Debt authority examined

WASHINGTON – A plan by the Senate’s two top leaders to allow President Barack Obama to raise the debt limit without congressional approval is emerging as the most likely strategy to avoid a looming federal default.

The plan being drafted by Senate Minority Leader Mitch McConnell of Kentucky and Majority Leader Harry Reid of Nevada would lock in about $1.5 trillion in deficit reduction over the next 10 years – considerably less than what Republican leaders and Obama had been seeking.

Administration officials have said they still would prefer a broader deal on the deficit, but they signaled that Obama would accept the idea.

Conservatives, particularly in the House, seem likely to oppose it. But with efforts to deliver a larger deficit-reduction deal still at a stalemate, the new plan – which builds on a proposal earlier in the week by McConnell – could provide a way out of a dead end that has become economically and politically perilous.

House Speaker John A. Boehner, R-Ohio, indicated that such “last-ditch” efforts could become more palatable.

“What may look like something less than optimal today, if we’re unable to get to an agreement, might look pretty good,” Boehner said.

House Majority Leader Eric Cantor, R-Va., toned down his hard-line stance Thursday. “There is a dose of pragmatism in all that we do,” he said.

The plan came as Treasury Secretary Timothy F. Geithner warned that time for debate was running out. The nation’s bond rating, and with it the financial stability of the nation, hinges on the ability of Congress and the White House to approve more borrowing before the government begins running out of cash Aug. 2, he said.

“We’re running out of time,” Geithner said after a private lunch meeting with Senate Democrats.

Underscoring Geithner’s warning, the Chinese government, which is one of the largest holders of U.S. debt, urged American officials to act “responsibly.”

Congressional leaders met at the White House for the fifth straight day Thursday.

House Republican lawmakers planned to meet this morning, and Obama scheduled a news conference for 8 a.m. PDT.

“It’s decision time,” Obama told those meeting at the White House, according to Democratic officials familiar with the session.

Under the emerging proposal, Obama would be able to order increases in the debt ceiling without congressional approval.

Congress would vote on legislation to block an increase, but if such a resolution passed, as is likely, Obama would veto it. If the veto were sustained by Congress, the debt limit would be increased.

Republican strategists think that scenario would force Obama to take full political responsibility for the rising national debt, a prospect that White House spokesman Jay Carney said Obama could live with.

“The president is willing to take responsibility for leading, and he is willing to do what it takes to compromise to reach something significant, and he is willing to own it, if other people won’t,” Carney said. “We have to raise the debt ceiling, because the United States is the United States and it does not default on its obligations.”