U.S DEBT TALKS DEADLINE: Republicans blocked a Democratic effort to end debate

Republicans blocked a Democratic effort to end debate on Sen. Harry Reid's proposal and move to a vote.

Washington .- Democrats and Republicans are "very close" to reaching a $3 trillion deal that would avoid a possible government default in coming days, Senate Minority Leader Mitch McConnell told CNN's "State of the Union" Sunday.

"We had a very good day yesterday," the Kentucky Republican said, adding that the two sides "made dramatic progress" in negotiations on a deal that would cut government spending and raise the federal debt ceiling.

Another Republican senator, Johnny Isakson of Georgia, later told reporters he expected a Monday vote on a compromise.

"It feels like they're going to finish the deal today and then we'll have the vote tomorrow," Isakson said, adding he supports the plan under discussion.

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Pelosi: GOP bill 'perfectly absurd' House Speaker John Boehner, meanwhile, advised his Republican caucus that serious issues remain under discussion, but to be ready for a possible conference call on Sunday to discuss a proposed deal.

Democrats in Congress and the Obama administration agreed that progress has been made, but noted negotiations continue on difficult issues.

Senate Majority Leader Harry Reid, D-Nevada, opened the Senate session Sunday by saying there was no agreement yet on raising the federal debt ceiling, but "we are cautiously optimistic."

"If there's a word right here that would sum up the mood, it would be relief -- relief that we won't default," Sen. Chuck Schumer, D-New York, said on the CNN program. "That's not a certainty, but default is far less of a possibility now than it was even a day ago."

With the deadline to reach a debt ceiling agreement just two days away, congressional leaders and the White House are trying to complete the possible deal that would extend the debt limit through 2012 -- a presidential election year.

If Congress fails to raise the current $14.3 trillion debt ceiling by Tuesday, Americans could face rising interest rates and a declining dollar, among other problems.

Some financial experts have warned of a downgrade of America's triple-A credit rating and a potential stock market plunge. The Dow Jones Industrial Average dropped for a sixth straight day on Friday.

Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. President Barack Obama recently indicated he can't guarantee Social Security checks will be mailed out on time.

In Afghanistan on Sunday, Joint Chiefs of Staff Chairman Adm. Mike Mullen was unable to assure U.S. troops they would get their paychecks following the August 2 deadline without a deal. Mullen said August 15 would be the first payday jeopardized if the United States defaults.

Last week, a Department of Defense official told on condition of not being identified that "it's not a question of whether, but when" military pay gets withheld if no agreement is reached.

Vice President Joe Biden arrived at the White House on Sunday morning, though no additional formal talks involving the administration and congressional leaders have been announced. A Democratic source told on condition of not being identified that Biden was engaged in behind-the-scenes negotiations with both congressional legislators and the administration.

Initial news of a possible deal came shortly after the Senate delayed consideration of a debt ceiling proposal by Reid late Saturday night, pushing back a key procedural vote by 12 hours. When that vote occurred on Sunday afternoon, Republicans blocked a Democratic effort to end debate on the Reid proposal and move to a vote, extending consideration of the plan while negotiations continue.
The vote was 50-49, short of the super-majority of 60 required to pass.

Reid plans to insert a negotiated final agreement into the proposal once a deal has been reached. When it became clear that Democrats would lose Sunday's vote, Reid voted against his own plan in a procedural move to preserve the ability to bring it up again.

According to McConnell and other congressional and administration officials interviewed Sunday, as well as various sources who spoke on condition of not being identified, the deal under discussion would be a two-step process intended to bring as much as $3 trillion in deficit reduction over 10 years.

Some sources provided differing targets for the total, ranging from $2.4 trillion up to $3 trillion.

A first step would include about $1 trillion in spending cuts while raising the debt ceiling about the same amount. The proposal also would set up a special committee of Democratic and Republican legislators from both chambers of Congress to recommend additional deficit reduction steps -- including tax reform as well as reforms to popular entitlement programs such as Medicare and Social Security.

The committee's recommendations would be put to a vote by Congress, without any amendments, by the end of the year. If Congress fails to pass the package, a so-called "trigger" mechanism would enact automatic spending cuts. Either way -- with the package passed by Congress or the trigger of automatic cuts -- a second increase in the debt ceiling would occur, but with an accompanying congressional vote of disapproval.

