Officials said the two sides were discussing a plan to raise the debt limit by $2.4 trillion and enact spending cuts of a slightly larger amount in two stages.
Senate Majority Leader Harry Reid announced late Saturday evening that he would be delaying a previously scheduled 1 a.m. vote in an effort to give more breathing room for negotiations between his counterpart, Senate Minority Leader Mitch McConnell, and the Obama administration.
“There are many elements to be finalized and there’s still a distance to go before an arrangement can be completed. And I believe we should give everyone as much room as possible to do their work,” Reid said
Mr. Reid’s announcement set off an almost audible sigh of relief on Capitol Hill, where lawmakers and their aides had been bracing for an overnight clash over the debt following a day that had seen a heated House vote and lawmakers trudging from office to office in search of an answer to the impasse.
The head of the World Bank has warned that Washington was “playing with fire” by failing to reach deal before Tuesday, when the US Treasury says the country will run out of money to meet its financial obligations.
President Obama has threatened to veto any legislation that would allow a recurrence of the current crisis next year but has agreed to Republican demands that deficits be cut – without tax increases – in exchange for additional US borrowing authority.
Currently, Republicans and Democrats have agreed on the rough outlines of approximately $1 trillion in spending cuts. House Speaker John Boehner has insisted that those cuts would only be applied to extend the debt ceiling through, roughly, December.
After that, he has demanded that a select committee of lawmakers be tasked with finding an additional $1.8 trillion in cuts and entitlement reforms. Should that committee fail to pass its recommendations (and it would be granted extraordinary procedural powers to get them into law) then, under Boehner’s plan, Congress would have to extend the debt ceiling all over again.
Following the House’s sharp rejection of a proposal by Mr. Reid to raise the debt limit and cut spending, Senator Mitch McConnell of Kentucky, the Republican leader and a linchpin in efforts to reach a deal, said he and Speaker John A. Boehner were “now fully engaged” in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.
“I’m confident and optimistic that we’re going to get an agreement in the very near future and resolve this crisis in the best interests of the American people,” said Mr. McConnell, who noted he was personally talking to both Mr. Obama and Vice President Joseph R. Biden Jr., a favorite partner in past negotiations.
“There is very little time,” Barack Obama said in his weekly radio and Internet address. He called for an end to political gamesmanship, saying “the time for compromise on behalf of the American people is now”.
But according to sources on Capitol Hill it was Mitch McConnell, the Senate Republican leader, who initiated talks on Saturday with the White House after bills to raise the debt limit failed.
Mr. Boehner, who would have to steer a compromise through the House, said he based his confidence on the prospect of an agreement on the sense that “we’re dealing with reasonable, responsible people who want this crisis to end as quickly as possible.”
The deal they were discussing, this person said, resembled the bill that Mr. Boehner won approval for in the House on Friday more than it did the one that Mr. Reid had proposed.
There was also some concern that Congress would not be able to act in time for a bill to pass by midnight August 2nd, when the Treasury is supposed to run out of borrowing authority. On Friday, Democratic officials suggested that a two-day extension of the debt ceiling might be passed to prolong the deadline. Speaking late on Friday, Sen. Kent Conrad (D-N.D.) said he “hoped” such an extension could be avoided.
“The speaker and Republican leader should know that merely saying you have an agreement in front of television cameras doesn’t make it so,” Mr. Reid said after returning from a visit to the White House with Representative Nancy Pelosi of California, the Democratic leader in the House.
House Republicans signaled their disapproval of the Reid plan by holding a symbolic vote on Saturday, rejecting it by a 246 to 173 vote, in a move intended to show it had no chance of passing in that chamber. About a dozen Democrats joined Republicans in rejecting the Reid plan.
Trying to build momentum for his own proposal, Mr. Reid and fellow Democrats were working to win over Republican senators to support his plan to raise the debt ceiling through 2012 and circumvent Mr. McConnell.
“Americans are watching us and demanding a result that is balanced,” Mr. Reid said.
At the Treasury Department, Secretary Timothy F. Geithner met with top advisers on Saturday on contingency plans for managing the financial consequences of Congressional inaction. “No one will be pleased,” said one adviser, who spoke on the condition of anonymity. [via The New York Times, Huffpost and The Telegraph]