Progress Toward a Debt Deal?

With the clock ticking down to the reopening of the markets, Congressional leaders try to patch together a two-step agreement

With time running low for a resolution to a looming economic crisis, congressional leaders worked into Saturday night, negotiating to prevent default on the nation's debt and a potential financial market calamity.

There were signs of progress: Both Democrats and Republicans are prepared to accept a two-step process for cutting the federal deficit by up to $3 trillion, but are at odds over whether the debt limit should be in one step that gets past the November 2012 election, or in two increments.

House Speaker John Boehner is pushing a plan that would raise the debt ceiling by $3 trillion or more in two steps or tranches, with both debt ceiling increases allowed only if matching spending cuts are identified, a senior Democratic aide familiar with talks today said. The total of $3 trillion or more in cuts, through two steps of $1.5 trillion or more, is the plan Boehner suggested on a call today with House Republicans, congressional aides in both parties said.

Boehner, Senate Majority Leader Harry Reid, D-Nev., House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Mitch McConnell, R-Ky., all met for a one-hour meeting in Boehner's office Saturday evening.

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Earlier in the day, after the group had met with President Obama at the White House, Boehner's office had issued a statement in which Boehner said, "As I said last night, over this weekend Congress will forge a responsible path forward. House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States."

Responding to that outline, Democrats and President Obama in repeated statements Saturday made clear that a two-step debt ceiling increase is not acceptable to them.

Reid was particularly blunt, blaming Republican intransigence for pushing the country to the brink of default.

"I am deeply disappointed in the status of negotiations with my Republican colleagues. I have said repeatedly, including last night and again today, that I will not support any agreement that fails to raise the debt ceiling though the end of 2012," Reid said in a statement Saturday night.

"I hope that Speaker Boehner and Leader McConnell will reconsider their intransigence. Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation."

The dueling positions and public statements mask the fact that both sides are ready to agree to a two-step process, but the crucial sticking point, on which talks will likely focus is on the second debt ceiling increase.

In a conference call with Republican rank-and-file members after a meeting with President Obama and Congressional leaders Saturday morning, House Speaker John Boehner said he wants signs of significant progress on a package to raise the debt ceiling by 2 p.m. Sunday, before the Asian markets open. He told his members he is aware of the concerns that Asian markets could drop, if an agreement isn't close.

Boehner's office on Saturday morning chided Obama for opposing any proposal that does not raise the $14.3 trillion plan by enough to resolve the issue until after the November 2012 election, accusing the president of playing politics. "We do not know what size or shape a final package will take, but 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," a Boehner aide said.

The White House reiterated its position against any short-term deal, saying in a statement that a brief extension could risk harming the economy and "causing every American to pay higher credit cards rates and more for home and car loans."

"Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit," Carney said.

If the latest proposals hit roadblocks, Boehner could move forward with a plan he proposed to Obama before their grand bargain talks collapsed. It would incorporate $1.5 trillion in spending cuts identified in talks led by Biden and require raising the debt ceiling again before March 2012. The measure could include two years of spending caps. Senate Minority Leader Mitch McConnell has encouraged House GOP leaders to consider this course.

But Obama and Reid, worried the House would try to pressure them into passing the bill just before the August 2 deadline with the suggestion the must accept it or risk default, have said they would reject it.

Reid could start floor action Monday by filing cloture on a joint proposal with McConnell to allow Obama to raise the debt ceiling by $2.5 trillion himself if, ultimately, more than two thirds of both chambers did not stop him.

That measure would also create a special bicameral congressional committee of 12 members that could recommend cuts that would receive expedited consideration and it could include a mechanism to give the deficit reduction plan from the so-called Gang of Six a vote. Reid has suggested the House could then add the same $1.5 trillion in cuts it is eyeing after Senate passage.

But Boehner aides on Friday called this option as good as dead, insisting talks with Reid were starting anew with a clean slate.

Of the potential paths ahead, the McConnell-Reid option has remained deeply unpopular for most House Republicans, and would likely require a good number of House Democrats to join fewer Republicans to pass the House.

Boehner has stopped short of shutting the door. He said at a press conference July 14 that, "Mitch described his proposal as a last-ditch effort in case we're unable to do anything else... And what may look like something less than optimal today, if we're unable to get to an agreement, might look pretty good a couple of weeks from now."

Image credit: AP Photo/Harry Hamburg