In addition, the agreement would require both chambers of Congress to vote on a balanced budget amendment to the U.S. Constitution. Such an amendment would require two-thirds majorities in both chambers to pass, followed by ratification by 38 states -- a process likely to take years.

Schumer told that a main sticking point still under discussion was the trigger mechanism of automatic spending cuts in case Congress fails to enact the special committee's recommendations.

According to sources, cuts in the trigger mechanism would be across-the-board, including Medicare and defense spending, to present an unpalatable alternative for both parties in the event Congress fails to pass the special committee's proposal.

"You want to make it hard for them just to walk away and wash their hands," Gene Sperling, the director of Obama's National Economic Council, told. "You want them to say, if nothing happens, there will be a very tough degree of pain that will take place."

Preliminary reaction showed sensitivity to that pain. Sen. Carl Levin, D-Michigan, said the automatic spending cuts under a trigger mechanism should not affect Medicare benefits for senior citizens.

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"The way we understand it's going to be worded is it does not affect beneficiaries. It would affect providers and insurance companies," Levin said. "That should be the case, because if it hits beneficiaries, you're going to lose lots of Democratic votes."

Meanwhile, former U.S. ambassador to the United Nations John Bolton, an aide to former Republican President George W. Bush, warned that automatic spending cuts for the military under the trigger would put national security at risk.

"By exposing critical defense programs to disproportionate cuts as part of the 'trigger mechanism,' there is a clear risk that key defense programs will be hollowed out," Bolton said in a statement.

Overall, the agreement under discussion would increase the debt limit in two stages, both of which would occur automatically -- a key Democratic demand that would prevent a repeat of the current crisis before the next election.

McConnell, who appears to have become the lead Republican negotiator, said he is "very, very close to being able ... to recommend to my members that this is something that they ought to support."

The deal will not include tax increases, McConnell added, expressing a key demand of Republicans. Obama has pushed for a comprehensive approach that would include additional tax revenue as well as spending cuts and entitlement reforms to reduce budget deficits.

Reid, D-Nevada, said Saturday night that the delay in considering his proposal was additional time for negotiations at the White House.

His announcement capped a day of sharp partisan voting in the House and extended talks behind closed doors between congressional and administration officials. Concern continued to grow that Congress will fail to raise the nation's debt ceiling in time to avoid a potentially devastating national default this week.

Earlier Saturday, the Republican-controlled House rejected Reid's plan -- partisan payback for the Democratic-controlled Senate's rejection of Boehner's plan Friday night.

House members rejected Reid's plan in a 246-173 vote. Most Democrats supported the measure; every Republican voted against it.

For their part, Republicans continued to trumpet Boehner's proposal. The measure won House approval Friday, but only by a narrow margin after a one-day delay during which the speaker was forced to round up support from wary tea party conservatives.

Boehner's deal with conservatives -- which added a provision requiring congressional approval of a balanced budget amendment in order to raise the debt limit next year -- was sharply criticized by Democrats, who called it a political nonstarter.

Democratic leaders vehemently object not only to the balanced budget amendment, but also the GOP's insistence that a second debt ceiling vote be held before the next election. They argue that reaching bipartisan agreement on another debt ceiling hike during an election year could be nearly impossible, and that short-term extensions of the limit could further destabilize the economy.

Leaders of both parties now agree that any deal to raise the debt ceiling should include long-term spending reductions to help control spiraling deficits. But they have differed on both the timetable and requirements tied to certain cuts.

Boehner's plan proposed generating a total of $917 billion in savings while initially raising the debt ceiling by $900 billion. The speaker has pledged to match any debt ceiling hike with dollar-for-dollar spending cuts.

His plan would require a second vote by Congress to raise the debt ceiling by a combined $2.5 trillion -- enough to last through the end of 2012. It would create a special congressional committee to recommend additional savings of $1.6 trillion or more.

Any failure on the part of Congress to enact mandated spending reductions or abide by new spending caps would trigger automatic across-the-board budget cuts.


The plan also calls for congressional passage of a balanced budget amendment before the second vote to raise the debt ceiling.



