Illinois Government Consultants Incorporated

(Updates with comptroller’s comments in ninth paragraph.)

Jan. 6 (Bloomberg) — Illinois had its general-obligation bond rating reduced by Moody’s Investors Service to A2 from A1, making it the company’s lowest-graded U.S. state.

The downgrade to the sixth-highest level came after a legislative session that “took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays,” Moody’s said in a report. Illinois, it said, has “weak management practices.”

Moody’s revised its outlook on the debt to stable from negative, citing the state’s power over revenue and spending, and laws that establish the priority of payment for general- obligation bonds. The downgrade affects $32 billion of debt, according to the statement.

“Although the state has taken positive steps toward fiscal stability, swift bipartisan action to implement further cost reductions and reforms in the upcoming legislative session are needed to stabilize the budget,” Kelly Kraft, a spokeswoman for Democratic Governor Pat Quinn, said in a statement.

The state’s unfunded pension liability in 2010 was $85 billion, and the system has assets to pay 45 percent of promised benefits, according to a study by Bloomberg Rankings. It is the lowest so-called funded ratio of any U.S. state.

‘Calculated Decision’

Last January, Illinois lawmakers approved record increases in personal and corporate-income taxes, generating about $7 billion in annual income. On Dec. 13, they approved breaks for CME Group Inc., which operates the Chicago Mercantile Exchange and Board of Trade; Chicago Board Options Exchange; and Sears Holdings Corp. after threats the companies might leave.

“The state had to make a calculated decision with respect to certain large employers,” Ted Hampton, a senior analyst at Moody’s who co-authored the report, said in a telephone interview. “Imposing tax increases is politically difficult.”

The higher levies addressed about half Illinois’s projected deficit. The state has about $7 billion in unpaid bills, and lawmakers rejected Quinn’s proposal in May to borrow to pay them. Quinn is to present his fiscal 2013 budget Feb. 22.

“Illinois leaders have a responsibility to hear the message being sent,” Republican Comptroller Judy Baar Topinka said in a statement. “The only way out of this mess is to keep cutting spending, provide for a better business climate and, for once, let growth outpace spending. ”

Looking to Sell

An Illinois general-obligation bond maturing in January 2015 traded yesterday at an average yield of 2.07 percent, according to Municipal Securities Rulemaking Board data compiled by Bloomberg. Similarly rated general-obligation debt maturing in three years yielded 1.44 percent, according to a Bloomberg Fair Value index.

Illinois, the fifth-most-populous U.S. state, plans to sell $800 million in taxable and tax-exempt general-obligation bonds as soon as Jan. 11. With the downgrade, Moody’s rates Illinois one step lower than California, at A1.

“There is no fear of the state missing a bond payment,” Topinka said in her statement. “The first payment we make each month is to our bondholders.”

Illinois still has an A+ rating from Standard & Poor’s, its fifth-highest. That’s two grades better than California, at A-.

S&P affirmed its rating, citing the “deep and diverse” Illinois economy that’s anchored by Chicago, the third-largest U.S. city, according to a statement.

Source: Bloomberg BusinessWeek

Updated with President Obama comments, Daley to co-chair re-elect….

NASHUA, NH–White House chief of staff Bill Daley is resigning, President Obama announced on Monday, departing earlier than expected after a rocky tenure. Daley will be replaced by Budget Director Jack Lew. He will become a co-chair of Obama’s 2012 re-election campaign, based in Chicago.

President Obama discussed the move flanked by Daley and Lew, not taking questions after brief comments. Obama said he originally did not accept Daley’s resignation. Daley’s departure comes a day before Obama returns home to Chicago for three fund-raising events.

Obama said Daley was leaving for reasons that seem very vague: to return to Chicago and to spend more time with his family, especially his grandchildren.

“I didn’t accept Bill’s decision right away. In fact, I asked him to take a couple of days to make sure that he was sure about this. But in the end, the pull of the hometown we both love — a city that’s been synonymous with the Daley family for generations — was too great. Bill told me that he wanted to spend more time with his family, especially his grandchildren, and he felt it was the right decision.”

“…I plan to continue to seek Bill’s advice and counsel in the years to come,” Obama said.

Daley will become a co-chair of Obama’s 2012 re-election campaign, based in Chicago.

“He’s got a ton of political experience, knowledge and contacts and we look forward to leveraging those assets and working closely together to re-elect the President this year,” a member of the Obama team told the Chicago Sun-Times.

