Obama Dismisses House Debt Plan
Policy + Politics

Obama Dismisses House Debt Plan

President Obama, warning that time is running out to lift the federal debt ceiling, said Friday that a House GOP plan has “no chance of becoming law,” and he urged Senate Democrats and Republicans to come together on a “bipartisan compromise.”

Obama spoke as House Republican leaders labored Friday to rescue a debt-limit plan opposed by their party’s arch-conservatives. But he reiterated that the House leaders are wasting their time by trying to pass a measure that includes a short-term raise of the debt ceiling.

The House plan “does not solve the problem,” Obama said. He urged the American people to keep up the pressure on their elected representatives to reach a compromise and said the two sides in the Senate are not far apart.

Reentering the fray on the negotiations to avert a potentially disastrous U.S. default that is now only four days away, Obama delivered his hastily scheduled statement in the Diplomatic Reception Room at the White House. He did not take questions afterward.

“Today I urge Democrats and Republicans in the Senate to find common ground on a plan that can get support from both parties in the House, a plan that I can sign by Tuesday,” Obama said. “There are plenty of ways out of this mess, but we are almost out of time.”

Administration officials indicated earlier that Obama and fellow Democrats remain opposed to the House GOP plan and its provision for a two-stage increase in the federal debt ceiling tied to large spending cuts. The White House wants a single increase in the $14.3 trillion debt limit that would last into 2013, arguing that a series of short-term raises would fail to calm the markets, possibly trigger a credit-rating downgrade and become embroiled in election-year politics.

House Speaker John A. Boehner (R-Ohio) called a 10 a.m. meeting with his party members to plot the way forward after he was forced to cancel a vote on his plan late Thursday in the face of persistent opposition from recalcitrant conservatives.

In the Senate, Majority Leader Harry M. Reid (D-Nev.) vowed to proceed Friday with his own bill to raise the debt ceiling. He appealed to his chamber’s Republicans to help him pass the bill, which he described as a compromise that meets key GOP demands, and he invited Minority Leader Mitch McConnell (R-Ky.) to a new round of negotiations to modify it so it can obtain the needed 60-vote supermajority in the Senate. He urged House Republicans to “break away from the shrill voices of the tea party” and return to the party of Ronald Reagan.

“The last train is leaving the station, and this is a last chance to avert a default,” Reid said in a morning floor speech. “I ask my Republican friends, break away from this thing going on in the House of Representatives.” He said a vote against the Senate compromise proposal would be “a vote to default on the full faith and credit of the United States.”

Sen. Charles E. Schumer (D-N.Y.) said that even if the House Republicans get together and pass their bill, it will not pass the Senate and will not become law. The House, he said, “is pursuing a path to nowhere.”

After a night of legislative chaos, with control of his caucus slipping in dramatic fashion from his grasp, Boehner yanked the bill from the House floor and prepared to make changes aimed at appealing to his tea-party-influenced right flank. Republican aides said they hoped for a Friday vote.

In his White House comments Friday, Obama made clear that the House effort is a nonstarter.

“Right now, the House of Representatives is still trying to pass a bill that the majority of Republicans and Democrats in the Senate have already said they won’t vote for,” he said. “It’s a plan that would force us to relive this crisis in just a few short months, holding our economy captive to Washington politics once again. In other words, it does not solve the problem, and it has no chance of becoming law. What’s clear now is that any solution to avoid default must be bipartisan.”

Obama said there are “plenty of modifications” that can be made to either Reid’s plan or one offered by McConnell to produce an acceptable compromise.

“This is not a situation where the two parties are miles apart,” he said. “We’re in rough agreement about how much spending can be cut responsibly as a first step toward reducing our deficit. We agree on a process where the next step is a debate in the coming months on tax reform and entitlement reform, and I’m ready and willing to have that debate. And if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that too if it’s done in a smart and balanced way.”

Without an agreement, Obama warned, the United States could lose its AAA credit rating. “Not because we didn’t have the capacity to pay our bills; we do. But because we didn’t have a triple-A political system to match our triple-A credit rating.”

He cautioned those who oppose any tax increases on anyone that a lower credit rating could effectively raise taxes on everyone in the form of higher interest rates for consumers.

“And that’s inexcusable,” Obama said. “There are a lot of crises in the world that we can’t always predict or avoid. . . . This isn’t one of these crises. The power to solve this is in our hands.”

