WASHINGTON — Two weeks before the government faces default, President Obama and congressional leaders are pursuing very different solutions. The Democratic-led Senate is pursuing a bipartisan fallback plan to raise the $14.3 trillion debt limit in three installments and throw responsibility for deficit reduction to a new panel of lawmakers whose recommendations would require up-or-down votes in Congress. The plan could be unveiled this week.The Republican-led House of Representatives plans to vote today on a “Cut, Cap and Balance” plan featuring deep spending cuts and a balanced budget amendment to the Constitution. It has little chance of passing the Senate, and Obama threatened to veto it if it does.
The White House is holding out for a deficit-reduction package now — even though just two months ago, its top economic adviser, Austan Goolsbee, called combining that with a boost in the borrowing limit “quite insane.”
Obama “is continuing to push for a deal with the most significant deficit reduction possible,” White House communications director Dan Pfeiffer said. “While there's certainly still time, time is growing short.”
In public, Obama and congressional leaders continued to talk about what couldn't pass. As they did in five White House meetings last week that focused primarily on an elusive 10-year, $4 trillion package of spending cuts and tax hikes, their focus Monday was the House package that's doomed in the Senate.
Behind the scenes, talks continued in an effort to win the votes needed to raise the debt ceiling before Aug. 2, when Treasury Secretary Timothy Geithner has forecast a “loss of capacity to function as a government.”
That prognosis is worrying ratings agencies such as Standard & Poor's and Moody's, along with foreign investors such as China. Business leaders have called on lawmakers to settle their differences, and on Monday the non-partisan group No Labels rallied on Capitol Hill in support of “a deal, not a default.”
As they did in April with House passage of a 2012 budget resolution that projected major cuts for Medicare and Medicaid, Republicans are taking the lead again this week by pushing for a balanced budget, leaving the White House to react.
“If we are going to raise the debt limit and avoid default, the White House must be willing to demonstrate more courage than we have seen to date,” House Speaker John Boehner said.
The plan calls for $111 billion in spending cuts next year and strict caps on spending for the next decade, all identical to the April budget. It includes a balanced budget amendment that would require two-thirds majorities in Congress to increase taxes — a requirement that would have defeated the 1990 and 1993 deficit-reduction packages. The amendment would need approval by 38 states.
Before the House debate began, the Republican National Committee sought to raise money from it, and the White House issued a veto warning. “Instead of pursuing an empty political statement and unrealistic policy goals, it is necessary to move beyond politics as usual and find bipartisan common ground,” it said.
“We've decided to bring our case to the American people,” said Senate Republican leader Mitch McConnell.
While waiting for the House to act, Senate leaders were preparing a complex plan that would raise the debt limit three times before the 2012 elections. Talks focused on attaching about $1.5 trillion in spending cuts tentatively agreed upon in bipartisan negotiations led by Vice President Biden. In addition, a congressional panel would be created to recommend deficit cuts that Congress would have to approve or deny.
Senate Democratic leader Harry Reid vowed to keep the Senate in session every day until the debt-limit crisis is solved. “The Senate has no more important task than making sure the United States continues to pay our bills,” he said.
Also on Monday, Sen. Tom Coburn, R-Okla., introduced a plan that would cut the debt by $9 trillion over 10 years by, among other things, raising the Social Security age to 70, ending subsidies and raising $1 trillion in new taxes.