In his resignation letter, dated Jan. 3, Daley wrote to Obama, “I have been honored to be a small part of your administration. It is time for me to go back to the city I love.”

Daley, a former Commerce Secretary and brother of former Mayor Richard Daley, followed Chicago Mayor Rahm Emanuel in the job last year, but seemed mismatched for the position as the political and governmental situations changed. Daley was not close to Obama and the two did not share much in common except political strategist David Axelrod and Emanuel.

Last year, Daley told NBC5 Chicago that he was going to stay only through the end of Obama’s first term. Last year, Daley was put in an uncomfortable position within the White House after much sniping and infighting–he was demoted from running day-to-day operations, turning them over to Pete Rouse, who served as interim chief after Emanuel left.

Daley, a former Chase Bank executive, was hired in part to be a bridge between the White House,the business community and the Republicans in Congress–a job that soon ceased to exist as relations continued to fray–especially with Republicans– and eventually snap all together.

The beginning of the end for Daley started in October, in an interview he gave to to Politico’s Roger Simon where he blamed congressional Democrats–as well as Republicans–for the deadlocks.

“On the domestic side, both Democrats and Republicans have really made it very difficult for the president to be anything like a chief executive,” Daley said. “This has led to a kind of frustration.”

At that point, Daley barely had a relationship with Senate Majority Leader Harry Reid (D-Nv.) and by November, his position was reconfigured with Rouse taking on the day-to-day role.

Daley “retains obviously all of his authority and ultimate responsibility for the White House operations and White House staff,” White House press secretary Jay Carney said at an early November briefing. “… It’s less about transferring duties than it is about adding responsibilities without subtracting any from anybody else.

Daley was tapped by Obama in January, 2010 and started a few weeks later.

Obama, in naming Daley said then, “Few Americans can boast the breadth of experience that Bill brings to this job. He served as a member of President Clinton’s Cabinet, as Commerce secretary . . . He’s led major corporations. He possesses a deep understanding of how jobs are created and how to grow our economy. And, needless to say, Bill also has a smidgen of awareness of how our system of government and politics works. You might say it is a genetic trait.”

Daley returned to Washington from the banking world, the Midwest chief for J.P. Morgan Chase since 2004, before that president of SBC. He’s also run Chicago’s Amalgamated Bank and as a partner at the law firm of Mayer Brown, handled government relations, with his close relationship to the late Rep. Dan Rostenkowski very helpful. Obama White House policy will call for Daley to recuse himself from any J.P. Morgan matter for two years.

One of Daley’s major accomplishments was as “NAFTA Czar,” winning congressional approval for then-President Clinton of the North American Free Trade Agreement — with a big assist from Emanuel. Clinton named Daley to the Fannie Mae board and in his second term made Daley his Commerce secretary, where Daley performed for the first time on a global stage.

Vice President Gore drafted Daley to take over his troubled 2000 presidential bid. By that time Daley had advised the 1988 Biden presidential campaign and Vice President Mondale’s 1984 bid.

In October, Daley said his best day on the job was the Sunday when Osama bin Laden was killed by U.S. forces. The worse day was when negotiations failed for a deal to raise the debt ceiling.

Chicago community organizer has roots and clout dating to 1960s but current issues hang over his multimillion-dollar empire

The Rev. Leon Finney Jr. is a noted community organizer on Chicago’s South Side, and some of his related multimillion-dollar business operations are under scrutiny. (Abel Uribe, Chicago Tribune / December 9, 2011)

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The Rev. Leon Finney Jr. built a name for himself in the 1960s by fighting slumlords and helping to save his Woodlawn community from being swallowed by the University of Chicago.

The community group he came to lead, The Woodlawn Organization, became a national model as Finney built a network of social programs and gained control of millions of dollars in publicly funded development.

But now Finney’s business dealings are being questioned on a number of fronts.

Federal housing authorities are investigating allegations that the Gary Housing Authority was overbilled by $850,000 for payroll expenses related to public housing projects managed by the Woodlawn Community Development Corp., where Finney is chief executive.

A federal lawsuit filed by Finney’s former chief financial officer alleges a host of financial improprieties, from ghost payrolling to the use of government money for Finney’s private pursuits, including a family-owned restaurant.

