Prospects for a debt breakthrough seem dim

July 23, 2011 - 11:30 AM
Obama Debt Showdown

President Barack Obama meets with Senate Majority Leader Harry Reid of Nev., right, and House Speaker John Boehner of Ohio, left, in the Cabinet Room of the White House, Saturday, July 23, 2011, in Washington, to discuss the debt. (AP Photo/Carolyn Kaster)

WASHINGTON (AP) — Prospects for a breakthrough in debt talks Saturday at the White House appeared dim as Republican leaders issued defiant statements ahead of their meeting with President Barack Obama.

A visibly irritated Obama on Friday summoned congressional leaders from both parties to find a way to raise the debt limit before an Aug. 2 deadline cuts off the government's borrowing authority.

Neither House Speaker John Boehner, R-Ohio, nor Senate Minority Leader Mitch McConnell, R-Ky., seemed optimistic before the session with Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif.

"If the White House won't get serious, we will," Boehner's office said. Boehner announced late Friday he was walking out of the negotiations.

The statement noted that Obama has said he wants an agreement that will take care of the problem through the November 2012 elections.

"It would be terribly unfortunate if the president was willing to veto a debt limit increase simply because its timing would not be ideal for his re-election campaign," according to Boehner's office.

McConnell said in a statement that it was "disappointing that the talks with the White House did not reach a favorable conclusion, and I appreciate the speaker insisting on reduced spending and opposing the president's call for higher taxes on American families and job creators."

At a hastily scheduled news conference Friday after Boehner's announcement, Obama told reporters, "We have run out of time and they are going to have to explain to me how it is that we are going to avoid default.

Boehner accepted the invitation for Saturday's meeting even while arguing that Obama bore the blame for the collapse.

"It's the president who walked away from his agreement and demanded more money at the last minute," Boehner said. "And the only way to get that extra revenue was to raise taxes."

The political theater played out even as the deadline neared. Barring action by then, the Treasury will be unable to pay its bills. That could cause interest rates to rise, threaten the U.S. economic recovery and send shock waves around the globe.

The deadline pressure hasn't seemed to bring the parties closer, even though they all insist they do not want a default.

For the first time since talks began, Obama declined to offer assurances that a default would be avoided, although moments later he said he was confident of that outcome.

Obama said Boehner left a deal on the table that was better for Republicans than for Democrats, with $2.6 trillion in cuts outweighing new tax revenue of $1.2 trillion. The president said he was losing confidence that the underlying deficit problems would be dealt with even if the borrowing limit rose.

"I've been left at the altar now a couple of times," Obama said.

Still, aides on both sides said there was agreement on gradually raising the age of eligibility of Medicare from 65 to 67 for future beneficiaries, and slowing the increase in cost-of-living raises in Social Security checks.

Even by the recent standards of divided government, Boehner's decision triggered an extraordinary evening Friday as the Democratic president and then the Republican speaker maneuvered for political position on this vital issue.

Unspoken, yet unmistakable in all the brinkmanship was the 2012 election campaign, still 18 months away, with the White House and both houses of Congress at stake.

Obama devoted his weekly radio and Internet address Saturday to the impasse and urged Republicans to make a deal.

"We can come together for the good of the country and reach a compromise. We can strengthen our economy and leave for our children a more secure future," the president said. "Or we can issue insults and demands and ultimatums at each another, withdraw to our partisan corners and achieve nothing."

Rep. Jeb Hensarling, R-Texas, pressed the Republicans' sharply opposing view in his party's weekly address.

"If we're going to avoid any type of default and downgrade — if we're going to resume job creation in America — the president and his allies need to listen to the people and work with Republicans to cut up the credit cards once and for all," he said.

Private, sometimes-secret negotiations had veered uncertainly for weeks, generating reports as late as Thursday that the two sides were possibly closing in on an agreement to slash spending. That triggered a revolt among Democrats who expressed fears the president was giving away too much in terms of cuts to Medicare and Social Security while getting too little by way of additional revenues.

Obama said his only requirement for an agreement was legislation that provides the Treasury enough borrowing authority to tide the government over through the 2012 election. Boehner said he had little interest in a short-term extension either.

Republican aides said Obama had upped his demand for higher taxes during the week. The aides said administration officials had tacitly agreed to $800 billion in new revenue over 10 years but that the White House backed away and wanted $400 billion more.

Aides said the two sides were not able to bridge their differences over the triggers designed to force Congress to enact both tax changes and cuts to Medicare and other benefit programs by early next year. Both sides also were apart on the size of cuts for Medicaid, the health care program for the poor and disabled.

Yet aides on both sides said the negotiations had yielded agreement for cuts of $250 billion from Medicare.

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Associated Press writers Charles Babington, David Espo, Ben Feller and Jim Kuhnhenn contributed to this report.