Reid's plan, meanwhile, would reduce deficits over the next decade by $2.4 trillion and raise the debt ceiling by a similar amount. It includes $1 trillion in savings based on the planned U.S. withdrawals from military engagements in Afghanistan and Iraq.

Reid's plan also would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed by a Senate vote with no amendments by the end of the year.

In addition, it incorporates a process based on a proposal by McConnell that would give Obama the authority to raise the debt ceiling in two steps while providing Congress the opportunity to vote its disapproval.

Among other things, Reid has stressed that his plan meets the key GOP demand for no additional taxes. Boehner, however, argued last week that Reid's plan fails to tackle popular entitlement programs such as Medicare, which are among the biggest drivers of the debt.

A recent CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.

According to the poll, the public is sharply divided along partisan lines; Democrats and independents are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a major crisis for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.

U.S. DEBT TALKS DEADLINE: Boehner vs. Reid bills: Where they meet

NEW YORK.- There certainly are some big differences between the debt-ceiling bill proposed by House Speaker John Boehner and the one proposed by Senate Majority Leader Harry Reid.

But there is also more than $900 billion's worth of compromise between the two.

Both bills call for caps on discretionary spending -- that's the money Washington uses to pay for defense and all manner of government agencies and programs.

Excluding spending on the wars in Iraq and Afghanistan, the Boehner bill would reduce overall spending by $917 billion over 10 years, according to Congressional Budget Office estimates. Similarly, Reid's bill would cut spending by $927 billion.

Breaking those estimates down further, Boehner's bill would cut discretionary spending by $756 billion and save $156 billion in interest costs on the debt. The comparable numbers for Reid's bill are $752 billion and $153 billion.

Both bills also ignore the hot-potato issues of tax and entitlement reform.

So why can't these two bills get along?

There are some major sticking points.

Boehner's plan: The House bill would call for a two-stage increase in the debt ceiling. The first would be worth $900 billion, which might cover the Treasury Department's borrowing needs into early 2012.

But the House bill would set two high hurdles that would have to be cleared before increasing the debt ceiling by another $1.6 trillion -- which could cover borrowing needs past the presidential elections into 2013 .

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First, Congress would have to approve $1.8 trillion worth of debt-reduction proposals by the end of this year. Those proposals would be made by a joint committee the bill would create and no amendments would be permitted.

In addition, to secure the second debt ceiling increase Congress would have to enact a balanced budget amendment by a two-thirds vote in the House and Senate, which is very difficult to secure.

Overall, Boehner's bill would increase the debt ceiling by a total of $2.5 trillion in exchange for $2.7 trillion in debt reduction.

Reid's plan: By contrast, Reid's bill as amended would set a procedure to raise the debt ceiling by $416 right away and two more times after that for a total debt ceiling increase of $2.4 trillion, in exchange for $2.2 trillion in debt reduction.

Reid's cuts count roughly $1.3 trillion in war savings in Iraq and Afghanistan, including debt service costs. But those savings can only be claimed if one assumes that U.S. engagement in Iraq and Afghanistan will continue at full throttle for the next decade, which is not realistic.

Like Boehner's bill, Reid's legislation would create a joint committee but it would be charged with proposing ways to reduce annual deficits to 3% or less of gross domestic product. And while the Senate would have to vote on those proposals without amendment, there is no requirement the proposals be enacted.
The House approved the Boehner bill on Friday evening in a 218-210 vote; 22 Republicans voted against it and no Democrats voted for it. But the Senate then promptly voted to table it. That was expected, since 53 senators on Thursday said that if presented with the Boehner bill they would vote against it.

It's also not at all clear that Reid's plan will pass the Senate, which is scheduled to vote on it at 1 am Sunday.

Presuming both measures fail to generate sufficient support in one or both chambers, lawmakers will have to get serious about striking a real compromise between the parties and the two chambers.

At the rate they're going they may have mere hours to do so before the government's borrowing authority is fully exhausted on Tuesday

Senate Democrats block Boehner debt ceiling plan after House approval
 
House Speaker John Boehner's plan to raise the nation's debt ceiling and slash government spending narrowly passed his chamber on Friday and then was blocked by Senate Democrats, setting up a weekend of negotiations to seek a deal that would avoid a potential federal default next week.


The Senate vote was 59-41 to table the measure, which effectively kills it unless Democrats decide to bring it up again.

