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The federal debt ceiling debate is already complicating life for state and local governments.

Maryland is postponing a bond sale that had been scheduled for Friday, after the state was warned that its credit rating would probably be lowered in the event of a federal downgrade. California, which typically issues short-term bonds at this time of year, is working to arrange bank loans instead, citing the market uncertainty. And state officials across the nation are trying to figure out what will happen to the federal payments they rely on for everything from Medicaid to unemployment to highway construction if a deal is not reached to raise the debt ceiling by the Aug. 2 deadline.

States whose economies rely on the federal government — including Maryland and Virginia, home to many federal employees and contractors — are at the greatest risk if there is no agreement and Washington has to decide which payments to make and which to skip. They were among the states warned by Moody’s Investors Service this week that their credit ratings were being jeopardized by Washington — which would make it more expensive for them to borrow for costs like construction, through no fault of their own.

“For nearly 75 years we have worked hard to earn the highest credit ratings from all three rating agencies,” Gov. Bob McDonnell of Virginia, a Republican, wrote this week to President Obama and members of Congress, urging them to raise the debt limit. “Now your failure to get the job done is hurting the businesses and citizens of our commonwealth.”

Many state and local officials are still hoping that a deal will be reached, averting a situation in which federal payments to the states could start to be cut in August. But a number of states have begun preparing for the worst.

Ric Brown, Virginia’s secretary of finance, said that it was a difficult task, made much more difficult by the lack of concrete information coming from Washington. “What you’ve got at the federal level, let’s face it, is outright chaos,” he said in an interview. “It’s hard to make sense out of that.”

In Maryland, the uncertainty over what will happen in Washington is complicating the state’s plans to sell bonds for school construction and to refinance some existing debt. The sale was pushed back to Monday after the state was warned that the debt ceiling debate could harm its credit rating.

Of course, if the debt limit is not raised and the federal government cannot meet all its costs, states and localities will face a new set of more serious problems. The National Conference of State Legislatures told members this week that there was little experience to guide their many “what if” questions, citing instead “a potpourri of ‘coulds,’ ” including the possibility that the federal government could pay its debts in the order in which they were received, or could prioritize which payments to make.

If the federal government were to stop paying some employees or contractors next month, or were to hold back Social Security checks, it could have a “profound effect on state and local tax revenues,” according to a report issued this week by the Pew Center on the States. On top of that, a delay in the payments that states and local governments rely on would pose cash-flow problems for many states. The Pew report noted that the federal government owed $10.4 billion in tuition assistance next month, when the academic year begins.

August is also the peak of the road construction season. In June, the states got $4 billion worth of reimbursements for transportation projects from the federal government, said Jack Basso, the director of program finance and management for the American Association of State Highway and Transportation Officials. Now the association is trying to figure out whether money in the highway trust fund — which comes mostly from the federal gas tax — would be protected if the debt limit were not raised.

An interruption in payments would put states in a bind, Mr. Basso said, since they use the money to pay private contractors. “They would have to face ‘How are we going to pay our bills?’ ” Mr. Basso said.

California had been preparing to issue $5 billion worth of short-term bonds next month, but now its treasurer, Bill Lockyer, is seeking to put together a bridge loan with banks instead.

“Given the situation in Washington, the treasurer decided it would be prudent to develop a contingency plan, a Plan B,” said Tom Dresslar, a spokesman.

Mayors are also watching the debate in Washington nervously. Several said in interviews that they were not worried in the short term. But some, including Mayor Ralph Becker of Salt Lake City, said they were worried about the general economic harm that a federal default would cause. “We all fear and see the specter, the dark clouds that would hide our beautiful blue skies and mountains,” he said. “It’s hanging over us.”

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Source:  The New York  Times

The contentious budget talks that have dominated Washington for months intensified Wednesday, prompting President Obama to say he would accept a short-term hike in the debt ceiling if it gave lawmakers time to finalize a comprehensive deal.

Obama had pledged to veto any short-term measure, but White House spokesman Jay Carney said Wednesday that the president could accept an extension of “a few days” if it allowed a long-term deficit-reduction and debt-ceiling deal to work its way through Congress.

The White House concession added to a whirlwind week in which negotiations appeared to be changing daily. At first, leaders were focused on a fallback plan that would raise the debt ceiling but do little to control future borrowing. Then they started considering an ambitious, but complicated, bipartisan strategy for raising taxes and cutting cherished health and retirement programs.

By Wednesday evening, as House Speaker John A. Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) huddled with Obama at the White House, aides in both parties said a grand bargain to slice $4 trillion out of the federal budget over the next decade was back on the table.

All of those options remain in the mix. “There are multiple trains heading towards the station, and we have to decide,” Carney said before Obama met with the two GOP leaders. “We need to be sure that that fail-safe option is there — even as we pursue, aggressively, the possibility of doing something bigger.”

Republican leaders went on record 10 days ago against the Obama proposal, saying that as long as the deal included higher tax revenue, it could not pass the House. And they maintained that stance after Wednesday’s meeting.

In a brief interview after the White House meeting, Cantor said he remained committed to “not raising taxes” but did not deny that discussions included a larger plan. “Again, there are a lot of things that may or may not be possible, but we’re just trying to drive toward a result right now,” he said.

The mood has changed in the past two days after the bipartisan “Gang of Six” senators unveiled a plan to shave at least $3.7 trillion off the deficit. Despite the fact that the plan included new tax revenue by closing loopholes, it received a relatively warm reception in some Republican quarters.

That has given Democrats hope that GOP resistance may be weaker than previously believed to a rewrite of the tax code that would raise significant new revenue — a key goal of negotiations between Obama and Boehner.

Still, the proposal came under fire Wednesday from some key Republicans, including House Budget Committee Chairman Paul Ryan (R-Wis.), who said it calls for a tax increase of at least $2 trillion over the next decade.

By Wednesday afternoon, Senate Budget Committee Chairman Kent Conrad (D-N.D.), a leader of the Gang of Six effort, said his primary push now is for “an option at some point for the Senate and the House to vote on the plan we’ve put together — which is the only bipartisan plan that’s come from anywhere.”

As the negotiations moved closer to the Aug. 2 deadline, the key obstacle to a deal remained the vehement opposition among many House Republicans to the proposals, especially ones that include higher tax revenue.

Some Democrats and administration officials question whether the GOP leadership can effectively sell a compromise to a fractious caucus determined to cut spending at all costs, particularly the bloc of 87 freshman Republicans. Democrats say they are not sure if there is any way to satisfy the needs of that faction. “We want to accommodate their needs,” Sen. Benjamin L. Cardin (D-Md.) said of the House leaders. “We just don’t understand what their needs are.”

