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Obama says time running out to avoid US default; compromise eludes partisan Congress so far

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Obama says time running out to avoid US default; compromise eludes partisan Congress so far

• Article by: DAVID ESPO , Associated Press
• Updated: July 29, 2011 - 2:41 PM

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WASHINGTON - Partisan to the core, Congress groped uncertainly Friday for a way to avoid a government default threatened for early next week. "We are almost out of time," warned President Barack Obama as U.S. financial markets trembled.
At one end of the Capitol, Speaker John Boehner and House Republicans pushed toward a vote on veto-threatened legislation rewritten overnight to win the support of conservative holdouts. The conservatives wanted a balanced-budget amendment to the Constitution, and it was added to Boehner's bill.
At the same time, Democratic Senate Majority Leader Harry Reid worked on an alternative bill to cut spending by $2.2 trillion and raise the debt limit by $2.7 trillion. That would be enough to meet Obama's terms that it tide the Treasury over until 2013.
The final result — Obama and Reid pressed for compromise as the deadline drew near — was anything but certain.
Boehner's measure would provide a quick $900 billion increase in borrowing authority — essential for the U.S. to keep paying all its bills after next Tuesday — and $917 billion in spending cuts. After the bill's latest alteration, any future increases in the debt limit would be contingent on Congress approving the constitutional amendment and sending it to the states for ratification.
"With conservatives insisting on the addition of a balanced-budget amendment requirement, Speaker Boehner's bill will now cut, cap and balance" federal spending, said Rep. Jeff Flake of Arizona as Friday's scheduled vote approached.
The White House called the bill a non-starter. "'Amend the Constitution or default' is a highly dangerous game to play," said press secretary Jay Carney, and Democrats said they would scuttle it as soon as it arrived in the Senate.
Reid, inviting Republicans to suggest changes, said, "This is likely our last chance to save this nation from default."
At the same time Reid appealed for bipartisanship, he and other party leaders accused Boehner of caving in to extremists in the GOP ranks — "the last holdouts of the tea party," Sen. Richard Durbin of Illinois called them.
The developments occurred one day after Boehner was forced to postpone a vote in the House for fear the earlier version of his measure would suffer a defeat. But by forcing a delay the conservative rebels upended the leadership's strategy of making their bill the only one that could clear Congress before a default and win Obama's reluctant signature.
"Everybody acknowledges that because of the dust-up yesterday we've lost some leverage," said Rep. Steven LaTourette, R-Ohio, an ally of the speaker.
The rebels said they were more worried about stemming the nation's steady rise of red ink.
Rep. Jeff Landry, R-La., a, a first-term lawmaker, issued a statement saying his pressure had paid off.
"The American people have strongly renewed their November calls of bringing fiscal sanity to Washington. I am blessed to be a vehicle driving their wishes to fruition," he said. "This plan is not a Washington deal but a real solution to fundamentally change the way Washington operates."
Administration officials say that without legislation in place by Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink.
The day's economic news wasn't very upbeat to begin with — an economy that grew at an annual rate of only 1.3 percent in the second quarter of the year.
Investors weren't impressed with either the economy or the efforts in Washington.
The Dow Jones industrial average appeared headed for a sixth straight day of losses, and bond yields fell as investors sought safer investments in the event of a default.
At the White House, Obama cited the potential toll on the economy as he urged lawmakers to find a way out of gridlock.
He said that for all the partisanship, the two sides were not that far apart. Both agree on initial spending cuts to take effect in exchange for an increase in the debt limit, he said, as well as on a way to consider additional reductions in government benefit programs in the coming months.
"And if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that, too, if it's done in a smart and balanced way," he said.
That went to the crux of the conflict — his insistence that Congress raise the government's borrowing authority by enough to avoid a repeat of the current crisis during the heat of the 2012 election campaigns.
Republicans have resisted, accusing him of injecting purely political considerations into the debt limit negotiations.
But Boehner's failure to line up the votes for his legislation Thursday night seemed to embolden Democrats.
Obama asked his 9.4 million followers on Twitter to send tweets to Republican lawmakers.

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