Debt crisis: Dems, GOP at odds as debt default risk looms

(AP, WJLA) — President Barack Obama threatened on Tuesday to veto Republican emergency legislation to avert an unprecedented default as the clash over the U.S. debt deepened with a deadline only a week away.

The impasse extended beyond the long-standing battle over increasing the debt limit between Democrats and Republicans, as a conservative revolt within the Republican party threatened to sink Speaker John Boehner's efforts to line up enough votes for the measure to pass.

Majority Leader Harry Reid said the measure stood no chance of passing the Senate even if it clears the House. He pronounced it "dead on arrival."

Washington is staring down an Aug. 2 deadline to raise the debt limit or face national default.

In the D.C. area, many residents and federal workers are growing concerned that a government default could impact their bottom line.

District resident Laura Ericson, 76, is worried that her Social Security payments may cease.

"I expect a check every month," Ericson says. "If it doesn't come, what is going to happen to me?"

Fears that interest rates on home and car loans may skyrocket also have consumers making alternative plans in case Aug. 2 comes and goes without a deal.

"I was going to wait until next year to buy a new car, but I might do it sooner now," William Troop, an area prospective car buyer, tells ABC7.

Many have predicted dire consequences for the American and global economies should the United States default. Credit rating agencies such as Moody's and Standard & Poor's have threatened to downgrade the United States' gold-plated AAA rating if Congress and the White House don't extend the debt ceiling and take steps to bring long-term deficits under control.

As a price for raising the debt limit, Republicans insist on not increasing taxes and want to force Democrats and the president to cut spending in expensive benefit programs that Democrats have long protected, despite escalating costs.

At stake is the Treasury's ability to continue borrowing money to pay its bills after the current $14.3 trillion limit expires next Tuesday. The Republican House bill would raise the debt limit by $1 trillion while making deep cuts to federal spending of $1.2 trillion — reductions that conservatives say aren't enough.

The measure also would establish a committee of lawmakers to recommend additional budget savings of $1.8 trillion, which would trigger an additional $1.6 trillion increase in the debt limit.

The White House, wanting to avoid making the debt a hostage of the next presidential election, objects to the requirement for a second vote before the 2012 elections.

Neither of the rival plans offered by Boehner in the House and Reid in the Senate seemed to have the necessary votes in Congress amid a bitter stalemate that could have far-reaching repercussions for the fragile U.S. economy as well as global markets. Stocks fell Tuesday as U.S. markets registered their nervousness over the Washington gridlock between Obama and Republicans.

At the White House, spokesman Jay Carney said the administration remains in contact with congressional leaders despite the collapse of talks last Friday and inconclusive discussions this past weekend.

"We're working on Plan B. ... There has to be a product that can pass the House and the Senate and be signed into law," said Carney, who argued that the Boehner plan had no chance of passing in the Senate.

Positions seemed only to harden after Obama and Boehner engaged in an extraordinary joust on TV on Monday. In televised primetime addresses, they squabbled over fiscal issues that have consumed Washington since a large block of first-term members of the U.S. House of Representatives, elected last year under the mantle of the small-government, low-tax tea party, returned the lower chamber to Republican control.

Amid uncertainty in the House about the spending bill's prospects, Boehner told reporters, "This was negotiated in a bipartisan manner between both Houses of the Congress. I do think that we are going to have some work to do to get it passed but I think we can do it."

Conservative Republicans in the House cast doubt about whether there is sufficient backing for the speaker's plan.

Flanked by conservative colleagues, Rep. Jim Jordan told reporters he could not back the Boehner proposal and said it doesn't have the votes to pass in the Republican-controlled House.

"We think there are real problems with this plan," said Jordan. He argued that the spending cuts are insufficient and expressed opposition to likely tax increases.

In the Senate, Reid challenged Republicans to back his competing legislation, which would cut spending without raising taxes.

In his Monday night speech, Obama said the long and caustic fight was a "partisan three-ring circus." Boehner, borrowing the president's very words, said Obama "would not take yes for an answer."

The president and his Democratic allies have sought a plan that would to make deep cuts in government spending but would increase tax revenues by closing loopholes and ending the tax cuts for wealthy Americans instituted under former President George W. Bush.

Republicans, under the sway of their conservative tea party wing, refuse to consider higher taxes.

Obama's White House on Monday backed the new Senate Democratic plan even though it omitted Obama's requirement of increased tax revenues. It would raise the debt limit by the $2.4 trillion figure the White House wants and carry the country into 2013, beyond the next election. It calls for $2.7 trillion in federal spending cuts, but assumes $1 trillion of that would derive from the end of the wars in Iraq and Afghanistan.

After Monday's competing TV addresses, congressional officials said the House switchboard was near capacity with a high volume of calls and suggested using backup numbers. Websites also experienced heavy traffic and lawmakers were sending out appeals for patience.