In part, this is the same dilemma facing GOP leaders as they try to negotiate. They don’t know what will sell, and selling is the only option they have. Boehner is not an arm-twister — as he campaigned for the speaker’s chair last year he vowed that he would take a more gentle, consensus-driven approach. Rank-and-file lawmakers are surveyed, their opinions sought out, their temperature taken, and then decisions are made about how to maneuver.

“It’s not an issue of style as much as it is an issue of the American people just aren’t where we need them to be yet in order to move the Congress,” said Rep. Devin Nunes (R-Calif.).

“Part of this is just a slow education process of having people come to the realization of what it’s really going to take to balance the budget,” Nunes said. “I don’t think having a strong-arm style would have been any more helpful. It probably would have hurt early on.”

For the moment, Democrats are still waiting for an answer from House Republicans about the direction to take. “We have a plan to go forward over here, so I await word from the speaker,” Senate Majority Leader Harry M. Reid (D-Nev.) said Wednesday.

Later, after the meeting with Obama and Vice President Biden, Boehner huddled in the Capitol with a group of freshman lawmakers. GOP aides said it could be several more days before Boehner’s leadership team makes clear which path it intends to pursue.

Republicans are awaiting the outcome of the Senate’s debate on a bill that places caps on federal spending and then sends a constitutional amendment to the states mandating a balanced budget.

With Democrats in control of the Senate, that proposal’s defeat is likely to come by the weekend.

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Source:  The Washington Post

 President Obama seized on the re-emergence of an ambitious bipartisan budget plan in the Senate on Tuesday to invigorate his push for a big debt-reduction deal, and he summoned Congressional leaders back to the bargaining table this week to “start talking turkey.”

The bipartisan proposal from the so-called Gang of Six senators to reduce deficits by nearly $4 trillion over the coming decade — and its warm reception from 43 other senators of both parties — renewed hopes for a deal days after talks between Mr. Obama and Congressional leaders had reached an impasse.

Financial markets rallied on the news. And with time running out before the deadline of Aug. 2 to raise the government’s $14.3 trillion debt ceiling, Mr. Obama’s quick embrace of the plan left House Republicans at greater risk of being politically isolated on the issue if they continue to rule out any compromise that includes higher tax revenues.

Representative Eric Cantor, the House majority leader who has led opposition to any deal including tax increases, later issued a statement saying the bipartisan Senate plan includes “some constructive ideas to deal with our debt.”

But Mr. Cantor stopped far short of endorsing it. And House Republicans passed legislation on Tuesday evening calling for deep spending cuts and the adoption of a constitutional amendment requiring a balanced budget. Though the legislation has no chance of passing the Senate, the 234-to-190 vote was a symbolic statement by conservatives heading into the end game of a confrontation whose economic and political stakes are hard to overstate.

The Senate group’s plan, modeled on the recommendations last year of a bipartisan fiscal commission established by Mr. Obama, calls for both deep spending cuts and new revenues through an overhaul of the income-tax code.

But while its sponsorship by staunch conservatives as well as liberals suggested enough flexibility within both parties to get a deal eventually, it would be all but impossible to turn it into detailed legislation — at the moment it is a four-page outline — and pass it in less than two weeks. Both parties were considering ways to use the proposal as the basis for a broader budget agreement if they can find a way to get past the immediate pressure to increase the debt limit.

Tuesday marked the return to the bipartisan Senate group of Senator Tom Coburn, a conservative Republican of Oklahoma, two months after he abandoned the effort by two other Republicans and three Democrats to reach a deal, saying it would not cut spending enough. On Monday he had laid out his own $9 trillion debt-reduction plan, but acknowledged it could not be passed.

Mr. Coburn’s willingness to sign on to the bipartisan approach signaled that at least some conservatives, having made their principled point, might now be ready to bargain.

And Republicans increasingly are showing signs of splintering. Some conservatives within Congress and outside have become increasingly vocal in asserting that the party is at risk of putting ideological purity ahead of the chance for a major deficit reduction that includes substantial Democratic concessions, including cuts in Social Security, Medicare and Medicaid spending.

In appearing in the White House briefing room just hours after the Gang of Six went public with its proposal, Mr. Obama sought to use the development to increase the pressure on House Republicans even as they moved toward a vote on their bill.

The bill passed by the House would slash spending for next year, cap future spending levels and advance a constitutional amendment requiring a balanced budget. Its passage was a rejoinder of sorts to a plan hatched by the Republican leader, Senator Mitch McConnell of Kentucky, that would allow Republicans to accede to a $2.4 trillion increase in the government’s debt limit without actually voting for it, but also without the dollar-for-dollar spending cuts that House Republicans had demanded in return.

The House bill “isn’t the easy choice,” said Representative Rich Nugent, Republican of Florida, “but it’s the right choice.”

House Democrats excoriated the Republican plan, which they said would devastate entitlement programs though the mandatory spending cuts as a result of the cap. “Regardless of what other parts of this bill say,” said Representative Jerrold Nadler of New York, ”there is no way to meet these goals without destroying Medicare, Medicaid, Social Security, veterans’ programs, and military preparedness.”

Democrats are certain to make the House Republicans’ proposal an issue in the 2012 elections, along with the House Republicans’ budget passed earlier this year that would remake Medicare and Medicaid. But most attention shifted to the Gang of Six blueprint, and the reaction to it from the White House and Congressional leaders, who were cooler to it than Mr. Obama. 

While Mr. Obama said he did not agree with all of the senators’ plan, by his endorsement of its thrust and his remarks to reporters, he plainly sought to isolate further the House Republicans.

“We have a Democratic president and administration that is prepared to sign a tough package that includes both spending cuts and modifications to Social Security, Medicaid and Medicare that would strengthen those systems” while also providing new revenues, Mr. Obama said. And, he added, “we now have a bipartisan group of senators” and a majority of Americans who agree with such a balanced approach.

Forty-nine senators, 25 Democrats and 24 Republicans, were present for a closed-door meeting in the Capitol where those in the Gang of Six, except Mr. Coburn, outlined the debt-reduction plan that had been seven months in the works.

“It is early to say, but their timing is good,” said Senator Lamar Alexander, Republican of Tennessee. He added, “It helps that the three Republicans senators are three of the most conservative, most respected members of the Senate who are Republicans.”