Earlier, Boehner's proposal was approved by the House in a sharply polarized 218-210 vote that was delayed by a day while the speaker rounded up support from wary tea party conservatives. No Democrats supported the measure, and 22 of the 240 members of the Republican majority also opposed it.

Even though it was blocked in the Senate, the Boehner plan now is the Republican negotiating position for hammering out a deal with congressional Democrats and President Barack Obama to avert a possible government default next week.

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However, no face-to-face talks were scheduled, with Democrats accusing Senate Republican Leader Mitch McConnell of refusing to negotiate and McConnell in turn seeking a chance for his caucus to reject a proposal offered by Senate Democratic Leader Harry Reid as a vehicle for compromise.

Democratic and Republican sources familiar with the situation told CNN that McConnell insists the White House be present in further negotiations toward a debt ceiling deal.

In a continuation of the political theater that has characterized the negotiations so far, the House scheduled a vote on the Reid plan for Saturday -- before the Senate will even begin considering it -- as what appeared to be payback for the rejection by Senate Democrats of the Boehner proposal.

Reid, meanwhile, said the Senate will likely vote to take up his plan at 1 a.m. Sunday ET as part of the procedural path required to get something passed in coming days.

As the political maneuvering continues, the clock continues to tick down. If Congress fails to raise the current $14.3 trillion debt ceiling by August 2, Americans could face rising interest rates and a declining dollar, among other problems.

Some financial experts have warned of a downgrade of America's triple-A credit rating and a potential stock market plunge. The Dow Jones Industrial Average dropped for a sixth straight day on Friday.

Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. Obama recently indicated he can't guarantee Social Security checks will be mailed out on time.

Defense Secretary Leon Panetta issued a statement Friday to remind military personnel that they should plan to come to work next week as scheduled, regardless of whether a deal gets worked out. Panetta pledged to do "everything possible to ensure that our national defense is protected."

A Department of Defense official told on condition of not being identified that on the possibility of military pay being withheld, "it's not a question of whether, but when, if an agreement isn't reached."

Friday's House vote was a critical test of Boehner's control over his tea party-infused GOP caucus. The speaker was forced to quell a right-wing revolt over the measure after a number of members complained that it doesn't do enough to shrink the size of government and stem the tide of Washington's red ink.

Boehner, R-Ohio, managed to sway several of those members by including a provision requiring congressional passage of a balanced budget amendment to the Constitution before the debt ceiling can be extended through the end of 2012.

In his floor speech before the vote, Boehner called the proposal imperfect but necessary, and he criticized Obama and congressional Democrats for rejecting all deficit reduction measures passed by the House so far.

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John McCain taking on the tea party? "We've tried to do our level best ... but some people continue to say no," Boehner said, adding: "I stuck my neck out a mile to try to get an agreement with the president of the United States."

His voice rising to a shout, Boehner continued to cheers and applause from fellow Republicans: "It is time for this administration and the other party across the aisle -- put something on the table. Tell us where you are."

Democratic leaders vehemently object both to the balanced budget amendment and the requirement of a second debt ceiling vote before the next election. They argue that reaching bipartisan agreement on another debt ceiling hike during an election year could be nearly impossible, and that short-term extensions of the limit could further destabilize the economy.

Earlier in the day, Obama urged Senate Democrats and Republicans to take the lead in the congressional deliberations.

Boehner's plan "has no chance of becoming law," Obama said. "The time for putting party first is over. The time for compromise on behalf of the American people is now. ... It's important for everybody to step up and show the leadership that the American people expect."

"This is not a situation where the two parties are miles apart," the president insisted. But "we are almost out of time."

Obama urged Americans to contact their members of Congress "to keep the pressure on Washington." Phone lines on Capitol Hill were jammed Friday as people from coast to coast tried to weigh in on the debate.

Meanwhile, Reid, D-Nevada, has been pushing his own plan to raise the debt limit, though he will need to win over at least seven Senate Republicans to win the 60 votes necessary to overcome a certain filibuster.

Reid announced Friday morning that he intended to "take action" on a Senate bill by the end of the day. Later, he complained on the Senate floor that Republicans would effectively filibuster his proposal by requiring a 60-vote super-majority in the 100-member chamber to support the start of debate on it. It was unclear when Reid would attempt to hold that vote, and he warned it could as late as 1 a.m. ET Sunday.

