Split over debt ceiling hardens with one week left

WASHINGTON — With the deadline to raise the nation's debt limit and prospects for financial-market panic a week away, an impatient-sounding President 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, he charged, Obama "wants a blank check today."

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

The key split involved the length of any new debt-limit increase. House Republicans 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 an accord could be reached, adding, "Republican leaders and I have found common ground before." He called on viewers to urge their lawmakers to compromise.

"The only reason this balanced approach isn't on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a different approach, a cuts-only approach — an approach that doesn't ask the wealthiest Americans or biggest corporations to contribute anything at all," Obama said in his address.

"And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about — cuts that place a greater burden on working families," he said.

But after Obama 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 this year the American people will not accept a debt-limit increase without significant spending cuts.

With no compromise in sight, the two sides positioned themselves for a showdown later this week over efforts 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.

White House officials say that passing only a short-term debt-ceiling increase would fail to lift the cloud of uncertainty rising from the controversy, which they argue makes business decision-making tentative and contributes to the economic slowdown.

The White House, which backed the Senate Democratic plan, and Senate Majority Leader Harry Reid of Nevada were equally disdainful of the GOP position.

Both the Republican-controlled House and the Democrat-dominated Senate prepared to take up rival 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.

Features of the 10-year plans include:

Discretionary spending. The 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 an additional $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. An additional $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.

It was not clear if Boehner's plan could pass the House, since many conservative Republicans oppose any increase in the debt limit, and Democrats oppose his whole approach.

As for the outlook in the Senate, Reid hopes for a Wednesday vote on cutting off debate on his plan — a test vote on its strength. If all 51 Democrats, plus two independents, side with him, he still would need seven Republicans to proceed, and it's unclear if he'll get them.