Besides Mr. Coburn, those are Senators Michael D. Crapo of Idaho and Saxby Chambliss of Georgia, who formed the group with Senator Mark Warner, Democrat of Virginia. The other two Democrats are Senators Richard J. Durbin of Illinois and Kent Conrad of North Dakota, chairman of the Senate Budget Committee.

A spokesman for Speaker John A. Boehner said, “This plan shares many similarities with the framework the speaker discussed with the president, but also appears to fall short in some important areas.”

The timing displeased both Senate leaders — the majority leader, Harry Reid, Democrat of Nevada, and Mr. McConnell — who have been negotiating the fallback plan to raise the debt limit that Mr. McConnell initiated last week. At a closed-door luncheon for Democratic senators, Mr. Reid gave Mr. Warner 24 hours to develop a plan on how to move forward — a challenge the Gang of Six met later to discuss.

“I’m happy to work and use anything in the Gang of Six that we can,” Mr. Reid said. “But remember we only have 13 days — 13 days — and there’s a number of senators who have said they’ll do everything they can to stop the debt ceiling from being increased, that they would in effect allow us to default on our debt.”

After the Republican senators’ luncheon, Mr. McConnell said of the Gang of Six outline, “I haven’t had a chance to decide how I feel about it.”

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Source:  The New York Times

A bipartisan effort in the Senate to allow President Obama to raise the federal debt ceiling in exchange for about $1.5 trillion in spending cuts over 10 years gained momentum Sunday, as leaders agreed they would have to act in the next two weeks to avert a potential default by the U.S. government.

The growing sentiment for raising the federal limit on U.S. borrowing sets the stage for a week of largely scripted actions on Capitol Hill, where leaders in both chambers are looking to build support for the plan being crafted by Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.).

Republican leaders will first push forward in the House and the Senate with a constitutional amendment to balance the federal budget. The measure is virtually certain to fail in the Senate, which will then take up the debt limit proposal by midweek.

If that clears the Senate, the House is expected to revise the measure, adding a proposal to reduce the deficit by $1.5 trillion over 10 years — savings that will come through cuts to domestic programs but not new tax revenue. The plan would also create a new congressional panel that would, by the end of the year, seek to come up with a way of reducing the deficit potentially by trillions more through cuts in entitlements and other new tax revenue.

While the debt-limit plan has broad support in the Senate, the prospects in the House are less clear and rely largely on whether House Speaker John A. Boehner (R-Ohio) will bring the proposal up for a vote and how many House Democrats would support it since few Republicans are expected to get behind it.

“At a minimum, Congress has a way to take action and avoid default on the U.S. debt. It’s critical,” Jacob Lew, Obama’s budget director, said Sunday on CNN’s “State of the Union.”

At the same time, the White House will continue to push for as big a deal as possible to cut the deficit, which would include spending cuts and changes to entitlements as well as increases in tax revenue.

On NBC’s “Meet the Press,” Lew said he hoped the Republicans could compromise with Obama on a big deal. But he did not express optimism. “The question is: Do we have a partner to work with?” he asked.

Informal talks between the White House and Congress over the weekend did not appear to move the two sides significantly closer to a big deal. Leaders face an Aug. 2 deadline to raise the federal debt ceiling or face a potentially damaging government default on its obligations. They say they need to get a piece of legislation underway by week’s end to clear procedural barriers and raise the debt ceiling in time.

Most lawmakers were focusing on the new Senate plan, originally proposed last week by McConnell and further developed by Reid. Under the plan, Obama would be able to raise the debt ceiling three times over the next year for a total of $2.5 trillion. Congress could also vote on a resolution of disapproval each time, assigning blame to Obama for increasing the nation’s debt.

In addition to the $1.5 trillion in spending cuts, the plan would create a new committee of 12 lawmakers, which would issue a report to Congress by the end of the year on how to cut trillions more from federal deficits over the next 10 years. This panel would seek agreement where Obama and Republicans haven’t been able — primarily over changes to entitlement programs and whether raising new tax revenue should play a key role in cutting the deficit.

“At the end of the day Republican leaders have made it clear that we will not be the ones to put the government into default,” Sen. Jon Kyl (Ariz.), the chamber’s No. 2 Republican, said on ABC’s “This Week. “Now the House of Representatives has to make its decision about what it will do.”

“We basically have to accept this responsibility and do this job and lead,” said the Senate’s No. 2 Democrat, Richard J. Durbin (Ill.), on CBS’s “Face the Nation.”

Obama and Boehner have both shown a keen interest in a “grand bargain,” but the issue of taxes has so far proven in­trac­table. Such a deal could still be achieved in the coming weeks, though the prospects have dimmed.

Before taking up the McConnell-Reid plan, the House and Senate will consider the “cut, cap and balance” approach being pushed by Republicans. The House is slated to vote early this week on a balanced budget amendment to the Constitution that would significantly scale back government spending and make it harder for lawmakers to raise taxes.

Nearly 40 House Republicans have said they would not support an increase in the debt ceiling without such a constitutional amendment. But Democrats strongly oppose the measure.

Other Republicans will continue to exert pressure for even bigger cuts. Sen. Tom Coburn (R-Okla.) will propose on Monday a plan to cut $9 trillion from the federal deficit over 10 years. “The McConnell plan is more of Washington not taking responsibility,” he said on Sunday.

Lew expressed confidence that the debt ceiling will be raised despite some GOP objections. “There will be a fringe that believes that playing with Armageddon is a good idea, but I don’t think that’s where the majority will be,” he said.

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Source:  The Washington Post

President Obama prepared Thursday to bring bipartisan talks over the debt to a close, as Senate leaders worked across party lines to craft an alternative strategy to raise the nation’s $14.3 trillion debt limit and avert a government default.

“It’s decision time,” Obama told congressional leaders after meeting at the White House for a fifth straight day. Obama gave Republicans until early Saturday to tell him whether any of three options for trimming the federal budget would win GOP support.

“We need concrete plans to move this forward,” he said.

A breakthrough in the White House talks looked unlikely, however, leaving the Senate framework as the chief option for raising the debt limit before Aug. 2, when the Treasury will be unable to pay its bills without additional borrowing authority.

That deadline loomed ever larger Thursday, as China, the U.S. government’s largest foreign creditor, called on U.S. policymakers to take action to protect the interests of investors. Federal Reserve Board Chairman Ben S. Bernanke warned that failure to raise the debt ceiling would amount to “a self-inflicted wound” that would cause “a very severe financial shock” to the global economy. And Treasury Secretary Timothy F. Geithner told lawmakers that they are running out of time.

