Debt deal remains elusive

WASHINGTON – With the deadline for raising the nation’s debt limit and prospects for financial-market panic now a week away, an impatient, frustrated President Barack Obama warned the nation Monday night that the partisan impasse risks “sparking a deep economic crisis, this one caused almost entirely by Washington.”

But House Speaker John Boehner of Ohio, presenting the case for the Republicans, countered that “the solution to this crisis is not that complicated. If you’re spending more money than you’re taking in, you need to spend less of it.”

Obama and the Democrats should just accept the massive spending cut package pushed by the GOP, Boehner said – but Obama, he charged, “wants a blank check today.”

Obama’s 15-minute nationally televised address capped a day when Senate Democrats’ and House Republicans’ positions hardened, as each group unveiled deficit-cutting plans Monday that showed the two sides remain sharply divided.

The key conflict dividing the new Republican and Democratic congressional plans involved the length of any new debt-limit increase. Republicans in the House of Representatives want to increase it in two stages, the first a short-term stopgap that would last through early next year. Democrats want a new ceiling that will last through the 2012 elections.

Obama took the unusual step of getting specific in criticizing the House GOP plan offered earlier Monday by Boehner.

“A six-month extension of the debt ceiling might not be enough to avoid a credit downgrade and the higher interest rates that all Americans would have to pay as a result,” Obama said. “We know what we have to do to reduce our deficits; there’s no point in putting the economy at risk by kicking the can further down the road.”

Obama said he was still confident that an accord could be reached, saying, “Republican leaders and I have found common ground before.” He called on viewers to urge their lawmakers to compromise.

But after he finished speaking, Boehner, in a five-minute address, demonstrated why breaking the impasse has been and remains difficult.

He criticized Obama for a “massive spending binge,” including the 2010 health care overhaul. He recalled telling Obama earlier this year that the American people will not accept a debt limit increase without significant spending cuts.

Boehner argued, “I’ve always believed the bigger the government, the smaller the people. And right now, we’ve got a government so big and so expensive it’s sapping the drive out of our people and keeping our economy from running at full capacity. The solution to this crisis is not complicated.”

With no compromise in sight, the two sides positioned themselves for a showdown later this week over rival broad plans aimed at reducing future federal budget deficits, estimated to total about $7 trillion over the next decade, while increasing the nation’s $14.3 trillion debt limit.

If the debt limit is not raised by Aug. 2, the government will exhaust its borrowing authority, which could ignite a global financial panic and send the American economy reeling.

After another weekend of stalemate, lawmakers feared markets would stumble Monday. U.S. stocks fell slightly, and analysts cited concern about the debt limit. The Dow Jones industrial average fell 88 points, or 0.7 percent, and closed at 12,593.

But those losses provoked no rush to find common ground on Capitol Hill; instead, lawmakers spent Monday staking out partisan positions.

Both the Republican-controlled House and the Democratic-dominated Senate prepared to take up partisan plans to raise the debt limit and cut deficits. First votes are expected Wednesday.

The plans share a number of similarities – both would cut discretionary spending by $1.2 trillion and set up special committees to find more savings. And neither plan includes new revenues – a major concession by Democrats to the GOP’s bottom line.

The 10-year plans’ features include:

• Discretionary spending. Both plans would cut the same amount from programs like education, transportation and other areas where lawmakers have discretionary authority over spending.

They would take different paths to the goal. Boehner would impose spending caps on future spending. Failure to meet those caps would trigger across-the-board cuts. Reid’s proposal includes no such caps; presumably lawmakers would seek cuts item by item.

• Entitlements. Both plans would create a special 12-member bipartisan committee to seek more savings.

Boehner’s panel would be required to write legislation to reduce deficits by another $1.8 trillion over 10 years. Reid’s plan does not specify a number.

• Debt limit. Boehner would raise the limit first by up to $1 trillion, about the same amount as the cuts in discretionary spending, which should give the government authority to borrow through early next year. Another $1.6 trillion increase could be authorized after the special joint committee’s plan was adopted. Reid would extend the debt limit enough to cover through 2012.

• Other savings. Reid’s plan includes $1 trillion saved by winding down the Iraq and Afghanistan wars. Boehner’s plan does not; many Republicans say such savings should not be counted because those savings are coming anyway – even though the budget they adopted in April included those savings.

• Balanced budget amendment. Boehner would require a vote on a constitutional amendment requiring the federal budget to be in balance; the vote would occur between Oct. 1 and congressional adjournment for this year. Reid omits such a vote.