Reid also blasted Boehner's decision to include a mandatory balanced budget amendment provision in the GOP plan, calling the addition of "even more stuff in this right-wing leaning bill. ... It's really hard to comprehend."

Sen. Chuck Schumer, D-New York, accused Boehner of "adding all kinds of unrealistic poison pills to his plan."

But McConnell, R-Kentucky, argued Senate Democrats were doing little to actually resolve the crisis.

"I would suggest to my friends on the other side ... that they start taking their responsibilities as a majority party a little more seriously, because at this point, the only people who are disregarding the consequences of default are Senate Democrats -- not the Republicans in the House -- but them," McConnell said. In a statement after the House vote, McConnell said: "I eagerly await the majority leader's plan for preventing this crisis."

Leaders of both parties now agree that any deal to raise the debt ceiling should include long-term spending reductions to help control spiraling deficits. But they differ sharply on both the nature and timetable of the cuts.

Despite the strong partisan rhetoric, there have been signs of a growing recognition of a need for further compromise. Earlier this week, McConnell called for renewed negotiations with Obama, and indicated that his party must be willing to move away from some of its demands.

Sources close to the negotiations have also told that Vice President Joe Biden is very much in the mix of back-channel conversations on a possible fallback position.

White House Chief of Staff Bill Daley told Thursday that, presuming the Boehner plan wins House approval and gets blocked in the Senate, the next step is for everyone "to take a step back in the Congress and look at where is a point of compromise."

Daley said that similarities between the Boehner and Reid plans "may be the grounds for a deal that, hopefully, both parties can pass."

Both plans suffered setbacks earlier this week when the nonpartisan Congressional Budget Office released reports concluding that they fell short of their stated deficit reduction goals.

Boehner's plan, which has since been revised, proposed generating a total of $917 billion in savings while initially raising the debt ceiling by $900 billion. The speaker has pledged to match any debt ceiling hike with dollar-for-dollar spending cuts.

His plan, however, would require a second vote by Congress to raise the debt ceiling by a combined $2.5 trillion -- enough to last through the end of 2012. It would create a special congressional committee to recommend additional savings of $1.6 trillion or more.

Any failure on the part of Congress to enact mandated spending reductions or abide by new spending caps would trigger automatic across-the-board budget cuts.

The plan, as amended Friday, also calls for congressional passage of a balanced budget amendment to the Constitution before the second vote to raise the debt ceiling, which would likely be required at some point during the winter.

As for Reid's plan, a revised version he proposed Friday would reduce deficits over the next decade by $2.4 trillion and raise the debt ceiling by a similar amount. It includes $1 trillion in savings based on the planned U.S. withdrawals from military engagements in Afghanistan and Iraq.

Reid's plan also would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed by a Senate vote with no amendments by the end of the year.

In addition, it incorporates a process based on proposal by McConnell that would give Obama the authority to raise the debt ceiling in two steps while providing Congress the opportunity to vote its disapproval.

Among other things, Reid has stressed that his plan meets the key GOP demand for no additional taxes. Boehner, however, argued this week that Reid's plan fails to tackle popular entitlement programs such as Medicare, which are among the biggest drivers of the debt.

A recent CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.

According to the poll, the public is sharply divided along partisan lines; Democrats and independents are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a major crisis for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.

U.SA DEBT TALKS: Obama tells nation debt stalemate requires compromise now

Washington.-  Congress is at a stalemate over raising the federal debt ceiling, and Americans need to pressure their elected representatives to work out a compromise that will avoid a potentially devastating default, President Barack Obama told the nation Monday night.

In his seventh prime time televised address, Obama sought to increase pressure for congressional leaders to reach a deal that would allow the government to continue borrowing money to pay its debts after August 2.

The president singled out House Republicans for intransigence and said the political showdown is "no way to run the greatest country on Earth."

"The American people may have voted for divided government, but they didn't vote for a dysfunctional government," Obama said. "So I'm asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your member of Congress know. If you believe we can solve this problem through compromise, send that message."