“We’ve looked at all available options, and we have no way to give Congress more time to solve this problem,” Geithner told reporters after meeting behind closed doors with Senate Democrats. “The eyes of the country are on us, and the eyes of the world are on us, and we need to make sure that we stand together and send a definitive signal that we are going to take the steps necessary to avoid default.”

The ticking clock spawned a day of high political theater on Capitol Hill, as lawmakers grew increasingly nervous about the lack of movement in the House. Many conservative Republicans continued to deny claims of impending calamity, and Democrats unleashed an unusually harsh and personal attack against the man they view as the biggest impediment to compromise, House Majority Leader Eric Cantor (R-Va.).

Senate Majority Leader Harry M. Reid (D-Nev.) said Cantor “shouldn’t even be at the table” in the White House talks, where Cantor has eclipsed House Speaker John A. Boehner (R-Ohio) as the voice of the GOP in demanding unprecedented spending cuts while rejecting Democratic calls for fresh tax revenue.

Reid accused Cantor of fueling the “irresponsible voices in the Republican Party” who continue to view default as a legitimate option for restraining the size of government.

“More than anything else, he is holding up an agreement at this point,” Sen. Charles E. Schumer (D-N.Y.), the No. 3 Democratic leader, said of Cantor.

Democrats have been kinder to Boehner, who briefly seemed willing to work with Obama to craft a landmark debt-reduction package. But Boehner abandoned that effort last weekend, when it became clear that he would have to convince the House rank and file to consent to a rewrite of the tax code that would raise upwards of $1 trillion in fresh revenue over the next decade.

Cantor, by contrast, has drawn a hard line against taxes, casting himself as a champion of the tea party-influenced freshmen who gave Republicans control of the House last fall.

Boehner and Cantor went out of their way Thursday to present a unified front. Boehner slung his arm around Cantor’s shoulders during a televised news conference, telling reporters that “we have been in this fight together.”

“Listen, we’re in the foxhole,” Boehner said. “This is not easy. Because what we’re trying to do here is solve a problem that has eluded Washington for decades. I’m glad Eric’s there, and those who have other opinions, they can keep them to themselves.”

Still, clear differences were apparent between the two GOP leaders. While Cantor dismissed the strategy emerging in the Senate as unworkable, Boehner on Thursday opened the door wide to that approach, saying, “I think it’s worth keeping on the table.”

“What may look like something less than optimal today, if we’re unable to get to an agreement, might look pretty good a couple of weeks from now,” Boehner told reporters. When asked whether the strategy could win a 218-vote majority in the House, the speaker said: “I have no idea.”

Details of the Senate approach were sketchy. Reid said he is working with the White House and Minority Leader Mitch McConnell (R-Ky.) on “a number of different alternatives” for pushing a debt-limit increase quickly through the Senate and the more hostile House.

“We’re not there yet . . . So I’m not in a position right now to tell you where we are going to go,” Reid told reporters at the Capitol.

Reid confirmed, however, that discussions are focused on what McConnell has called “Plan B”: an elaborate legal framework to raise the debt limit by $2.5 trillion that would place the entire political burden for the unpopular move on Obama.

Unveiled earlier this week, McConnell’s plan included no mechanism to force the sharp spending cuts that Republicans have demanded in exchange for voting to lift the debt limit. But in a sign of the unusual political times, Democrats said they were reluctant to go along with that proposal and are pressing to add roughly $1.5 trillion in cuts to government agencies to the measure.

Talks were also underway over a plan to appoint 12 lawmakers from both parties to draft a long-term framework to stabilize the national debt. The new debt committee would be given a deadline, and its recommendations would be fast-tracked to a vote in the House and Senate without amendment, similar to the process used to close military bases.

Late Thursday, McConnell told a radio interviewer that the new debt-reduction panel would “probably be part of the bill” and that it would likely be asked to issue its report by the end of the year.

Given the high stakes, Reid and McConnell were moving quietly. Too much information, Reid said, could “kill” the deal. “It’s best to try to move this down the field very slowly and make sure every step of the way is covered,” he said.

Separately, House leaders are pursuing an amendment to the Constitution that would require Congress to balance the budget. With a vote expected next week, House GOP aides said the vote could go a long way toward soothing conservative angst over the debt limit, even if it doesn’t pass. The Senate is scheduled to vote on a similar measure next week.

House GOP leaders, meanwhile, have summoned rank-and-file lawmakers to an unusual Friday morning meeting to discuss the path forward, a few hours before Obama has scheduled a White House news conference.

Before bringing talks to a close Thursday, Obama gave Republicans three options: The far-reaching $4 trillion deal that includes taxes and cuts to entitlement programs; a $2 trillion package that would require each side to give only a little; and a much smaller package that would include no tax increases and no cuts to entitlement programs — and do much less to solve the nation’s financial problems.

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Source:  The Washington Post

 President Obama tried on Sunday to revive the chances for a sweeping budget agreement to reduce the nation’s deficit and repair its perilous finances, but Congressional Republicans continued to balk, insisting on a more modest deal to avert a default on the national debt.

Mr. Obama, meeting with leaders from both parties at the White House, bluntly challenged Republicans a day after Speaker John A. Boehner pulled back from a far-reaching agreement aimed at saving as much as $4 trillion over 10 years, officials briefed on the negotiations said. The meeting ended after an hour and 15 minutes with little progress, but the two sides agreed to resume talking Monday, and every day after that, until a deal is done.

White House officials said Mr. Obama was still determined to pursue the boldest package possible — one that would require new tax revenue as well as cuts in Medicare and other entitlement programs — but he faces steadfast opposition from Republicans and growing qualms among Democrats.

“Congress has to act,” Treasury Secretary Timothy F. Geithner said on the CBS News program “Face the Nation.” “If they don’t act, then we face catastrophic damage to the American economy, and the leadership, to their credit, and I mean Republicans and Democrats, fully understand that.”

Mr. Geithner, noting that the Treasury issues 80 million checks a month, including Social Security payments to 55 million Americans, warned that failure to reach an agreement within the next two weeks could be calamitous. Delivering a version of the lecture he gave to the lawmakers at the White House last week, Mr. Geithner said a default would unhinge financial markets, drive up interest rates, and derail the economic recovery.

Mr. Obama, who arrived from Camp David shortly before the Sunday evening session, appeared to have made headway in at least one regard: lawmakers from both parties pledged not to let the United States default on its debt. That is what the Treasury said would happen after Aug. 2, when the government would lose its authority to borrow.

