Dems, GOP working hard on debt deal to avoid default

      WASHINGTON (AP) - The third ranking Democrat in the Senate says a deficit-reduction proposal put forward by Majority Leader Harry Reid has the best chance of ending the political stalemate and avoiding a government default.

      New York Sen. Chuck Schumer tells MSNBC he expects the Nevada Democrat to release details of his plan later Monday. Schumer says the deal would last through 2012, cut spending by the same amount as borrowing is increased and contain no new taxes.

      Schumer also says he believes no accord can be reached without the approval of President Barack Obama, Reid, Senate Republican Leader Mitch McConnell, House Speaker John Boehner and House Minority Leader Nancy Pelosi.

      Schumer says he believes the Reid proposal is "the kind of thing Speaker Boehner can rally his tea party troops" to support.

      Dems, GOP working hard on debt deal to avoid default

      WASHINGTON (AP) - Bickering in public yet bargaining in private, congressional leaders are struggling for a compromise debt limit deal that avoids a market-rattling default in little over a week while cutting trillions in spending.

      House Speaker John Boehner, R-Ohio, planned to meet with his chamber's Republicans on Monday to discuss the GOP's clash with President Barack Obama over extending the government's borrowing authority, which lapses on Aug. 2 - a week from Tuesday. There were widespread expectations on Capitol Hill that Boehner would unveil debt ceiling legislation by that session, if not earlier.

      After meeting at the White House on Sunday with Obama and House Democratic Leader Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid said bipartisan talks on a solution had collapsed because Republicans were insisting on only extending the debt limit for a short period. He said he was crafting a $2.7 trillion package of spending cuts that would also push the government's borrowing authority through next year, a timeline that Obama and top Democrats are demanding.

      Reid, D-Nev., called Boehner's forthcoming proposal "a nonstarter in the Senate and with the president." In a written statement, he said that it "would not provide the certainty the markets are looking for and risks many of the same dire economic consequences that would be triggered by default itself."

      As yet another day passed with the two parties unable to shake hands, the drama seemed certain to play out in nail-biting fashion. If the government's authority to borrow money isn't renewed by Aug. 2 - its current $14.3 trillion limit has been reached - it won't have cash to pay all its bills. The administration and many others say that scenario would risk a first-ever federal default, with higher interest rates and other devastating effects cascading through the entire economy.

      Both Boehner and Reid were hoping that by presenting their competing plans, they would demonstrate a seriousness that could prevent the world's financial markets from panicking and punishing the U.S. by demanding higher interest rates for the huge amounts of cash it must constantly borrow. Speaking to the U.S. Chamber of Commerce in Hong Kong early Monday, Secretary of State Hillary Rodham Clinton tried to reassure financial markets that America's economy is sound and a deal on the debt limit would be reached. Nonetheless, Asian markets fell Monday.

      In a conference call with his colleagues on Sunday, Boehner provided no details of what he was considering, other than saying it would embrace the principles of the so-called cut, cap and balance bill. That measure, which the House approved last week and the Democratic-led Senate defeated, would have cut spending deeply and extended the debt limit into 2013 - but only on condition that Congress approve a constitutional amendment requiring a balanced federal budget.

      "It's gonna require some of you to make some sacrifices," Boehner said of his strategy during the 45-minute call, according to excerpts the speaker's office distributed to Republican offices. "If we stand together as a team, our leverage is maximized, and they have to deal with us. If we're divided, our leverage gets minimized."

      Officials said Boehner's legislation would likely add about $1 trillion to the debt ceiling, enough to last about six months, accompanied by a slightly greater amount of spending cuts and the prospect of more savings later - in effect a dare to the Senate and Obama to reject it. Those elements were part of a plan that congressional and White House negotiators discussed over the weekend but never completed because of clashes over how the future, deeper spending cuts would take effect.

      "I would prefer to have a bipartisan approach to solve this problem," Boehner said on Fox News Sunday. "If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."

      Obama, backed by Democratic congressional leaders, has demanded a debt-limit extension that would last through next year. He has argued that to let the cap on federal borrowing lapse anew would jeopardize the economy by thrusting the issue into the red-hot campaign season preceding the 2012 presidential and congressional elections.

      Top congressional aides labored to try producing a compromise Sunday that the House and Senate could quickly approve, and Obama and Boehner spoke by phone, aides said. Though Boehner and Reid both now back plans without immediate increases in federal revenue, no agreements were announced.

      Administration officials took to the airwaves on Sunday to make their case, with White House chief of staff William Daley saying Obama would veto a bill that didn't extend the borrowing limit into 2013.

      "The president believes that we must get this uncertainty in order, to help the American economy and help the American people," Daley said on NBC's "Meet the Press."

      Treasury Secretary Timothy Geithner also underscored administration opposition to a short-term extension of the debt ceiling. But reaching out to investors, he said on CNN's "State of the Union" that a U.S. default was unthinkable, saying, "We never do that. It's not going to happen."

