WASHINGTON — Republicans on Tuesday offered a last-ditch backup plan for raising the nation's debt limit as White House and congressional negotiators failed for a third straight day to break an increasingly ugly impasse.
At the Capitol, Senate Republican leader Mitch McConnell suggested an agreement would be "unattainable" with President Barack Obama in the White House.
But he later presented a plan to increase the nation's debt limit in three stages. His proposal would have Obama offer a plan lifting the debt ceiling by $700 billion before Aug. 2, the date the government is set to exhaust its borrowing authority. Separately, Obama also would recommend non-binding spending cuts exceeding that same amount, but they would be only a list, not legislation.
The White House said late Tuesday it would continue to push for a more sweeping plan to cut the deficit.
"Senator McConnell's proposal today reaffirmed what leaders of both parties have stated clearly, that defaulting on America's past due bills is not an option," Press Secretary Jay Carney said in a statement. "The president continues to believe that our focus must remain on seizing this unique opportunity to come to agreement on significant, balanced deficit reduction. As the president has said, "If not now, when?" It is time for our leaders to find common ground and reduce our deficit in a way that will strengthen our economy."
Under McConnell's plan, Obama's debt-ceiling increase proposal would be structured to go into effect unless Congress disapproves it, much like federal regulations often do.
Republicans likely would oppose the debt-ceiling increase because it wouldn't include the spending cuts they've insisted on. They'd offer a resolution of disapproval of the debt-ceiling hike. If it passed, it would go to Obama, who could veto it, and Democrats have enough votes in Congress to prevent his veto from being overridden.
That way the higher debt limit would go into effect, avoiding an unprecedented U.S. default — which threatens to throw financial markets into chaos and the economy back into recession — while leaving Republicans free to complain that Democrats would not back dramatic spending cuts, framing their stand for the 2012 elections.
Under McConnell's plan, Obama then would offer two more debt limit increases, of $900 billion each, later this year or next year, under the same procedure. Those increases presumably would cover government debt through the end of Obama's term in January 2013. Obama is seeking a $2.4 trillion debt ceiling increase over that period.
House Speaker John Boehner said McConnell's proposal was one of several "backup" measures that Republicans have discussed, if negotiators are unable to come to an agreement. "I think Mitch has done good work," he said in an interview on Fox News.
Obama said flatly Monday that he would not back any short-term debt limit plan. Carney said in a briefing before McConnell released his plan that deals that fall short of the "grand bargain" Obama is seeking are "certainly possible."
And he sought to rebuff suggestions that there's been no progress in the meetings, saying that "the process continues to move forward because despite elevated rhetoric, the fact is everyone recognizes that there is no alternative here to taking action."
Ironically, McConnell's plan essentially could result in a "clean" debt limit hike, one without any of the deficit reduction now being discussed in the White House talks. Liberal Democrats have long urged a debt limit without such strings. Republicans have insisted until now that they will not raise the debt limit unless they also win deep spending cuts to reduce future deficits.
Obama and congressional leaders have been negotiating over proposals to shave trillions of dollars from projected budget deficits over the next decade. But Republicans insist on no tax increases, Democrats are adamant that Social Security and Medicare benefits remain intact, and there's been little apparent movement to close the gap between them.
McConnell's proposal came on a day when leaders of the U.S. business establishment joined together to push hard for a breakthrough. A joint letter from the U.S. Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, the Financial Services Forum and the Partnership for New York City called for the politicians "to put aside partisan differences and act in the nation's best interests. ... It is time to pull together rather than pull apart."
They called specifically to raise the debt limit and also for a long-term deficit reduction plan, but for that they offered no specifics.
Chamber president Thomas Donahue starkly outlined the stakes.
"An unprecedented default on the nation's bills would have dire consequences for our economy, our markets, and Main Street Americans," he said. "Businesses are interested in deficit reduction solutions that help unleash the investment potential of the private sector, leading to economic growth, job creation and enhanced revenues."
Added Business Roundtable president John Engler, a former governor of Michigan, "The business community in large numbers is saying to our leaders in Washington, `Do your job.'"
At the White House, Obama warned Tuesday that he wouldn't be able to guarantee delivery of Social Security checks if the debt ceiling is not increased.
"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue," Obama said in an interview with CBS News. "There may simply not be the money in the coffers to do it."
White House spokesman Carney suggested that not raising the ceiling would spark "a kind of Sophie's choice situation where you have to decide what bills you can pay."
Boehner in the Fox News interview chided Obama for the remarks. "There's going to be money available on Aug. 3 and I think it's way too early to be making some veiled threats like that," he said.
McConnell's offer did little to mollify conservative critics who oppose any raise of the debt ceiling. Conservative activist Brent Bozell charged McConnell with "caving" in to Obama's "appetite for out-of-control spending."
"If he is serious about giving Obama and the Democrats a free pass in exchange for not having to make the difficult decisions, he should look to John Boehner to see real courage," Bozell said.
Separately, Treasury Secretary Timothy Geithner reiterated the urgency of raising the nation's $14.3 trillion debt limit, while voicing confidence that it will be done.
Much of Tuesday's public debate involved sharp partisan sniping. McConnell blasted Obama and Democrats for blocking any effort to reach a bipartisan deal, saying their proposed savings were "smoke and mirrors."
"After years of discussions and months of negotiations," McConnell said. "I have little question that as long as this president is in the Oval Office, a real solution is unattainable."
Democrats fired back:
"It's time for Republican leaders to do some much-needed soul-searching," said Sen. Charles Schumer, D-N.Y. "Are they willing to risk an economic cataclysm just to mollify an extreme wing of their party and score political points against the president?"
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