Transcripts: Obama's speech
Boehner's speech

It was a political speech that intended to convince an increasingly frustrated and concerned public that Obama's approach to dealing with mounting deficits is better for working class Americans and the nation as a whole. In response, House Speaker John Boehner argued the opposite, saying in televised remarks that excessive government spending caused the problems the nation faces and cutting that spending is the only way to solve the problem.

"The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today," Boehner said. "That is just not going to happen."

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How could debt crisis impact you? If Congress fails to raise the $14.3 trillion debt limit by August 2, Americans could face rising interest rates and a declining dollar, among other problems. As the cost of borrowing rises, individual mortgages, car loans and student loans could become significantly more expensive.

Officials also warn that, without an increase in the debt limit, the federal government will not be able to pay all its bills next month. Obama recently indicated he could not guarantee Social Security checks would be mailed out on time.

Months of increasingly tense negotiations have failed to bring a deal that can win approval from all of the necessary players -- the Republican-led House, Democratic-led Senate and the White House.

The talks initially involved a broad deficit-reduction plan intended to reduce the mounting gap between how much the government spends and how much revenue it collects. Obama pushed for a comprehensive plan that included spending cuts, increased tax revenue and entitlement reforms, while Republicans sought to shrink government by proposing spending cuts and reforms without increased revenue.

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Obama said "it's not fair" to make massive cuts to programs affecting the poor and middle class, without asking for sacrifices from wealthy Americans and large corporations as well. As he has in recent weeks, the president called for "a balanced approach" that includes large spending cuts along with revenue hikes -- including a halt to Bush era tax cuts for families earning more than $250,000 a year -- to address the nation's deficit.

"The only reason this balanced approach isn't on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a cuts-only approach -- an approach that doesn't ask the wealthiest Americans or biggest corporations to contribute anything at all," Obama said. "And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about -- cuts that place a greater burden on working families."

House Republicans, buoyed by conservative tea party support that helped them win a majority in last November's congressional elections, have successfully linked the deficit reduction talks with the need to raise the debt ceiling due to increased government spending.

Obama and Democrats argue the debt ceiling should be a separate issue free of political wrangling because it involves the credit of the United States and can potentially impact the U.S. and global economies.

To Boehner, the overall long-term health of the U.S. economy is the issue, and he showed no sign of moving off his party's opposition to any kind of increase in taxes.

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"The president has often said we need a 'balanced' approach -- which in Washington means: we spend more. . .you pay more," Boehner said in his response. "Having run a small business, I know those tax increases will destroy jobs."

Your cheat sheet to the debt talks

Earlier Monday, Democratic and Republican congressional leaders unveiled separate new proposals that the other side quickly rejected, demonstrating the cavernous partisan divide that exists.

Both plans -- one by Senate Majority Leader Harry Reid, D-Nevada, and the other by Boehner, R-Ohio -- provide a path to raise the debt ceiling through the end of 2012, but they differ in scope and over key components involving requirements for future congressional action.

Obama endorsed Reid's plan, but acknowledged it has little chance of getting passed in the House, just as the competing Republican plan unveiled by Boehner is unlikely to get passed by the Senate.

The president pushed for the two parties to work out an acceptable deal, and called for Americans to demand that their congressional representatives put aside short-term politics to reach a compromise.

Reid's blueprint calls for roughly $2.7 trillion in spending cuts over the next decade while raising the debt limit by $2.4 trillion -- an amount sufficient to fund the government through 2012, which means past next year's election.

The plan excludes major provisions of a comprehensive deficit-reduction strategy, such as increased revenue and reforms to politically popular entitlement programs -- such as Medicare, Medicaid and Social Security -- that face skyrocketing growth in costs.

Specifically, Reid's plan includes $1.2 trillion in savings from various domestic and defense programs, along with $1 trillion in savings from winding down the wars in Iraq and Afghanistan. It also generates $400 billion in interest savings on the debt, and another $40 billion by rooting out waste, fraud and abuse.

It also would establish a congressional committee made up of 12 House and Senate members to consider additional options for debt reduction. The committee's proposals would be guaranteed a Senate vote with no amendments by the end of the year.

Obama immediately endorsed the Reid plan, with White House Press Secretary Jay Carney calling it a "responsible compromise ... that should receive the support of both parties."

Timeline: How we got to this messy point

Reid stressed that his plan doesn't include tax hikes and would cut spending more than it increases the debt ceiling -- two key GOP demands.

