White House Seeks Plan B On Debt Limit

A plan of the Republicans to cut the U.S. deficit faced delay and stiff opposition on Wednesday, accumulates anxiety onto investors and ordinary Americans hoping for a late compromise to avoid a crippling debt default.

US President Barack Obama speaks with US Speaker of the House John Boehner during a meeting in the Cabinet Room at the White House in Washington, DC, on July 23, 2011. Photo: Belomauro/Flickr

Republican and Democratic leaders are trying to find common ground with less than a week before the government hits its borrowing limit approved by Congress, triggering a possible default that would shake global markets. “We’re working on Plan B,” White House press secretary Jay Carney told reporters on Tuesday.

“The White House is working on – talking to members of Congress about – as it has every day, seven days a week, for multiple weeks now – about ways that we can get to a result here,” he said.

“We have to do something significant, and we absolutely have to ensure that we remove the … threat to our economy that uncertainty creates,” Carney said.

President Obama declined to present specific details of a possible compromise plan, instead calling for a renewed attempt at a “grand bargain” deal that includes both spending cuts and revenue increases.

That’s an approach that most people in Washington thought was effectively dead, and Mr. Obama’s decision to focus on it – instead of the plan from Senate Democrats, or a new proposal – left many in Washington scratching their heads.

House Speaker John Boehner is insisting on Mr. Obama to sign a two-step plan that would increase the debt limit for about six months (in addition to cutting $1.2 trillion in spending) before the fight begins anew.

The GOP-led House is set to vote on that plan Wednesday, though it’s not clear it can pass, since many fiscal conservatives say it does not go far enough to cut spending and balance the budget.

The influential fiscal conservative group The Club for Growth came out against the Boehner plan Tuesday, and the nonpartisan Congressional Budget Office said late Tuesday it would save about $150 billion less than Boehner claimed.

President Barack Obama has threatened to veto the Boehner plan and top Senate Democrat Harry Reid described it as “dead on arrival.”

Reid said he could not understand why Republicans did not support the plan he presented since it does not raise taxes and the spending cuts in the proposal have been endorsed by them. “It’s everything Republicans have demanded wrapped up in a bow and delivered to their door,” he said.

The plan has also failed to win the backing of conservative Tea Party Republicans, who have steadfastly refused to back tax rises and want much heavier cuts to social programs that are traditionally protected by Obama’s Democrats.

Senate Majority Leader Harry Reid, meanwhile, called the Boehner plan “dead on arrival in the Senate, if they get it out of the House.” He said it “was written for the tea party, not the American people.”

The White House said on Tuesday it was working with Congress to craft an unspecified “Plan B,” providing a glimmer of hope that an 11th-hour deal could be reached as lawmakers feel the pressure from increasingly anxious financial markets.

Credit ratings agencies have warned that they are poised to withdraw the United States’ triple-A credit rating without guarantees that it will not default, and they have also suggested that the credit rating is in danger without a significant deficit reduction effort.

That would potentially mean an increase in the cost of borrowing both for the U.S. government and for Americans seeking home and car loans and a higher interest rate for those seeking to pay off credit card debt. [Photo via Belomauro/Flickr; via Reuters and CBS]

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