officials he was postponing a test vote set for shortly after midnight on his own legislation to raise the debt limit while cutting spending.
Republicans opposed his bill and said in advance that they had the votes to block its advance.
Halfway around the world, on a visit to Camp Leatherneck in Afghanistan, the nation’s top military officer fielded questions from troops asking if they would be paid in the event of a default.
“I actually don’t know the answer to that question,” said Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, although he told them they would continue to go to work each day.
Obama, in his weekly radio and Internet address, said there were several ways out of the gridlock that has prevented action by Congress, then added, “There is very little time.”
But to get to the endgame, Republicans and Democrats had to go through the formality of killing each other’s bills – scoring their own political points – before they could turn to meaningful negotiations.
And a few hours after the president spoke, House Republican leaders engineered a vote to defeat the Reid-drafted proposal to raise the debt limit on a near-party line vote at midafternoon.
That was payback of sorts – Reid had arranged the rejection of a House-passed bill on Friday within minutes after it reached the Senate.
Individual lawmakers expressed anxiety about the prospect that faced the country if it were to default for the first time in history.
“I’m worried about Congress defaulting on our country,” said Sen. Johnny Isakson, R-Ga., urging lawmakers to find common ground. He suggested that spending cuts take place automatically if necessary to ensure the debt limit does not expire before 2013.
With financial markets closed for the weekend, lawmakers had a little breathing room, but not much. Asian markets begin opening for the new workweek when it is late this afternoon in the capital.
In his remarks at a news conference, McConnell said Obama “needs to indicate what he will sign, and we are in those discussions.”
He said later he had spoken several times during the day with Vice President Joe Biden, who played a prominent role in earlier attempts to break the gridlock that has pushed the country to the verge of an unprecedented default.
Boehner said that despite the partisanship of recent weeks, “I think we’re dealing with reasonable, responsible people who want this crisis to end as quickly as possible, and I’m confident it will.”
The talk of compromise contrasted sharply with the day’s earlier developments as both the House and Senate convened for unusual Saturday sessions.
The House voted down legislation drafted by Reid to raise the government’s debt limit by $2.4 trillion and cut spending by the same amount.
The vote was 246-173, mostly along party lines and after debate filled with harsh, partisan remarks.