He urged Americans to “make a phone call, send an e-mail, tweet, keep the pressure on Washington, and we can get past this.”

But with GOP leaders unable to offer assurances that the needed support would materialize, Senate Democrats laid plans to proceed with their own debt-ceiling plan in hopes of pushing a measure through Congress by Tuesday, when the U.S. Treasury says it could begin running short of cash to pay the nation’s bills.

The late-night drama developed after debate on Boehner’s debt-limit bill had concluded and lawmakers were minutes away from what was expected to be a cliffhanger vote. Suddenly, action on the House floor shifted to a series of non-controversial measures, leaving befuddled lawmakers debating whether to rename a post office in Hawaii.

Outside the House chamber, Boehner summoned members of the holdout GOP South Carolina delegation to his second-floor office just off the Capitol Rotunda. But he appeared to make little headway and, within minutes, freshman Reps. Mick Mulvaney and Jeff Duncan left the meeting, saying they were heading to a nearby chapel to pray for their leaders.

Rep. Tim Scott (R-S.C.) later joined them, and the trio, stalwart conservatives who have steadfastly opposed efforts to grant the Treasury additional borrowing authority, told reporters that Boehner’s pitch had not been persuasive.

“Divine inspiration already happened,” said Scott, a liaison to party leadership for the Republican freshman class in the House. “I’m a no.”

A short while later, the South Carolinians gathered with other undecided Republicans in the first-floor offices of House Majority Whip Kevin McCarthy (R-Calif.), a usual hangout for many of the 87 freshmen. There, Boehner, McCarthy and House Majority Leader Eric Cantor (R-Va.) pleaded with their fellow Republicans for support.

Aides said that some holdouts objected to an item in the bill related to the Pell grant college loan program, complaining that it amounted to a $17 billion spending increase. Some members also wanted to see stronger language calling for a constitutional amendment to require a balanced federal budget, aides said.

Across the Capitol, Senate Democrats had been waiting to put the Boehner bill to a quick death in a late-night vote of their own. But with House Republicans locked in yet another closed-door meeting, Reid said on the Senate floor that Boehner and his allies appeared to be “having trouble passing their bill” and warned that Congress faced the prospect of yet another wasted day.

Deadline looming

The chaos in the House left Washington no closer to a resolution over the debt limit just days before the Aug. 2 deadline. The national debt hit the current $14.3 trillion limit in mid-May. Unless Congress acts, the government will be in danger of defaulting on its obligations as early as Tuesday.

The partisan impasse is shaking Wall Street and the confidence of top business leaders. Early Thursday, chief executives of some of the largest U.S. financial companies — including Brian Moynihan from Bank of America, Jamie Dimon from J.P. Morgan Chase and John R. Strangfeld of Prudential — wrote a letter to President Obama and members of Congress urging them to strike a deal this week.

“The consequences of inaction — for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership — would be very grave,” they wrote.

Liberal activists and tea party organizers large and small found themselves aligned in opposition to the Boehner bill. Move­On.org staged a rally on the Capitol grounds, where Democratic lawmakers decried the legislation’s deep cuts to government agencies. They also complained that the measure would set up a second fight over the debt limit next year, forcing Obama to endure another harrowing budget battle in the heat of the presidential election campaign.

Meanwhile, FreedomWorks Chair­man Richard K. Armey, the former House majority leader and a tea party backer, called congressmen from Texas and urged them to vote no. Mark Meckler and Jenny Beth Martin, the co-founders of Tea Party Patriots, traveled to Washington to decry the spending cuts in Boehner’s bill as “fake” and “phantom.”

And during a lunchtime speech at the National Press Club, Rep. Michele Bachmann, the Minnesota Republican who is running for president, repeated her assertion that the country would not suffer in the event of a default.

“I don’t believe for a moment we will lose the full faith and credit of the United States,” said Bachmann, who has previously argued that the Treasury would be left with enough cash for critical needs while the rest of government would be subjected to “tough love.” “I am committed to not raising the debt ceiling.”

If the House proves unable to pass its bill, action is likely to shift to the Senate, where Reid was preparing to proceed with his own debt limit measure, perhaps as soon as Friday evening. But it was not clear the Reid bill could win approval, either, and talks over a bipartisan compromise have so far failed to yield results.