In addition, government-mandated audits, court records and other documents obtained by the Tribune show:

•A federal housing consultant lived in a Woodlawn apartment owned by a company run by Finney while in charge of monitoring property management contract awards in Gary. During that time several contracts went to the Woodlawn Development Corp. Court records show the consultant failed to pay $17,000 in rent on the apartment.

•In several instances, government subsidies awarded to one low-income housing development were used to pay the utility bills and other expenses of unrelated properties, a violation of federal rules governing those funds.

•The Woodlawn Organization, headed by Finney’s wife, Georgette Greenlee Finney, spent $132,000 to lease office space from a real estate company owned by Finney, a 2008 audit shows.

Finney, 73, declined to comment on the Gary investigation, as well as most of the allegations made in the federal lawsuit filed by his former chief financial officer, Virgil Savage. His attorney, Devlin Schoop, also declined to comment.

However, Finney acknowledged financial problems at The Woodlawn Organization and its network of nonprofits and property management companies, which have been sued for a host of unpaid bills.

That has led to a scramble to “keep it all together” by shifting money from one organization’s bank account to another’s in an effort to pay bills, Finney said.

Finney’s network of organizations and companies runs seven social services programs and manages or owns roughly 5,000 subsidized apartments in Illinois and northwest Indiana.

“When you have no stockholders to go to get an additional capital infusion, in an effort to try to keep it all working, in instances you borrow from one property to another in order to keep the whole working and you hope that in the interim you can pay it back,” he said.

But, Finney insisted, “No money has gone into my pocket or anybody’s pocket.”

Attorneys with the Gary Housing Authority confirmed the agency is cooperating with an investigation by the federal department of Housing and Urban Development. HUD officials declined to comment.

Gary housing officials said the investigation is largely based on allegations made by Savage, who in 2010 was fired as chief financial officer for The Woodlawn Organization and its affiliated entities after about 2 1/2 years.

In his lawsuit, filed last winter, Savage, 53, claims he was fired shortly after he sent an internal memo to the organization’s board members that accused Finney of using money budgeted for federally subsidized properties for his personal benefit and to pay employees of Finney’s church.

“That’s when our relationship began to sour,” Savage said.

Source: Chicago Tribune

WASHINGTON (AP) — A burst of hiring in December pushed the unemployment rate to its lowest level in nearly three years, giving the economy a boost at the end of 2011.

The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months.

The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006.

“There is no question that today’s employment report is a positive and there is also no question that the pace of job growth has accelerated of late,” said Dan Greenhaus, an analyst at BTIG LLC, a brokerage firm

A better job market is a positive sign for President Barack Obama, who is bound to face voters with the highest unemployment rate of any sitting president since World War II. Unemployment was 7.8 percent when Obama took office in January 2009.

Still, the level may matter less to his re-election chances if the rate continues to fall. History suggests that presidents’ re-election prospects hinge less on the unemployment rate itself than on the rate’s direction during the year or two before Election Day.

For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9 percent last year, down from 9.6 percent the previous year.

Economists forecast that the job gains will top 2.1 million this year.

The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers.

And hiring increased across most major industries.

Manufacturing added 23,000 jobs, as did the health care industry. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.

Economists cautioned that some of the gains reflected temporary hiring for the holiday season. The government adjusts the figures to account for those seasonal factors, but doesn’t always fully account for them.

The gains in transportation and warehousing, for example, reflected a strong increase in hiring for couriers and messengers. That could stem from a big jump in online shopping over the holidays, the department said.

The nation’s work force, which includes both people working and those searching for jobs, shrank slightly last months and is little changed from this spring. That’s a concern because a strengthening job market normally draws more applicants.

The work force has declined by about 160,000 over the past two months, one reason the unemployment rate has fallen.

“You have to take that unemployment rate decline with a grain of salt when you look at the declines in the labor force,” said Marisa DiNatale, an economist at Moody’s Analytics.

The government only counts people as unemployed if they are actively searching for jobs. Discouraged workers who have given up on looking are not included in the rate.

And some of those who are counted as employed are working part time, but want full-time work.

When including those groups, the broader “underemployment” rate was 15.2 percent. That’s down from 15.6 percent the previous month, but still high. The figure has dropped for three straight months.

And the job market has a long way to go to recover from the Great Recession. The nation has 6 million fewer jobs that it did in December 2007, when the recession began.