“Nobody is talking about not raising the debt ceiling; I haven’t heard that discussed by anybody,” the Senate minority leader, Mitch McConnell of Kentucky, said on “Fox News Sunday,” adding that he had an unspecified “contingency plan” to raise the ceiling if the talks fell apart.

Just as Mr. Obama was sitting down with Mr. McConnell and other leaders shortly after 6 p.m. on Sunday, with the men wearing open-collar shirts and blazers, he was asked whether he could get a deal done in 10 days, leaving enough time to draft and pass legislation before Aug. 2.

“We need to,” he replied.

The problem for Mr. Obama is that Republicans are not budging on their demand that any deal include no tax increases. The administration also needs Democratic lawmakers, but for many of them, it will be impossible to vote for a package composed entirely of spending cuts, especially to popular programs.

In a statement after the meeting, Mr. McConnell’s spokesman, Don Stewart, said, “It’s baffling that the president and his party continue to insist on massive tax hikes in the middle of a jobs crisis.”

The House minority leader, Nancy Pelosi, said she favored a large deal but that it “must do no harm to the middle class or to economic growth. It must also protect Medicare and Social Security beneficiaries.”

It was not clear that the president would be able to reconcile these positions, especially after Mr. Boehner set a lower bar for a deal that both parties might find more palatable. In a statement issued after the meeting, Mr. Boehner said the leaders should aim for a midrange deal that would build on spending cuts identified in talks led by Vice President Joseph R. Biden Jr. Such a deal might produce savings of $2 trillion to $3 trillion over a decade.

Mr. Boehner appeared subdued at the meeting, officials said, letting the House majority leader, Eric Cantor of Virginia, do most of the talking. Mr. Cantor reiterated his opposition to a bigger deal.

Privately, some in Congress expressed regret at Mr. Boehner’s decision on Saturday to walk away from an agreement that they said would have been a rare opportunity for Republicans and Democrats to radically restructure the government’s finances, rewrite the tax code and fix longstanding problems with Medicare and Medicaid.

In the end, officials briefed on the talks said, ideological differences over a tax overhaul bogged down the bigger agreement. Mr. Boehner, they said, was open to letting Bush-era tax cuts for wealthy people expire, while maintaining the cuts for middle-income wage-earners. But Democrats briefed on the talks said he made that contingent on rewriting the tax code by the end of this year, so that the loss of the cuts would be offset by lower overall tax rates.

The White House, officials said, was willing to put a deadline on a tax overhaul. But it rejected Mr. Boehner’s formula, arguing that it would place too much of a burden on the middle class while protecting the rich.

A Republican official familiar with the negotiations said Mr. Boehner “would only discuss new revenues if they came from economic growth and tax reform instead of tax increases.” And he insisted on a “trigger” that would set off deep spending cuts and other measures if the tax changes were not implemented before the end of 2011.

Mr. Boehner and the White House, Democratic officials said, also disagreed over the scope of cuts to entitlement programs, with the speaker demanding deeper cuts in Medicare and Medicaid than the administration was willing to accept.

Mr. Obama is pushing for a bigger deal on the argument that it will, paradoxically, be easier for Democrats and Republicans to sell to their rank and file, because they could present it as a historic effort to begin undoing years of deficit spending.

As Mr. Geithner said on “Face the Nation,” “It’s not clear that it’s easier trying to do less.”

Indeed, the hurdles to even a $2 trillion deal are numerous and significant, officials briefed on the negotiations said. During several rounds of talks led by Mr. Biden, the two sides identified spending cuts, and lower interest payments that would result from a reduction of the debt, which would have saved about $1.8 trillion over 10 years. But officials cautioned that there was never a deal.

Republicans, led by Mr. Cantor, rejected proposals to close loopholes or other tax breaks for owners of corporate jets, oil and gas companies and hedge funds. They said these measures, which would have raised about $130 billion, amounted to tax increases.

The administration has also proposed limiting deductions for high wage-earners, which the White House says would raise $290 billion. But there is little support for that in Congress. And if there are no tax measures in the deal, the leaders say, they will not be able to corral enough Democratic votes to pass it.

Mr. Geithner’s warnings about the high stakes were echoed by Christine Lagarde, the newly appointed managing director of the International Monetary Fund. Speaking on “This Week” on ABC, Ms. Lagarde said that a default by the United States would cause “interest hikes, stock markets taking a huge hit, and real nasty consequences, not just for the United States, but for the entire global economy.”

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Source:  The New York Times

For the second month in a row, employers added barely any jobs in June, showing that the economic recovery has hit a serious speed bump.

With all levels of government laying off workers, the Labor Department reported that employers eked out just 18,000 new nonfarm payroll jobs in June. The already low number created in May was also revised downward to a dismally small 25,000 new jobs, less than half of what was originally reported last month.

Although the government’s survey of employers showed them adding jobs, a separate survey of households showed that more people were out of work than in the previous month, causing the unemployment rate to rise to 9.2 percent.

Economists were stunned since they had been expecting June to show stronger job creation as oil prices eased and supply disruptions receded in the aftermath of the Japanese tsunami and earthquake. Instead, the government’s monthly snapshot of the labor market showed that several sectors, including construction, finance and temporary services, actually shed workers. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted.

“Even the wild-eyed optimists out there have nothing to grasp onto in this report except to say, ‘Ah, this too shall pass,’ ” said Joshua Shapiro, chief United States economist at MFR Inc.

Most analysts are not yet forecasting an outright slide back into recession, but at a time when President Obama and Congress are focusing on spending cuts, Europe is in financial crisis and even China’s growth is slowing, there is little expectation of anything other than a prolonged slog for the United States economy.

“Stimulus is fading, and we still have plenty of problems left over from the popping of the bubble,” said Mr. Shapiro. “So it’s going to be a touch-and-go, or a very sub-par, situation for a very long time. The question is a matter of degree in terms of how soft or sub-par it’s going to be, as opposed to whether it’s going to remain that way.”

In remarks in the Rose Garden at the White House on Friday, President Obama went beyond his usual remarks counseling patience on the economy’s long return to health and urged Congress to extend the payroll tax cut passed last December. He also said that legislators should sign pending trade agreements and pass bills that would establish an infrastructure bank and reform the patent process, all measures that he said would help create jobs.

“There are bills and trade agreements before Congress right now that could get all these ideas moving,” President Obama said. “All of them have bipartisan support. All of them could pass immediately, and I urge Congress not to wait.”

Republicans blamed the president and congressional Democrats for the weak job market, with Speaker of the House John Boehner saying that ending the ban on drilling for oil and lifting regulations would spur hiring.

