Illinois Government Consultants Incorporated

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.

——————-

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.

———————–

Source:  The Washington Post

Representative Maxine Waters, citing apparent misconduct by ethics committee staff last year, called on Monday for the termination of an investigation into allegations that her office may have acted inappropriately in helping a bank in which her husband owned stock to get federal bailout money in late 2008.

“The House ethics committee violated both its own rules and Representative Waters’s constitutional rights during its investigation of her,” Stan Brand, a lawyer for Ms. Waters, said in a statement on Monday, calling for dismissal of the case. “No other remedy exists to cure this misconduct.”

Ms. Waters made the request after learning of memos written late last year by the former ethics committee chief counsel that detailed unauthorized communications between the lead ethics committee lawyer handling the inquiry and Representative Jo Bonner, Republican of Alabama, who is now the committee chairman. The communications would have been inappropriate because they did not go through official channels, a violation of House rules.

Beyond that, the memos and the communication between the investigator and Mr. Bonner, first reported in an article in Politico on Monday, revealed serious missteps by committee staff, showing that investigators did not yet have e-mails considered critical to their case when charges had already been filed.

“Their actions could be used by some to cast doubt about the legitimacy of the committee’s proceedings,” R. Blake Chisam, then the committee’s chief counsel, wrote in the undated memo to Representative Zoe Lofgren, Democrat of California, who until last year was the ethics committee chairwoman.

At issue is the fact that ethics committee lawyers realized last August that they had not sought e-mails from a private Yahoo account maintained by Mikael Moore, Ms. Waters’s chief of staff. Investigators suspected the e-mails might contain evidence about his role in helping the bank, Boston-based OneUnited, get language written into legislation that would ultimately help it secure federal bailout assistance.

By this time, the committee had already filed formal charges against Ms. Waters.

In November, in an unusual maneuver, the charges against Ms. Waters and the investigation were referred back to the committee for further work. Committee staff said that the action was a result of the failure of Ms. Waters’s office and the House Financial Services Committee to fully comply with a request for documents.

In fact, according to the internal committee memos, it was the ethics committee staff’s own mistake, as it had not previously requested Mr. Moore’s personal e-mails.

“The behavior was inappropriate and misleading,” Mr. Chisam wrote, as he also detailed what he called inappropriate conversations and e-mails between a committee lawyer and Mr. Bonner and his staff about the case. “The staff also misled me. That was insubordinate.”

Spokesmen for the ethics committee, Mr. Bonner and Ms. Lofgren each declined to comment on Monday, citing committee rules prohibiting public discussion of the case.

———————–

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.

———————

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.

————————

Source:  The Washington Post

The Federal Reserve chairman, Ben S. Bernanke, warned on Wednesday of a “huge financial calamity” if President Obama and the Republicans cannot agree on a budget deal that allows the federal debt ceiling to be increased. Moody’s, the ratings agency, threatened a credit downgrade, citing a “rising possibility” that no deal would be reached before the government’s borrowing authority hits its limit on Aug. 2.

And the latest bipartisan negotiating session on Wednesday evening ended in heightened tension. Republicans said Mr. Obama had abruptly walked out in an agitated state; Democrats described the president as having summed up with an impassioned case for action before bringing the meeting to a close and leaving.

Across Washington, officials were weighed down with a sense that they were hurtling toward a crisis. Grim-faced lawmakers spent the day shuttling from meeting to meeting in search of a way out of the fix.

The stakes are high, for the economy, the financial markets and both parties. But the pressure was particularly intense on Republican leaders, who only weeks ago seemed to be on the offensive and in a strong position to extract major concessions from Mr. Obama and the Democrats.

For months, the Republican leaders have emphatically pledged that there will be no increase in the federal debt ceiling absent huge cuts in government spending and fundamental changes in popular social programs, all without the whiff of a tax increase.

Now, with negotiations stalled and a potential default by the United States government just over the horizon, they are being held to those promises by their own rank-and-file, leaving them in a bind that is defying easy resolution and putting them at risk of being blamed if things end badly.

Behind closed doors and by phone, they groped for a solution and struggled to assert some kind of control over the situation as rank-and-file Republican members, especially in the House, grew more confrontational.

Panic had not yet set in, but the worry and tension were evident as seasoned lawmakers of both parties whose experience told them that Congress always finds a white-knuckle way to avert disaster wondered if this was going to be the time when it did not.

“Our problem is, we made a big deal about this for three months,” said Senator Lindsey Graham, Republican of South Carolina.