More jobs and higher pay are crucial to helping the economy grow. They could enable shoppers to increase spending, which fuels 70 percent of economic activity.

The economy likely grew at an annual rate of above 3 percent, a healthy pace.

A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.

Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for U.S. auto sales.

Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.

Source: The State Journal Register - The Oldest Newspaper in Illinois

WASHINGTON (AP) — With its first chief now in place, the new Consumer Financial Protection Bureau will start enforcing rules aimed at reining in abusive mortgage servicers, student lenders and payday-loan companies.

It will be months, though, before the agency can police other areas of consumer finance, such as debt collection and credit-reporting bureaus.

Over Republican opposition, President Barack Obama used a congressional recess appointment Wednesday to install Richard Cordray to lead the consumer finance watchdog. The bureau was created in July as part of the 2010 overhaul of the nation’s financial regulations.

The idea behind the new agency was to prevent financial companies, such as mortgage servicers, from exploiting consumers. Such companies, facing scant federal oversight, committed some of the worst consumer abuses before the financial crisis.

In the past, only banks were subject to examination by federal financial regulators. And until now, with no permanent director, the bureau had authority to supervise only big banks.

Senate Republicans had vowed to block Cordray’s nomination until the agency’s structure was changed to allow closer congressional oversight. But Obama took advantage of the congressional break to install Cordray, a former Democratic attorney general of Ohio.

Cordray said he would immediately “begin working to expand our program to non-banks, which is an area we haven’t been able to touch up until now.”

That change will likely start within weeks. Agency officials who are supervising big banks have already been trained to examine non-bank financial firms.

Still, some areas of consumer finance will remain outside the bureau’s reach. Aside from payday, mortgage and student loan companies, the consumer protection bureau can supervise only non-bank companies it defines as “larger participants” in their markets.

In June, the agency sought public comments on a proposal to supervise major debt collectors, credit reporting bureaus, check cashers, issuers of prepaid debt cards and debt-relief companies. The comment period has ended, and the agency is reviewing the responses. It’s not clear how long the review will take.

Once the comments have been reviewed, the proposal must be revised, subjected to further public comment and then approved by the White House. This could take months or years. If the agency’s proposal is approved, it will be able to send inspectors to credit bureaus and others that meet the “large participant” definition.

Here’s a guide to the powers that the CFPB now hold over different categories of companies:

— Non-bank mortgage lenders and servicers:

These companies have been subject to existing laws and rules, but the agency was unable to supervise them without a permanent director. With Cordray’s appointment, the CFPB can have officials monitor mortgage lenders and servicers. That might discourage any from using “robo-signers” to foreclose on borrowers without doing the required paperwork. That practice became widespread over the past decade, and no federal agency was responsible for cracking down.

— Payday lenders:

Companies that make short-term loans to borrowers with weak credit already are governed by federal laws such as the Truth in Lending Act. But there’s been no federal oversight to make sure they comply. The CFPB can now send examiners to payday firms it suspects of illegal or abusive practices. The agency wants to make sure they disclose the full cost of a loan upfront so consumers can make an informed choice.

— Private student lenders:

CFPB examiners also have gained the ability to examine these companies. The federal government has been cracking down on for-profit education companies whose graduates can’t find jobs and have little chance of repayment. The CFPB can now require these lenders to follow existing rules and write new ones intended to guarantee that they lend fairly.

— Prepaid debit card companies, credit bureaus, money-transfer companies, check cashers, debt relief services:

These companies are subject to federal laws. But they’ve faced little oversight in the past. The CFPB proposed in June identifying major participants in those markets that it will oversee to make sure they’re following the rules. It’s unclear when that proposal might take effect.

— Big banks:

Nothing much will change. Since its creation, the agency has been placing full-time examiners in the nation’s biggest banks to enforce laws and rules. It can require them to file regular reports, monitor risks they might pose to consumers and write new rules.

Source: Chicago Tribune

DES MOINES – Caucus day arrived Tuesday morning as Iowans would expect it: sunny, chilly and wonderfully unpredictable. By nightfall, Mitt Romney will know whether his carefully calibrated strategy paid off.

They call Iowa a three-person race between Romney, Rep. Ron Paul (Tex.) and former Pennsylvania senator Rick Santorum, the dark horse who suddenly emerged from back in the field in the final two weeks here. Any of the three might win, or so the gossip that is swapped as intelligence in hotel lobbies and at candidate rallies suggests.