In June, virtually all the job growth came from private companies, which added 57,000 jobs, a striking retrenchment from the average of more than 200,000 jobs a month between February and April. The largest gains came from health care and leisure and hospitality, while manufacturing, which lost jobs in May, was able to add just 6,000 slots in June.

The economy needs to add at least 150,000 jobs a month just to keep up with normal population growth. The protracted stretch of weak-to-moderate job creation over the last two years has left many of the people who lost jobs during the recession increasingly desperate. There are now 14.1 million unemployed, with 6.3 million of them having searched for work for six months or longer. Including those who are working part-time because they can’t find full-time work and those who have stopped looking, the broader unemployment rate is now 16.2 percent, its highest level since December 2010.

Economists said that companies had been battered by a string of bad news throughout the spring and were reluctant to hire. “Sentiment for businesses is on a knife’s edge,” said Omair Sharif, United States economist for the Royal Bank of Scotland. “So that when you get a few negative data points, it’s all doom and gloom.”

Budget strains in the public sector were evident as the federal government slashed 14,000 jobs and state and local governments cut an additional 25,000. Nearly three-quarters of the job losses at the local level came in education.

The bleak Labor Department report gave little sign of a coming turnaround. Temporary help services, which tend to expand before employers hire permanently, fell back by 12,000 jobs.

Janette Marx, senior vice president at Ajilon Professional Staffing, a unit of Adecco, said that while companies in the accounting and finance sector had ratcheted down their requests for temporary workers, they were slowly recruiting permanent hires. Some economists pointed to more recent data showing a pickup in retail sales at chain stores and a rise in an index of business hiring intentions as an indication of future job growth.

In manufacturing, some analysts said that a pickup in auto production in the fall after the Japan-related slowdown, as well as steady growth in business equipment sales, could fuel job creation in the coming months.

Daniel J. Meckstroth, chief economist of the Manufacturers Alliance, a trade group, said that consumers who had been delaying purchases of cars, washing machines, refrigerators and other big equipment that breaks down over time would eventually start buying again as they paid down debts accumulated before the recession.

“Spending was severely cut during the recession,” Mr. Meckstroth said. “Now, the longer you wait, the more pressure there is to make purchases. You can’t postpone some things indefinitely.” Mr. Meckstroth said he expected auto sales in particular to rise in the fall.

But with so many people still unemployed and private-sector wages declining somewhat, consumer demand is likely to remain weak. “Just because Toyota didn’t sell the car in May or June doesn’t mean that they’re going to sell it in September,” said Steve Blitz, a senior economist for ITG Investment Research. He added that consumers were already satisfying their need for autos by buying used cars.

Other signs of economic fragility have emerged in recent reports showing tepid consumer sentiment and factory sales and continued weakness in the housing sector. Economists have also brought down their forecasts for the overall growth of the economy, with some estimating an annual rate of about 2 percent or slightly more for the second quarter.

Mr. Blitz said he saw little sign that hiring would pick up any time soon as online job listings were still flagging. “We’re looking for this type of weak employment numbers to continue through July, August and September,” he said.

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Source:  The New York Times

President Obama and congressional leaders from both parties opened a new round of deficit-reduction talks Thursday aimed at breaking a stalemate over raising the nation’s debt limit.

The White House meeting, which began shortly after 11 a.m., came as Obama pressed lawmakers to consider a far-reaching debt-reduction plan that would force Democrats to accept major changes to Social Security and Medicare in exchange for Republican support for fresh tax revenue.

Before sitting down for the negotiations with Obama, Vice President Biden, top aides and Democratic lawmakers, House Republican leaders emphasized Thursday morning that progress toward as much as $2 trillion in deficit savings has already been made. But they also renewed their pledge to oppose the inclusion of any tax increases in a final deal.

House Majority Leader Eric Cantor (R-Va.), one of the participants in the talks, said Republicans will insist that spending cuts in a deficit-reduction package “exceed the amount of the debt ceiling increase.”

Administration officials say the ceiling on the amount the federal government can borrow must be raised to avert a potentially disastrous default.

The deficit-reduction talks led by Biden over the past two months “were premised on how we can find common ground,” Cantor told a Capitol Hill news conference. But he added: “I’ll make it clear, as I did then, that we as Republicans are not going to support tax increases.”

Boehner, who has met privately with Obama twice since Republicans walked out of the bipartisan talks late last month, said that “the conversations have gone on for weeks, both in the Biden group and between the president and myself, but there is no agreement.”

The remarks ahead of Thursday’s meeting indicated that GOP opposition to tax increases in the debt-limit discussions has not softened — despite a statement by Cantor on Wednesday that Republicans would consider closing some tax loopholes if such a move were offset by tax cuts elsewhere, as well as a new willingness on the part of the White House to consider major changes to Social Security and Medicare as part of a far-reaching deficit deal. House Republicans on Thursday reiterated their support for reform of such entitlement programs.

House Speaker John A. Boehner (R-Ohio) told reporters before the meeting with Obama that “comprehensive tax reform, both on the corporate side and the personal side,” is under discussion as the negotiators look for ways to close loopholes while also lowering tax rates for businesses and individuals. But he reiterated Republican opposition to tax increases on those he said are the economy’s main job creators.

In addition to Boehner and Cantor, the GOP participants in the talks included Senate Minority Leader Mitch McConnell (Ky.) and Senate Minority Whip Jon Kyl (Ariz.). Democratic lawmakers taking part included Senate Majority Leader Harry M. Reid (Nev.), Senate Majority Whip Richard J. Durbin (Ill.), House Minority Leader Nancy Pelosi (Calif.) and House Minority Whip Steny H. Hoyer (Md.). Also at the table were administration officials Jacob J. Lew, director of the Office of Management and Budget; Treasury Secretary Timothy F. Geithner; White House Chief of Staff William M. Daley; and Gene B. Sperling, director of the National Economic Council.

 Obama planned to argue at the meeting that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action, officials said.

As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.

Several Senate Democrats reacted cautiously Thursday to news of the president’s overture, indicating they had few details. But some expressed hesitancy about including Social Security in the debate over deficit-reduction.

“I think when the president does a deal, he ought to talk to the Democrats,” said Sen. Barbara Mikulski (D-Md.) . “Before we start tinkering with Social Security, I want to know how we’re going to straighten out the tax code.”

Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said he has never believed that Social Security trims should be used to reduce the debt.

“Any savings from Social Security should be used to extend the solvency of Social Security,” Conrad said.

But new offers from the president and Boehner represent “significant developments,” Conrad added. “I’m very encouraged by what I hear,” he said.