“How many Republicans have been on TV saying, ‘I am not going to raise the debt limit,’ ” said Mr. Graham, including himself in the mix of those who did so. “We have no one to blame but ourselves.”

Potential last-minute options were being gamed out around Capitol Hill. Senate Republicans were pushing their counterparts in the House to deliver some legislation, which could take the form of a balanced budget plan due on the House floor next week. A bipartisan group that had been working on a major deficit-cutting plan in the Senate was trying again to produce a proposal.

And Senator Mitch McConnell of Kentucky, the Republican leader and procedural maestro, was pushing his plan that would allow a debt limit increase to clear Congress without Republican fingerprints — and without the guaranteed cuts many in his party are demanding. He would establish an elaborate process where Congress would vote to disapprove instead of approve a debt limit request. That would allow the president to raise the debt ceiling via a successful veto of the disapproval if it came to that.

Despite resistance from conservatives and the initial unease many lawmakers expressed at such a slippery approach, the McConnell gambit was gaining credence as the best escape hatch. Senate Democrats went virtually silent on the idea for fear of jinxing it. While the White House said it was not the preferable option, it was viewed inside the West Wing as a real option nonetheless, even if it would transfer to Mr. Obama and his party all the political responsibility for a debt limit increase.

Some of Mr. McConnell’s colleagues were coming around to it as the reality of a possible default began to sink in.

“I strongly support Senator McConnell’s efforts to avoid a default on our nation’s debt, and the last-case emergency proposal he outlined yesterday to ensure that Republicans aren’t unduly blamed for failure to raise the debt ceiling,” said Senator John McCain, Republican of Arizona.

But with House Republicans showing little to no appetite for Mr. McConnell’s plan, top lawmakers in both parties were looking for ways to sweeten the deal, perhaps by adding required spending cuts or somehow forcing consideration of a deficit-reduction package. Mr. McConnell portrayed his proposal as a last-stand way to spare Republicans from being blamed for a default if no alternative plan could be approved.

Recounting how the 1995 government shutdown helped President Bill Clinton win re-election the following year, Mr. McConnell said any impasse that drove down the nation’s credit rating and led to government checks being delayed could have the same result for Mr. Obama.

“He will say Republicans are making the economy worse,” Mr. McConnell said in an interview with the conservative radio host Laura Ingraham. “It is an argument that he could have a good chance of winning, and all of the sudden we have co-ownership of the economy. That is a very bad position going into the election.”

After the meeting at the White House, Republicans and Democrats offered differing versions of what by all accounts was a tense session.

Representative Eric Cantor of Virginia, the House majority leader, said he raised the idea of taking what savings could be achieved now — roughly $1.4 trillion — and then having additional votes to raise the debt limit again before the elections in November 2012, with Republicans ultimately seeking a total of at least $2.4 trillion in cuts with no tax increases.

At this, Mr. Cantor said, the president “got very agitated, seemingly.” Mr. Cantor quoted the president as saying: “Eric, don’t call my bluff. I’m going to the American people with this.”

Then, Mr. Cantor said, “He shoved back and said, ‘I’ll see you tomorrow’ and walked out.”

“I was a little taken aback,” Mr. Cantor added.

Democrats said that Mr. Obama’s departure was not abrupt, but that he had forcefully made a case that Republicans had been unwilling to compromise. “Enough’s enough,” one Democrat familiar with the talks quoted Mr. Obama as saying.

Democrats said Mr. Obama had set a deadline of Friday for the two sides to determine whether they could reach a broad budget deal. If not, he said, they will turn to finding an accord over how to raise the debt limit without agreement on taxes and spending.

In Asia, Moody’s threat to downgrade the United States’ credit rating dragged down the U.S. dollar. The dollar was set for its steepest two-day loss against the euro in five weeks, Bloomberg reported, declining 0.3 percent in Tokyo by mid-afternoon Thursday, and hit a fresh four-month low against the yen.

Investors also rushed to buy assets seen as safer, like gold, which hit a record high on Thursday at over $1,589 an ounce.

——————

Source:  The New York Times

 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.”

————————-

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.

———————-

Source:  The Washington Post

Surrounded by fields that grow corn, soybeans, melons and potatoes, this tiny rural village is 65 miles from Chicago but light years away from the big city. Still, St. Anne and a lot of the farm country around it have now been dragged into the metropolis as part of an ambitious political strategy focused on the 2012 national elections.   

A new census-based political map drawn by the state’s Democratic-controlled Legislature, and signed into law by Democratic Gov. Pat Quinn, has taken swaths of suburban and rural Illinois and added them to the districts of veteran Chicago Democrats such as U.S. Rep. Jesse Jackson Jr., who could be St. Anne’s next representative. 