Paul has his committed army and a turnout operation that has a good reputation but has yet to prove its mettle. Santorum is surging, or at least rising, and the shorthand on Iowa has always been to get hot late and ride the wave. Romney has a veteran operation and the longest initial list of supporters. Whatever. In reality, this contest is mostly about Romney — at least until one of the other candidates proves otherwise.

Months ago, the former Massachusetts governor and his campaign team were telling anybody who would listen that he couldn’t or wouldn’t win here. Memories of 2008 were still unhappy ones. Romney had poured millions of dollars into the state, won the straw poll in August 2007 and led in public opinion polls into the fall. Then he saw Mike Huckabee and his organic grass-roots organization suddenly rise up and overtake him in the final month. The loss was crushing.

There would be no repeating that sad exercise in this campaign, or so his team vowed. Among the lessons learned from 2008 was not to be put too many resources where they weren’t absolutely necessary. Headquarters slimmed down. Campaign events — other than fundraising — were fewer. Television interviews were kept at a minimum.

Iowa was Exhibit A of that change in thinking. Romney has been parsimonious about investing in Iowa from the start. When other candidates started making repeated visits in 2010 (remember Tim Pawlenty!), Romney stayed away. In the fall of 2010, he came to campaign for Terry Branstad, who was running (successfully) for governor, but barely left any footprints.

While other candidates put their hopes into Iowa—Santorum and Michele Bachmann particularly—Romney held back. He kept everyone guessing, and there were repeated waves of media stories saying, “Is he in or isn’t he? Is he trying to win or not?”

The shifting sentiments of Republican voters and the ups and downs of other candidates made decision-making at Romney headquarters that much more challenging, as the campaign tried to manage expectations and lay out a game plan for this first caucus state.

At different points over the past few months, Romney’s advisers have been presented with conflicting scenarios. At one moment it would be, “Well, with a little more effort, maybe victory is possible.” At another it might be, “Well, it will take a little more effort to avoid an embarrassing finish,” however defined.

Back in Iowa, his small team, led by strategist Dave Kochel, kept working the lists, maintaining contact with past supporters, showing up at party functions and tending to business.

Sometime in December, managing expectations became a losing proposition. Public opinion polls showing Romney narrowly ahead overrode the spin coming from the Romney team about “anything can happen.” Although not incorrect, that assessment was drowned out by everything else. Which is why on caucus morning, so much attention focused on the former governor.

Romney might not need to win here, but he is certainly in a position to do so, and victory would be particularly sweet if Paul and Santorum finished immediately behind him. That would relegate to fourth place or lower Texas. Gov. Rick Perry and former House speaker Newt Gingrich, the two rivals who have felt the negative sting of the Romney operation and who have been seen as the most threatening overall.

Romney would be happy to finish off the race as quickly as possible, although it seems destined to run through South Carolina and into Florida no matter what happens in Iowa and New Hampshire. His rivals have vowed to keep going. Several are largely avoiding New Hampshire (except for weekend debates) to campaign in South Carolina, where Romney doesn’t have the kind of built-in advantage that any Massachusetts politician has in New Hampshire.

Still, as caucus day opened, no one could say with any certainty what the order of finish would be. And so the wait began.

Source: Washington Post

Mayor Rahm Emanuel today said he erred last month when he said tighter protest rules and higher fines for thwarting police would be temporary measures designed just for a pair of spring meetings of international leaders in Chicago.

“I misspoke, and I take responsibility for the confusion,” Emanuel said at an unrelated news conference. The mayor meant to say that only the blanket spending authority for the G8 and NATO conferences, which he is seeking along with the other measures, would be temporary.

The mayor’s description of his errant statement came after protest leader Andy Thayer, noting today’s Tribune story that explained how the measures were permanent, accused the mayor of lying.

“Mayor Emanuel has frankly lied when he said that these ordinance changes would be temporary,” Thayer said. “He knew what it was about.”

Thayer and other members of the Coalition Against the NATO/G-8 War and Poverty Agenda this morning filed a permit application for a mass march on May 19 that would start at Daley Plaza and end at McCormick Place, where the NATO and G-8 summits are to be held.

Before filing the application, Thayer stood before a throng of television cameras, calling on Emanuel to reverse course on the proposed protest changes and aldermen to reject them before the Jan. 18 City Council meeting.