“Obviously, there will be some Democrats who don’t believe we need to do entitlement reform. But there seems to be some hunger to do something of some significance,” said a Democratic official familiar with the administration’s thinking. “These moments come along at most once a decade. And it would be a real mistake if we let it pass us by.”

Rather than roughly $2 trillion in savings, the White House is now seeking a plan that would slash more than $4 trillion from annual budget deficits over the next decade, stabilize borrowing, and defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.

That would represent a major legislative achievement, but it would also put Obama and GOP leaders at odds with major factions of their own parties. While Democrats would be asked to cut social-safety-net programs, Republicans would be asked to raise taxes, perhaps by letting tax breaks for the nation’s wealthiest households expire on schedule at the end of next year.

Privately, some congressional Democrats were alarmed by the president’s proposal, which could include adjusting the measure of inflation used to determine Social Security payouts. But others described it as primarily a bargaining strategy intended to demonstrate Obama’s willingness to compromise and highlight the Republican refusal to raise taxes.

Obama has already spoken to Boehner about the possibility of building support for a more ambitious debt-reduction plan, according to people with knowledge of those talks, who, like others quoted in this article, spoke on the condition of anonymity to shed light on private negotiations. The two discussed various options for overhauling the tax code and cutting entitlement spending, but they reached no agreement.

 The administration argues that lawmakers would also get an important victory to sell to voters in 2012. “The fiscal good has to outweigh the pain,” said a Democratic official familiar with the discussions.

It is not clear whether that argument can prevail on Capitol Hill. Thursday’s meeting at the White House — an attempt by Obama to break the impasse that halted debt-reduction talks two weeks ago — provides a critical opportunity for leaders in both parties to say how far they’re willing to go to restrain government borrowing as the clock ticks toward an Aug. 2 deadline for raising the debt limit.    

Asked to comment, Boehner spokesman Michael Steel would say only that “there are no tax increases on the table.”

Meanwhile, another senior Republican on Wednesday signaled a new openness to raising taxes— at least for selected special interests. Cantor told reporters that he is now willing to consider Democratic demands to end tax breaks for corporations, hedge-fund managers and owners of corporate jets, so long as the final deal does not raise tax rates or overall federal tax collections.

“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Cantor said at his weekly roundtable with reporters. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”

Among the options for cutting taxes are a number of proposals that should appeal to Democrats, said Cantor spokesman Brad Dayspring. They include a White House proposal to temporarily reduce payroll taxes for employers, an idea aimed at propping up the sputtering economy. Democrats also routinely support an annual effort to restrain the alternative minimum tax, which would otherwise strike heavily at households in high-cost urban areas that tend to vote Democratic.

Even as Cantor cracked the door open, however, McConnell slammed it shut, reiterating the long-standing Republican position that policymakers should consider eliminating tax breaks only as part of a comprehensive effort to rewrite the code and lower income tax rates.

“To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as pretty challenging,” McConnell told reporters, adding that raising taxes on any sector of the economy could trigger job losses at a time when the unemployment rate hovers around 9 percent. “We want to tackle deficit reduction in a way that doesn’t exacerbate unemployment.”

Democrats, in any case, dismissed Cantor’s offer, saying it makes no sense to cut taxes in a package whose primary goal is to reduce borrowing.

“It is like taking one step forward and then two steps back,” said Sen. Charles E. Schumer (N.Y.). “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere. It’s to do it in a way that contributes to the reduction of the debt.”

With Obama offering major savings from entitlement programs, Republican intransigence on taxes looms as the biggest sticking point in the debt negotiations. Policymakers are rushing to craft a debt-reduction deal big enough to persuade reluctant lawmakers to approve an increase in the legal limit on government borrowing, which now stands at $14.3 trillion.

The national debt hit the limit in mid-May. Unless Congress acts before Aug. 2, Treasury Secretary Geithner has said, the government will begin to default on its obligations for the first time in history.

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Source:  The Washington Post

Obama administration officials are offering to cut tens of billions of dollars from Medicare and Medicaid in negotiations to reduce the federal budget deficit, but the depth of the cuts depends on whether Republicans are willing to accept any increases in tax revenues.

Administration officials and Republican negotiators say the money can be taken from health care providers like hospitals and nursing homes without directly imposing new costs on needy beneficiaries or radically restructuring either program.

Before the talks led by Vice President Joseph R. Biden Jr. broke off 12 days ago, negotiators said, they had reached substantial agreement on many cuts in the growth of Medicare, which provides care to people 65 and older, and Medicaid, which covers lower-income people. Those proposals are still on the table when Congress reconvenes this week, aides said, and are serious options that Democrats could accept in exchange for Republican concessions that raise revenues.

“Congress smells blood,” said William L. Minnix Jr., the chief lobbyist for nonprofit nursing homes.

Mr. Minnix, the president of a trade group known as LeadingAge, is urging nursing homes to “bombard your senators with the message that Medicaid cannot be cut by $100 billion” over 10 years, as President Obama and many Republican lawmakers have suggested.

A coalition of hospital lobbyists, worried about the direction of the budget talks, has begun a national advertising campaign to block further cuts in the two health care programs, which account for about 55 percent of hospital revenues. The hospitals have made a commitment to spend up to $1 million a week through August on television, print and online advertising.

“This is white-knuckle time for a lot of people,” said Bryant Hall, a health care lobbyist whose clients include drug and biotechnology companies. “Stakeholders and beneficiaries are anxiously watching the budget negotiations.”

They may have reason to be anxious.

Senator Charles E. Schumer of New York, the No. 3 Senate Democrat, said: “We are very willing to entertain savings in Medicare. Medicare gives very good health care very inefficiently.”

In return, Mr. Schumer said, Republicans should be willing to consider some additional revenue.

Negotiators said they were seriously considering cuts in Medicare payments to hospitals for uncollectible patient debt and the training of doctors; steps to eliminate Medicare “overpayments” to nursing homes; a reduction in the federal share of some Medicaid spending; and new restrictions on states’ ability to finance Medicaid by imposing taxes on hospitals and other health care providers.

Medicare and Medicaid insure more than 100 million people, account for 23 percent of all federal spending and are likely to be an important part of any budget deal. Military spending, which accounts for about 20 percent of federal expenditures, is likely to be included as well.

Most Republicans have ruled out tax rate increases to reduce the deficit. Mr. Obama has rejected the idea of Medicare vouchers, Medicaid block grants or any rollback of the new health care law. But he and the Republicans say they still hope to find some common ground.

