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Congressional leaders work to avert default
Boehner, McConnell say they'll work over the weekend on plan to raise borrowing limit and cut spending.

msnbc.com staff and news service reports msnbc.com staff and news service reports
updated 29 minutes ago 2011-07-23T23:17:27


Jewel Samad / AFP - Getty Images President Obama chats with House Speaker John Boehner before a meeting in the Cabinet Room at the White House on Saturday, as the two tried to revive talks over the government's debt limit.


Congressional leaders were working over the weekend to design new legislation to head off a government default.
House Speaker John Boehner told House Republicans in a conference call after meeting with President Barack Obama Saturday that he hoped to be able to announce a "viable framework for progress" by 4 p.m. EDT on Sunday, before Asian financial markets open, two participants told the Associated Press.
The goal is to produce at least a framework agreement to raise the nation's debt limit by Monday, congressional officials said. Even that would allow scarcely enough time for the House and Senate to clear legislation in time for Obama's signature by the Aug. 2 deadline, a week from Tuesday.
Inconclusive meeting Saturday
Obama conferred at the White House for about an hour Saturday with congressional leaders in an attempt to revive negotiations over raising the debt ceiling, but no news of progress emerged from that meeting.The Obama-Boehner negotiations had ended abruptly Friday when the House speaker decided there was no prospect of success.
Financial markets could react nervously to the potential that no accord might be reached by the time the government reaches the debt limit on Aug. 2 and is unable to borrow more money to finance its debt.
While warning of the gravity of the situation, Obama said Friday night, "I remain confident that we will get an extension of the debt limit and we will not default."
In his press conference Friday night, frustration was evident in Obama’s voice as he said, “I’ve been left at the altar now a couple of times” in what he described as "very intense negotiations" with Boehner.
“I think that one of the questions that the Republican Party is going to have to ask itself is can they say yes to anything? Can they say yes to anything?”
Referring to congressional leaders, he said, “We have run out of time and they are going to have to explain to me how it is that we are going to avoid default.”
Obama's only bottom line
Obama said his only requirement for an agreement was legislation that provides the Treasury enough borrowing authority to tide the government over through the 2012 election. Boehner said he had little interest in a short-term extension either.
Obama said Friday night that he'd offered Boehner was “over a trillion dollars in cuts to discretionary spending, both domestic and defense. We then offered an additional $650 billion in cuts to entitlement programs — Medicare, Medicaid, Social Security.”
He did not specify a time period for the cuts, but presumably he meant over the usual ten-year budget forecasting period. Cuts of $650 billion in Medicare, Medicaid, and Social Security outlays would amount to roughly a three percent reduction in the ten-year cumulative spending of those programs.
He said he also asked for new tax revenues, but less than the $1 trillion that the bipartisan “Gang of Six” senators were seeking in their proposal released Tuesday.
If his proposal was unbalanced, Obama said, “It was unbalanced in the direction of not enough revenue.”
Boehner gives his side of the story
But in his version of events, Boehner Friday night blamed Obama for insisting that $400 billion more in new taxes must be raised as part of any agreement.
"It's the president who walked away from his agreement and demanded more money at the last minute," Boehner said. "And the only way to get that extra revenue was to raise taxes."
He said, “We had an agreement on a revenue number — a revenue number that we thought we could reach based on a flatter tax code with lower rates and a broader base that would produce more economic growth, more employees and more taxpayers, and a tax system that was more efficient” in collecting taxes.
Boehner said, “A deal was never reached, and was never really close.” He said he’d decided “to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward.”
Where some agreement was reached
Still, aides on both sides said agreement had been reached on two highly controversial changes.
One would raise the age of eligibility of Medicare gradually from 65 to 67 for future beneficiaries, while the other would slow the increase in cost-of-living raises in Social Security checks.
Additionally, aides said the two sides were not able to bridge their differences over the triggers designed to force Congress to enact both tax reform and cuts to Medicare and other benefit programs by early next year. Both sides also were apart on the size of cuts for Medicaid, the health care program for poor and disabled Americans.
Publicly held debt is now at its highest level than at any time in American history other than the period after World War II when the costs of the war were being paid off.
In a report last month, the Congressional Budget Office said publicly held debt “is expected to equal roughly 70 percent of the economy’s annual output, or gross domestic product (GDP), at the end of this fiscal year, up from 40 percent at the end of 2008.”
It said "that sharp deterioration in the fiscal situation" was caused by "an imbalance between spending and revenues that predated the 2007–2009 recession and turmoil in financial markets," a drop in tax revenues caused by workers losing their jobs or suffering pay cuts, and an increase in spending on Medicaid and other benefit programs caused by the recession, as well as by the costs of policies, such the $830 billion stimulus , enacted in response to the recession.

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