Don Rose, a political consultant who was an anti-Vietnam War spokesman during the troubled 1968 Democratic National Convention that led to riots, also spoke. He said tougher protest restrictions could trigger “acting out” by frustrated protestors seeking to peaceably demonstrate.

“I was one of the organizers when the whole world was watching, and I see some unfortunate parallels here,” Rose added, saying the “Battle of Michigan Avenue” was touched off in 1968 after marchers took to the sidewalks after being unable to get permits. “If they are serious about protecting first amendment rights, they will expedite and cooperate in giving the parade permits.”

Emanuel’s proposed new rules would double the maximum fine to $1,000 for protestors charged with resisting or obstructing a police officer, as well as those helping protestors escape custody. The minimum fine would soar to $200 — a $175 increase.

The duration of demonstrations would be reduced by 15 minutes to exactly two hours. Public parks and beaches would be closed until 6 a.m., two hours later than now. Loud noise, amplified sound and music at parades and public assemblies would be allowed only between 8 a.m. and 10 p.m.

“Every piece of sound equipment would need to be registered with the city a week in advance,” Thayer said, citing one of the proposed revisions he believes is unworkable. “You can’t predict who’s going to show up with a bullhorn, who’s going to show up with a megaphone or what have you.”

Emanuel, meanwhile, again said his intent is to allow world leaders to meet and conduct their business while also protecting protestors rights to free speech.

“Our fee structure hadn’t been updated in 20 years,” he said of the proposed fine increases. “We’re bringing it more in line.”

The NATO and G-8 summits are scheduled for May 19-21 at McCormick Place. Emanuel has stressed that the event in President Barack Obama’s hometown is a chance to showcase the city, while some observers note riots have resulted in other cities where those groups have met.

Emanuel was back on the job today with a tan after spending much of the last two weeks vacationing with his family in South America. The mayor, his wife, Amy Rule, and his three school-aged children went to Chile and Argentina on a 70-mile white water rafting trip. They also spent their time outdoors fly fishing and hiking, the mayor said. And the Emanuels brought in the New Year in Buenos Aires.

“Every year we try to take the kids to a different part of the world to see,” Emanuel said. “When you grow up again, you want to be an Emanuel child at some point.”

Source: Chicago Tribune 

In this Sept. 20, 2011 file photo, a phone is held in a car in Brunswick, Maine. Texting, emailing or chatting on a cellphone while driving is simply too dangerous to be allowed, federal safety investigators declared Tuesday, Dec. 13, 2011, urging all states to impose total bans except for emergencies. (AP Photo/Pat Wellenbach, File)

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House Republicans and Senate Democrats gained substantial support on Wednesday within party ranks for their separate plans to resolve a looming debt crisis, but the momentum seemed to be pushing both sides further from a compromise.

It was a day in which Capitol Hill seemed to operate in alternate realities: Republicans in the House sharing near universal belief that the Senate will eventually cave and accept their plan, and Senate Democrats assured that they will have the last word over the weekend and ultimately force the hand of the House.

As the House headed for a vote on Thursday, Congressional officials suggested that Senate leaders from both parties were keeping an open line for a potential compromise they could both brook. So far no such agreement appeared likely, and the Senate moved toward its own series of votes that could run through the weekend and perhaps into Monday, just one day short of the Aug. 2 date that the White House has insisted is the deadline for extending the debt ceiling for paying the nation’s bills.

Earlier in the day, at a House hearing, a representative of one of the credit rating agencies said that while the United States was unlikely to default on its obligations, its credit rating could still be cut if Congress failed to come up with a plan to reduce spending sufficiently. In the markets, investors sought alternatives to Treasury bonds and pushed down American stock prices for the fourth straight day as reverberations from the legislative impasse appeared to take a toll. The Dow Jones industrial average closed down 198.75 points, or 1.59 percent, on Wednesday; the broader Standard & Poor’s 500 stock index lost more than 2 percent.

Speaker John A. Boehner began mustering support for his budget-cutting plan early in the day as he cracked a verbal whip in meetings with his members even as Senator Harry Reid, the majority leader, made it clear the House legislation was dead on arrival in his chamber.

Less than a day after an unfavorable evaluation from the Congressional Budget Office forced Mr. Boehner to delay a vote and rework his bill to gain support, the speaker and other Republican leaders met with their conference Wednesday morning and bluntly commanded that they line up behind the reworked plan to cut spending at least as much as the $1 trillion increase proposed for the debt ceiling.