"I hope my colleagues on the other side will still know a good deal when they see it. I hope they'll remember how to say yes," Reid said. "Democrats have done more than just meet Republicans in the middle. We've met them all the way."

Boehner, however, argued at an afternoon news conference that Reid's plan is "full of gimmicks."

The package "doesn't deal with the biggest drivers of our deficits and debt, and that's entitlement programs," Boehner said.

Boehner's plan would require two separate votes by Congress. The first would approve approximately $1.2 trillion in spending cuts over the next decade while raising the debt ceiling through the end of 2011, two GOP leadership aides told CNN. Any failure on the part of Congress to enact the mandated spending reductions would trigger automatic across-the-board budget cuts.

The second vote would raise the debt limit through 2012, but only if Congress approves a series of major tax reforms and entitlement changes outlined by a bipartisan committee composed of Senate and House members.

The proposed structural changes -- a focal point of intense ideological conflict in Washington -- would have to generate between $1.6 trillion and $1.8 trillion in savings, according to a House Republican aide familiar with the package.

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Boehner's plan, while allowing a total debt-ceiling increase of roughly $2.6 trillion, also would require both a House and Senate vote on a balanced budget amendment to the Constitution between October 1 and the end of the year.

This plan is "less than perfect," Boehner said, but "reflects bipartisan negotiations" conducted with Senate Democrats over the weekend.

Democrats are vehemently opposed to the idea of holding more than one vote to raise the debt limit through the 2012 election, arguing that such a requirement is politically unrealistic and could prove to be economically destabilizing.

Republicans want to lock in long-term tax and spending changes, and argue that Obama is trying to avoid politically tough decisions in a presidential election year.

Meanwhile, top senators from each party said Monday night that behind-the-scenes talks continue to try to reach a deal that would avoid Congress voting on either the Reid or the Boehner proposals.

As leaders from the two parties continue to bicker, analysts warn that financial markets are growing increasingly nervous about the prospect of a national default. The Dow Jones Industrial Average dropped more than 100 points almost immediately after opening Monday morning, although it later cut that loss.

The debate over tying Washington's borrowing limit to deficit-reduction measures continues to severely test the ability of a divided government to effectively function in an era of fierce partisanship.

The negotiations have included repeated starts and stops, with Republicans walking out several times to stress their opposition to Obama's insistence that increased tax revenue be part of a comprehensive deficit reduction deal.

Democrats and Republicans appeared to be close to a $3 trillion deal on Friday before Boehner suddenly announced he was ending his talks with the White House. Republicans accused the White House of trying to add an additional $400 billion in new revenues to the deal; administration officials insisted they were not making any make-or-break demands.

Boehner told House Republicans in a conference call Sunday that the GOP's so-called "cut, cap, and balance" plan will not be part of any final deal. The conservative blueprint, which was passed by the House last week and rejected by the Senate, would have tied a debt-ceiling increase to sweeping reductions in federal spending, caps on future expenditures and a balanced budget amendment.

Boehner insisted Monday that the conservative principles behind "cut, cap, and balance" are embodied in his new blueprint. However, two conservative Republicans in the House immediately announced their opposition to Boehner's plan, saying it fell short of what was needed to deal with the deficit problem.

If Boehner can't get the support of the so-called tea party bloc of GOP conservatives, his proposal could be defeated in the chamber his party controls.

As the debt ceiling debate drags on, a new CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.

As in Congress, the public is sharply divided along partisan lines. Democrats and independents, according to the CNN/ORC Poll, are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a crisis of major problems for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.

Fifty-two percent of Americans think Obama has acted responsibly in the debt ceiling talks so far, but nearly two-thirds say the Republicans in Congress have not acted responsibly. Fifty-one percent would blame the GOP if the debt ceiling is not raised; only three in 10 would blame Obama.

U.S. DEBT TALKS: "It's decision time", Barack Obama said

WASHINGTON, July 16 - Here is what is happening on Saturday in negotiations to raise the U.S. $14.3 trillion debt limit.
* President Barack Obama in his regular weekly radio address calls for shared sacrifice in a deficit reduction package that would help clear the way for Congress to raise the debt ceiling. He says he's willing to compromise and calls on members of Congress to do the same. Republicans have refused to consider tax increases to reduce the deficit.