The move was one of the boldest by the national political parties this year as they sought to benefit by changing political boundaries.   

The new map should help Democrats and hurt Republicans in Illinois in 2012, and boost the Democrats’ hopes for retaking control of the U.S. House. But it’s creating an awkward situation for some of the people who live in these rural areas, who could soon find themselves represented by officials who live in a very different universe.  

“He’s a long way from home, isn’t he?” said Scott Rigsby, a former warehouse worker who lives in the village of some 1,300 people, referring to Jackson’s political base on Chicago’s industrial South Side. For a hamlet that goes by the motto of “preserving a rural life,” Rigsby said, “We’re way too far away for him to have his own personal finger on this town.” 

The political maneuvering began this year when legislatures and governors began redrawing political districts with the new census data as required by law. Because Republicans won major gains in the midterm elections last fall, they had the upper hand in most states, and have been aggressively massaging boundaries to their advantage. 

But in Illinois, where Democrats control all branches of state government, the party had its prime opportunity. If the new map survives an expected GOP court challenge, Democrats could knock off as many as five GOP House members who now find themselves in districts with many more Democratic voters or much tougher competition.  

Jackson and four other Democratic congressmen would have districts that stretch like tentacles from Chicago to take in — and politically neutralize — suburban and rural areas that recently have sent Republicans to Congress. 

The effort is an important part of the Democratic Party’s national strategy. “Illinois and particularly the suburbs of Chicago have always been a center of gravity in our path to retake the House majority, because those districts have been competitive and will remain competitive,” Rep. Steve Israel of New York, chairman of the Democratic Congressional Campaign Committee, told reporters in Washington at a breakfast hosted by The Christian Science Monitor. Republicans now hold a 48-seat advantage in the House.  

The new map places four freshman Republicans and one veteran GOP lawmaker in districts where they would have to run against other incumbents in 2012. Jackson’s expanded territory would take away parts of the current district of U.S. Rep. Adam Kinzinger, one of the GOP freshmen whose victories in 2010 bolstered the tea party coalition in Washington. The new Jackson district even includes Kinzinger’s hometown of Manteno in Kankakee County.  

Karl Kruse, a farmer and the GOP county chairman, is not optimistic about Kinzinger’s prospects. “Reality is that this district was drawn in a way that I don’t think Adam could win,” Kruse said. 

For his part, Kinzinger will say only that he “will definitely be running again.” He wouldn’t say whether he’ll move somewhere else to do it. 

Elsewhere, the map would force freshman GOP Rep. Robert Dold to face veteran Chicago Democrat Jan Schakowsky, who won her race in 2010 with 66 percent of the vote. The reworked districts of other Chicago-area Democrats, including Reps. Daniel Lipinski and Mike Quigley, would now cut into Republican territory. 

Democrats defend their new congressional map as fair, competitive and in line with the Voting Rights Act, which requires map drawers to protect the interests of minorities. They say the expanding Chicago districts are the inevitable result of the state losing one congressional seat, from 19 to 18, because of its slowing population growth. 

Kankakee is Republican territory — the home of former Republican Gov. George Ryan, Kinzinger and many other elected officials over the years. Jackson isn’t exactly unknown here. The son of the Rev. Jesse Jackson, he has served in Congress for 15 years. But he’s known for his role in Chicago-area issues, such as the push for a third airport there, and inner-city causes.  

Jackson’s chief of staff, Rick Bryant, said the congressman is ready to serve a new crop of farm constituents. “We may have more in common than people believe,” Bryant said.  

But Kruse, the county GOP chairman, said Kankakee County voters care a lot about agriculture, and that Jackson supported so-called “cap and trade” environmental legislation, which farmers didn’t like because it would have increased regulation and the cost of diesel fuel and fertilizer.  

“For a legislator who has not had an agricultural community in his or her district before, it would be a challenge,” said Kankakee County Farm Bureau manager Chad Miller said. “But somebody as seasoned as Congressman Jackson is, I’m sure he’s up for that challenge.”  

At a tiny gas station in the village of Hopkins Park — population 837— 83-year-old John Bender said he’ll be interested to see what Jackson could do for the area if he wins the district in the 2012 election. 

“Sometimes the further it (politician) is the better it is; sometimes the closer it is the worse it is,” said Bender, who says he switched to become a Republican eight years ago. “So, if he does his job, that’s as good as anybody else.” 

———————

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