With the hope of picking up more votes, Mr. Boehner revised his deficit-reduction plan to achieve additional savings of $65 billion over 10 years. The Congressional Budget Office said the revised proposal would save $915 billion over 10 years, up from an estimate of $850 billion in savings from the original plan.

The revisions involved technical changes in annual limits on spending in 2012 and 2013, but they produced substantial additional savings.

In a meeting with House Republicans on Wednesday morning, Mr. Boehner and the majority leader, Representative Eric Cantor, scolded members for allowing Democrats to unify in protest against them. “This is the bill,” Mr. Boehner said, according to those who attended the meeting, who said he advised them to “get your ass in line.”

On the other side of the Rotunda in the Senate, Mr. Reid sent Mr. Boehner a letter signed by all 51 Senate Democrats and two independents assuring that his legislation, which would raise the debt ceiling for roughly six months — far less than President Obama wants — faced certain failure in his chamber. “Your approach would force us once again to face the threat of default in five or six short months,” the letter said. A number of Senate Republicans also oppose the House bill, largely because they find the spending cuts insufficient.

Senator Mitch McConnell, the minority leader, reiterated his support for Mr. Boehner’s bill on the Senate floor on Wednesday. “The fact is, Republicans have offered the only proposal at this point that attempts to get at the root of the problem, and which actually has a chance of getting to the president’s desk,” he said.

Mr. McConnell’s aides vehemently denied that their boss was negotiating any side deal with Mr. Reid or that he intended to do so.

Mr. Reid’s package would cut roughly $2.2 trillion in spending over 10 years and raise the debt limit through 2012, according to an analysis from the budget office. “The bottom line is there’s only one bill in Congress that’s a true compromise,” he said Wednesday. “We’re running out of time, and it’s time to get serious about finding that compromise.”

Despite Mr. Reid’s warnings to the House, rank-and-file House Republicans — scores of whom initially seemed inclined to flee the House bill over what they felt were insufficient spending cuts — fell back in line behind Mr. Boehner, sensing that a compromise with Senate Democrats, which they would less favor, might otherwise be in the offing.

Mr. Boehner made it clear he needed members, even those who believed the bill did not go far enough in cutting spending, to help him avert either a default or Senate victory. “I can’t do this job unless you’re behind me,” people who attended the meeting recalled him saying.

The appeal was apparently effective.

“We’ve got this back and forth between have we cut enough, how much have we cut, how do we get a long-term solution on this,” said Representative James Lankford, Republican of Oklahoma. “I like tea sweet enough to stand the spoon up in it,” he said. “This is not super-sweet tea. But it is not unsweetened, either.”

Mr. Reid’s members threw their support behind him in equal measure. Senator Barbara A. Mikulski, Democrat of Maryland, a leading liberal voice in the Congress, endorsed the majority leader’s plan on the Senate floor, calling it “substantive; it’s real and it’s achievable.”

Mr. Reid’s plan would save $2.2 trillion over 10 years, less than the $2.7 trillion that the Democrats had claimed. Even discounting the savings achieved from winding down the wars in Afghanistan and Iraq (about $1.04 trillion) and related savings in interest on the public debt (about $250 billion), that would mean total savings of $900 billion compared with the Republicans’ $850 billion as tallied by the budget office.

Assuming the House is able to pass its bill on Thursday, the Senate has several options. The first is to simply vote to table the House measure, which would likely inflame Republican senators, deprived of the right to have a substantial debate on it.

Another option would be to have a quick vote on the House bill, and assuming it fails, immediately take up either Mr. Reid’s bill as a substitute for the House bill — a procedural move that allows it to be voted over the course of the weekend rather than Monday — or perhaps, some form of a compromise measure drafted with Republican senators, for a Saturday vote.

Alternatively, Mr. Reid could begin the procedural clock on his own bill on Thursday, requiring votes on Saturday and Monday, dragging the process out further.

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Source:  The New York Times

“Don’t call my bluff,” President Obama reportedly warned House Majority Leader Eric Cantor (R-Va.) during a tough bargaining session over the debt ceiling July 13. “I’m going to the American people with this.”