* Senator Orrin Hatch in the weekly Republican radio address talks about the need for a constitutional amendment requiring the federal government to balance its finances.

* No face-to-face negotiations are planned over the weekend between Obama and congressional leader but that could change.

* Senate Democratic Leader Harry Reid and Republican Leader Mitch McConnell are said to be discussing modifications to a plan put forward by McConnell that would raise the debt limit and put nearly all the burden on Obama to carry it out.

* Lawmakers are under growing pressure from the U.S. business community and U.S. creditors to strike a deal. China, the United States' biggest foreign creditor with more than $1 trillion in Treasury debt, is urging Washington to adopt responsible policies to protect investor interests.

US President Barack Obama bluntly told top lawmakers "it's decision time" in contentious talks to avert a ruinous early August debt default, according to a well-placed Democratic official.


Adding to the urgency, Standard & Poor's joined Moody's as the second ratings agency to warn Washington may lose its sterling Triple-A debt rating, as largest US creditor China and Wall Street titan JPMorgan Chase also sounded the alarm.

"I want to do the largest deal possible," the official quoted Obama as telling Democratic Senate leaders and their Republican counterparts in the House of Representatives in a fifth straight day of White House crisis meetings, on Thursday.

Obama ruled out a short-term fix to let the negotiations run beyond August 2, when cash-strapped Washington will lack money to pay for key services, and declared: "It's decision time. We need concrete plans to move this forward."

The Democratic official and Republican congressional aides said Obama had given the leaders 24-36 hours to get a sense from their rank-and-file what could win congressional approval, and left open the possibility of weekend talks.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling above the current $14.3 trillion by August 2 could send shockwaves through a world economy still reeling from the 2008 collapse.

Republicans, whose votes Obama needs to raise the congressionally set limit, have demanded sweeping spending cuts in return while rejecting calls from the White House and Democrats tie them to tax hikes on the rich and corporations.

"We're probably not going to meet tomorrow, this group. But we're going to continue to discuss the way forward over the next couple of days and we'll see what happens," Republican Senate Minority Leader Mitch McConnell told reporters.

Obama said he hoped for "a big deal" previously described as running about $4 trillion dollars in spending cuts, but said a smaller $2 trillion was possible "if all sides were willing to give a little," the Democratic aide said.

A third option was "to do significantly less on the deficit while still ensuring a long-term increase in the debt limit" to beyond the November 2012 elections in which Obama seeks a second term, the aide said.

US Treasury Secretary Tim Geithner told the group that skittish world markets believed "the debt ceiling must be raised, and we must put in place a plan to deal with our deficit and debt," according to a senior Republican aide.

Republican House Speaker John Boehner seized on that message to warn that "nothing the administration is offering to this point will resolve our debt problem" and pressed Obama to cut spending "in a meaningful way," the aide said.

Democratic House Minority Leader Nancy Pelosi said House Democrats favored a "grand bargain" to cut some $4 trillion while averting a default while protecting cherished social safety net programs.


Obama was to hold a press conference  in the latest push of a public relations charge on the issue, even as the US Treasury has begun contingency planning, according to US officials.

The White House and key lawmakers seemed to be rallying behind efforts by McConnell and Democratic Senate Majority Leader Harry Reid to craft an complex legislative escape hatch to avert a default, push spending cuts, but forego tax hikes.

McConnell's proposal would effectively let Obama raise the debt ceiling with support just from Democrats, who would shoulder the political responsibility but get to protect cherished social safety net programs.

"This remains a fallback option," a Democratic aide said.

Republicans would be able to vote against raising the debt ceiling, as many "Tea Party" conservatives have vowed to do no matter what, and would be in a strong position to enforce their fierce opposition to tax hikes on the rich.

"I have no idea," if it can pass the House, but it "might look pretty good a couple of weeks from now," Boehner told reporters.

Republicans embraced calls for fiscal discipline when Obama took office in January 2009, after years of playing down swelling US deficits, approving massive tax cuts, and rejecting calls to pay for the Iraq and Afghanistan wars.

But a new opinion poll by Quinnipiac University found the US public more ready to blame Republicans than Obama by a 48 percent to 34 percent in the event the talks collapse.

The US hit its debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations, but can only do so to August 2.


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