Mr. Obama has embraced the goal of reducing deficits by a total of $4 trillion over 12 years — an ambitious goal that suggests the size of any grand bargain.

In a speech in April, Mr. Obama offered to slow the growth of Medicare and Medicaid without cutting benefits. He said his ideas would save $340 billion over 10 years and a total of nearly $500 billion in the two programs by 2023. His numbers quickly became a starting point in the negotiations.

As for Medicaid, administration officials have indicated that they could accept savings of $100 billion or more over 10 years, much to the dismay of many House Democrats. The lawmakers say the cuts would impair access to care for the poor and shift costs to the states, which are facing a huge expansion in Medicaid eligibility and enrollment, scheduled to start in 2014 under the new health care law.

While insisting on new revenue at his news conference last week, Mr. Obama also said, “We’ll have to tackle entitlements,” adding that “health care cuts” need to be part of any deal.

Senator Joseph I. Lieberman, the Connecticut independent, described a fiscal and political imperative: “We can’t balance the budget without dealing with mandatory spending programs like Medicare. We can’t save Medicare as we know it. We can save Medicare only if we change it.”

The new health care law trimmed Medicare payments to most providers. Many states, in fiscal distress, are cutting Medicaid, which is financed jointly by the federal government and the states. If Congress and the president now make additional cuts, hospitals say, they will close some services and increase charges to patients with private insurance.

Hospital executives from around the country plan to visit Capitol Hill next week to deliver this message: “Cutting Medicare and Medicaid payments to hospitals will hurt the ones we love, especially the most vulnerable — children, seniors, the poor and disabled.”

Mr. Minnix, the lobbyist for nonprofit nursing homes, said: “The issue is not money. The issue is the effects on people, vulnerable people.”

The American Medical Association and AARP, the lobby for older Americans, have joined hospitals and nursing homes in fighting other proposals that would limit federal spending as a percentage of the gross domestic product. Members of Congress of both parties have introduced bills that would automatically cut spending across the board if such limits were about to be breached.

While details have yet to be decided, lawmakers and administration officials said they were seriously considering these proposals:

¶ Gradually eliminate Medicare payments to hospitals for bad debts that result when beneficiaries fail to pay deductibles and co-payments. Medicare reimburses hospitals for 70 percent of such debts after the hospitals make reasonable efforts to collect the unpaid amounts.

¶ Reduce Medicare payments to teaching hospitals for the costs of training doctors, caring for sicker patients and providing specialized services like trauma care and organ transplants. Medicare spends $9.5 billion a year for its share of those costs.

¶ Reduce the federal share of payments to health care providers treating low-income people under Medicaid and the Children’s Health Insurance Program. The administration wants to establish a single “blended rate” for each state. The federal government now reimburses states at different rates for different groups of people and different services in the two programs.

Representative Henry A. Waxman of California, the senior Democrat on the Energy and Commerce Committee and an architect of Medicaid, said he was “very concerned” that this proposal would reduce the federal contribution to Medicaid and shift costs to states.

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Source:  The New York Times

The White House believes it must strike a budget deal with Congress by July 22 to avoid a risk of defaulting on the national debt, Democratic officials briefed on the negotiations said Thursday, as Senate leaders canceled a recess next week to try to break the deadlock with Republicans.

The July 22 date looms large, the officials said, because it will take lawmakers at least a week to draft a bill and get it through two houses before Aug. 2. That is the day when, officials say, the government will reach its debt ceiling and no longer be able to borrow what it needs to keep operating and repay existing debt.

President Obama challenged Republicans on Wednesday to accept higher taxes as part of any package to reduce the deficit, a challenge that House Speaker John A. Boehner swiftly rejected. But underneath these fixed positions, the Democratic officials said, were hints of Republican flexibility, which gives the White House hope that it can strike a deal, albeit probably at the last minute.

While they emphasized that no agreement had been reached on any major items, the officials said the two parties were coalescing around $200 billion in cuts to Medicare and Medicaid, trims that Mr. Obama has held up as an example of cuts that will inflict pain on his Democratic base.

The officials also noted that while Republican leaders like Senator Mitch McConnell of Kentucky had ruled out tax increases, they had sometimes used the phrase “tax rates” — which the White House also does not want to raise. The Republicans, they said, have not explicitly ruled out other measures that would generate revenue, like ending tax breaks and loopholes on hedge funds or for the owners of corporate jets — an interpretation of the Republican position that few Republicans would agree with at this stage.

These tax-related measures being pushed by the White House would generate about $130 billion, a fraction of the roughly $2 trillion in savings over a decade that the White House and Republicans agree is necessary to stave off a debt crisis.

While Republican leaders have not shown enthusiasm for any of these measures, the Democratic officials said, they recognize that passing a bill without some concessions to House Democrats will be difficult, since House Republicans will not be able to corral enough votes on their own to pass a deficit-reduction package.

In his news conference on Wednesday, Mr. Obama chided lawmakers for leaving Washington with a deal undone, comparing them unfavorably to his daughters, Malia and Sasha, who he said finish their homework a day in advance. That rankled some on Capitol Hill, though his words appeared to have hit home.

“We should take responsibility seriously,” the Senate majority leader, Harry Reid of Nevada, said Thursday morning on the Senate floor in announcing the cancellation of the recess next week. “I’m confident we do.”

The Senate has scheduled a flurry of meetings next week, with Mr. Reid inviting Mr. Obama and Vice President Joseph R. Biden Jr. to meet with Democrats on Wednesday. The next day, the White House plans to send its economic team to brief Democrats on the state of the negotiations.

Democrats, echoing the president, continued to insist that tax-related revenue would have to be part of the deal.

“We need a willingness on both sides to give a little,” said Senator Charles E. Schumer of New York. “We’ve given a lot. The vice president has said more than $1 billion in cuts has already been identified. And that would put us far down the road towards an agreement. The question is how to make up the rest.”

Under the rubric of all revenue is personal, Democrats called for the elimination of $126 million in annual tax breaks for the horse-racing industry that Mr. McConnell secured in the 2008 farm bill.

Democrats dismissed complaints that Mr. Obama had been overly combative, noting that Republicans had demanded that he engage in the bargaining process, and then criticized him as soon as he did.

But Republicans were evidently still smarting from Mr. Obama’s chiding tone. Senator Pat Roberts of Kansas even suggested that the president needed some sedation before he resumed discussions with them.

“I remember when he talked to Republicans before, and all we got was a lecture,” Mr. Roberts said. “So maybe if he would just take a Valium and calm down and come down and talk to us, it might be helpful.”

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Source:  The New York Times