It was no empty threat. As the high-stakes negotiations with Congress to avoid financial default Aug. 2 have bogged down, Obama has taken his case directly to the public with increasing urgency. This month, he has appeared in front of reporters at the White House briefing room four times, taken the stage before a friendly crowd of 1,200 in a town hall-style event at the University of Maryland and delivered a rare televised prime-time address to the nation Monday night from the East Room.

The gambit is aimed at winning public support that could give him an upper hand at the negotiating table, though polls suggest Americans are frustrated both with the president and his Republican rivals.

With each appearance, Obama has not altered his message as much as his persona: He verged from poised early in the process — the “only adult in the room” strategy aimed at contrasting him against a squabbling, childish Congress — to frustrated and emotional by the end of last week, when House Speaker John A. Boehner (R-Ohio) abruptly left Obama “at the altar.” He returned to a more collected and determined demeanor Monday night, as he tried to leave the public with a lasting impression with just a week left until the deadline.

Along the way, Obama has perhaps revealed more public emotion than he has during his 2 1/2 years in office.

The last time the American people saw him up close, in a pair of appearances last Friday, Obama went through a dramatic mood swing before the cameras in a single day.

At a morning town hall appearance at the University of Maryland, Obama used humor and an easy-going manner to walk the crowd through his impasse with Congress.

During the question-and-answer portion, a high school government teacher told Obama that she was having trouble teaching her students the importance of compromise in a two-party political system when they saw the partisanship on Capitol Hill.

“Are things changing?”she asked “ Do we not use compromise anymore?”

Obama smiled.

“I think you should keep on teaching your students to compromise, because that’s not just how government works; that’s how life works,” he said. “How many people here are married?”

The crowd laughed. “For those of you who are not but intend to get married, let me just tell you,” the president continued, “you better get used to compromise.”

What the crowd did not know was that Obama had placed a call to Boehner earlier in the day. The president expected to begin wrapping up a “grand bargain” compromise that would include a mix of spending cuts and tax increases to slice the deficit by $3 trillion over the coming decade.

But Boehner, whose House Republican caucus revolted over the tax hikes, decided to walk away from the negotiating table. Not until late in the business day, many hours after Obama had left him a message, did Boehner call back to say the deal was off.

Obama instructed his communications team to assemble reporters, and the president appeared just after 6 p.m. Friday in the White House briefing room. He was as frustrated and emotional as he has ever been in public.

“Up until sometime early today when I couldn’t get a phone call returned, my expectation was that Speaker Boehner was going to be willing to go to his caucus and ask them to do the tough thing but the right thing,” Obama told reporters. “I think it has proven difficult for Speaker Boehner to do that. I’ve been left at the altar now a couple of times.”

He continued: “And I think that one of the questions that the Republican Party is going to have to ask itself is can they say yes to anything? Can they say yes to anything?”

Though the president summoned Boehner and other congressional leaders to his office over the weekend, pundits concluded that Obama risked being sidelined as the House and Senate crafted their own emergency debt limit proposals without him.

Perhaps fearing that the defining public image of him during the negotiations would be one of anger, Obama appeared again Monday night, this time bypassing reporters and speaking directly to the public from the East Room.

In the stately hall where he had feted the World Series champion San Francisco Giants only hours earlier, Obama appeared in a blue suit and red tie, looking equal parts grim, annoyed and determined.

His address included most of the same talking points and catch phrases that he has been using all month. He talked of reducing the deficit to put the economy on sounder footing for investments in jobs and avoiding a default that would raise interest rates on student loans. He trotted out populist lines about oil companies and corporate jet owners needing to pay their fair share in taxes. He even urged his audience to “make your voice heard” by contacting their representative in Congress.

But he strayed from the usual script when he got historical, noting that Republican hero Ronald Reagan and even George W. Bush had raised the debt ceiling 25 times between them. Calling for compromise, he quoted Thomas Jefferson: “Every man cannot have his way in all things. . . . Without this mutual disposition, we are disjointed individuals, but not a society.”

Summing up, Obama reached for some of the rhetorical flourish that large numbers of voters found so appealing three years ago.

“History is scattered with the stories of those who held fast to rigid ideologies and refused to listen to those who disagreed,” Obama said. “But those are not the Americans we remember. We remember the Americans who put country above self, and set personal grievances aside for the greater good. We remember the Americans who held this country together during its most difficult hours; who put aside pride and party to form a more perfect union.

“That’s who we need to be right now,” Obama said. “The entire world is watching.”

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Source:  The Washington Post