Throughout the day, House Republican leaders had predicted their legislation would pass the House and move on to the Senate. At an early-afternoon news conference, Boehner challenged Reid to drop his plans to kill the House bill and beseeched “my colleagues in the Senate” to “pass this bill and end this crisis.”

“We have a reasonable, responsible bill put together by the bipartisan leaders here in Congress. There’s no reason for them to say no,” Boehner said. “It’s time for somebody in this town to say yes. . . . When is somebody on the other side of the aisle going to take yes for an answer?”

But House Democrats appeared united in opposition to the measure, which would set up a two-stage process for raising the debt limit. The first stage would cut spending by $917 billion over the next decade, primarily by making deep cuts to government agencies. The debt limit, meanwhile, would be raised by $900 billion, granting the Treasury a reprieve until February or March.

The second stage would involve the creation of a new committee made up of 12 lawmakers from both parties and both chambers. The committee would be tasked with identifying another $1.8 trillion in cuts before the end of the year. If the committee made recommendations and they were adopted, Obama would be authorized to raise the debt limit into early 2013 without explicit congressional approval.

White House officials and other Democrats blasted the plan, arguing that it would hold a fragile economy hostage to partisan sniping over the budget at a time when the unemployment rate is stuck above 9 percent and businesses are looking for certainty to begin hiring. Democrats also noted that, under the Boehner bill, the next debt-limit battle stands a chance of consuming the Christmas holidays, traditionally the brightest spot of the year for consumer spending.

In a speech Thursday morning on the Senate floor, Reid said: “Republicans cannot get the short-term Band-Aid they will vote on in the House today. It will not get one Democratic vote in the Senate. . . . The economy needs more certainty than the speaker’s proposal would provide.”

The White House also lashed out against Boehner’s bill, with press secretary Jay Carney calling it a “political act” that guarantees another “three-ring circus” over the debt limit in a matter of months.

In a White House news briefing, Carney said the measure would further damage the economy, increasing the “uncertainty” that Republicans often point to as a damper on economic growth.

“It’s in­cred­ibly bad for the economy to have this kind of circus go on in Washington,” he said.

The Senate bill

Democrats were instead backing a variant of the Boehner bill that Reid planned to introduce. That measure would make the same cuts to agency budgets and establish the same debt-reduction committee. But Reid’s legislation would also count more than $1 trillion in savings from winding down the wars in Iraq and Afghanistan, an accounting move Republicans decried as a gimmick. More important, the Democratic bill would extend the debt limit into 2013.

McConnell pledged his support for the Boehner bill. Though he spoke Wednesday with Vice President Biden, McConnell’s aides denied that he was working to forge a compromise with Democrats.

In a speech Thursday morning, McConnell argued that Democrats would support the Boehner legislation if not for the requirement for a second debt limit vote early next year.

“It doesn’t allow the president to avoid another national debate about spending and debt until after the next presidential election,” McConnell said. “This assurance is the only thing the president and Senate Democrats are holding out for right now.”

Democrats highlighted the concerns of market experts, releasing a video Thursday in which several warned that Boehner’s plan could prolong the feuding over the debt ceiling and prompt credit-rating agencies to downgrade the nation’s AAA rating.

As the debt-limit drama stretched on, one truth became apparent: House leaders had come face to face with the realities of governing in a new Washington, where trading earmarks for votes was no longer an option and Boehner’s pledge to let the House work its will was making it far more difficult for leaders to impose theirs.

Shortly before 9 p.m., Rep. Jeff Flake (R-Ariz.), who had expressed opposition to the Boehner plan, exited McCarthy’s office. He declined to tell reporters if his views had changed. But he praised the lack of horse-trading of the type that marred passage of Obama’s health-care legislation. “It is the most refreshing thing in the world to see what’s going on in there,” Flake said. “This kind of negotiation a couple years ago would have cost about $20 billion.”

Meanwhile, Rep. Louise M. Slaughter (D-N.Y.) waxed philosophical about the situation, saying the GOP theatrics have convinced her that Congress should not have the power to put limits on Treasury borrowing at all. After all, Democrats have argued, the debt is the result of budget decisions Congress itself has made over the years.

“Frankly, I have pondered all this day. Why does the United States of America go through this process?” Slaughter told a reporter. “Nobody else in the world does. It makes no sense at all.”

Staff writers Felicia Sonmez and Amy Gardner contributed to this report.