      Dems, GOP ready competing emergency plans

      WASHINGTON (AP) - With bipartisan talks stalled, House Republicans and Senate Democrats readied rival debt-limit emergency fallback plans Sunday in hopes of reassuring world financial markets on Monday that the U.S. government will avoid an unprecedented default in barely a week.

      Late Sunday, House Speaker John Boehner summoned rank-and-file conservative lawmakers to be ready to back a compromise that is "going to require some of you to make some sacrifices."

      He said the new legislation, which he was expected to unveil as early as Monday morning, would cut federal spending, raise the government's borrowing authority and be able to clear both houses of Congress, according to one official familiar with his remarks on a conference call.

      Yet officials also said the plan would call for far less than the $6 trillion in cuts contained in legislation the House passed and the Senate rejected in the past week.

      Separately, President Barack Obama spoke by phone with Boehner during the day, and separately met with the two top congressional Democrats at the White House in a highly unusual Sunday evening conference.

      Neither Obama nor Senate Majority Leader Harry Reid, D-Nev., nor House Democratic leader Nancy Pelosi of California spoke to reporters when that session ended.

      The events unfolded in a crisis atmosphere - in a sweltering city swarming with summertime tourists - a little more than a week before an Aug. 2 deadline for action by Congress to raise the government's $14.3 trillion debt limit.

      Without legislation by that date, the Treasury will be unable to pay all its bills, possibly triggering a default that could have severe consequences for the U.S. economy and the world's, too.

      Officials - and many stockholders - were holding their breath to see how the uncertain situation would affect financial markets in the U.S. and around the world as they opened after the weekend of crisis negotiations.

      Several officials said leadership aides spent Sunday trying to produce a compromise that could quickly clear both houses of Congress.

      There were numerous suggestions of progress - both Boehner and Reid now support plans without immediate increases in government revenue - but no announced compromise.

      Details of fallback plans unclear

      Similarly, the precise elements of the rival fallback plans were sketchy.

      Republican officials said Boehner envisioned an increase in the nation's debt limit of about $1 trillion and slightly more than that in federal spending cuts, with the promise of additional progress on both sides of the ledger if Congress can agree.

      Democratic officials said Reid was at work on legislation to raise the debt limit by $2.4 trillion and reduce spending by slightly more.

      Unlike the House GOP approach, his plan would guarantee a large enough increase in borrowing authority to ensure no recurrence of this month's crisis until after the 2012 elections. That is Obama's stated precondition for a compromise.

      Yet any sum that large would require either cuts to benefit programs that aides said Reid preferred to leave untouched, or savings from the Pentagon, possibly by assuming the end of the wars in Iraq and Afghanistan.

      The White House was largely consigned to a spectator's role on a weekend that began with Boehner's decision to call off talks with Obama.

      Asked what the administration's plan was to avoid default, Treasury Secretary Timothy Geithner said, "Our plan is to get Congress to raise the debt ceiling on time."

      The state of play veered between bipartisanship and brinkmanship on an issue of immense economic consequences.

      Despite hours of compromise talks in the Capitol, lawmakers' aides had so far been unable to agree on a two-step plan that would satisfy Obama's demand for a large enough increase in the debt limit to tide the Treasury over until after the 2012 elections.

      White House Chief of Staff Bill Daley said anything short of that would be a gimmick and prompt the world to say: "These people just can't get their act together."

      Interviewed on Fox, Boehner said, "I would prefer to have a bipartisan approach to solve this problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."

      White House and congressional leaders talked past each other on the Sunday TV shows as negotiations unfolded in secrecy.

      "There will be a two-stage process. It's just not physically possible to do all of this in one step," Boehner said. "I know the president is worried about his next election. But, my God, shouldn't he be worried about the country?"

      Geithner says default "unthinkable"

      With an eye on the financial markets, Geithner insisted anew the United States would not default.

      "It's just unthinkable," Geithner said. "We never do that. It's not going to happen."

      The debt deal-making has consumed Washington for weeks and has put on display a government that at times risks utter dysfunction.

      Even after talks about between Obama and Boehner broke down in spectacular fashion Friday, Geithner said the two men were still negotiating.

      He also suggested the ambitious framework the two leaders had discussed, targeting a deficit reduction of $4 trillion, remained under consideration.

      "I don't know. It may be pretty hard to put Humpty Dumpty back together again," Boehner said of that grand plan. "But my last offer is still out there. I have never taken my last offer off of the table and they never agreed to my last offer."

      Under any scenario, Washington's leaders have run themselves almost out of time.

      Daley said, in fact, the consequences are already taking hold. "I don't think there's any question there's been enormous damage done to our creditworthiness around the world," Daley said.

      Boehner appeared on "Fox News Sunday." Geithner was on Fox, ABC's "This Week" and CNN's "State of the Union." Daley and Coburn spoke on NBC's "Meet the Press," and Daley also appeared on CBS' "Face the Nation."