No end in sight as Obama restarts debt talks

[July 23, 2011]  WASHINGTON (AP) -- President Barack Obama and congressional leaders are scrambling to find a way forward on a debt deal after House Speaker John Boehner threw negotiations into crisis by walking out on them with less than two weeks left to avert a potentially catastrophic default.

A visibly frustrated Obama called Boehner, R-Ohio, to come back to the White House Saturday morning along with Senate Majority Leader Harry Reid of Nevada, Reid's counterpart Sen. Mitch McConnell, R-Ky., and House Democratic leader Nancy Pelosi of California.

"We have run out of time and they are going to have to explain to me how it is that we are going to avoid default," the president told reporters at a hastily scheduled press conference Friday night.

Boehner accepted the invitation even while arguing that Obama bore the blame for the collapse of talks. "It's the president who walked away from his agreement and demanded more money at the last minute," Boehner said. "And the only way to get that extra revenue was to raise taxes."

The political theater played out even as the Aug. 2 deadline drew ever nearer. Barring action by then, the Treasury will be unable to pay its bills, and the economic fallout could send interest rates up, threaten the fragile U.S. recovery and send shock waves around the globe.

Yet the deadline pressure has brought the parties arguably no closer to a solution, even though all involved insist they do not want a default. Underscoring the uncertainty, for the first time since talks began Obama declined to offer assurances, when asked, that default would be avoided -- although moments later he said he was confident of that outcome.

Obama said that Boehner left a deal on the table that was better for Republicans than for Democrats since spending cuts totaling $2.6 trillion outweighed new tax revenue of $1.2 trillion, and he said he was losing confidence that the underlying deficit problems will be dealt with even if the debt ceiling is raised. "I've been left at the altar now a couple of times," Obama said wryly.

Still, aides on both sides said agreement had been reached on two highly controversial changes. One would raise the age of eligibility of Medicare gradually from 65 to 67 for future beneficiaries, while the other would slow the increase in cost-of-living raises in Social Security checks.

Given that accord, it seemed likely those agreements would be among many carrying over to the broader meeting Saturday morning and beyond.

Even by the recent standards of divided government, Boehner's decision triggered an extraordinary evening Friday as first the Democratic president and then the Republican speaker maneuvered for political position on an issue of enormous national import.

Unspoken, yet unmistakable in all the brinkmanship was the 2012 election campaign, still 18 months away, with the White House and both houses of Congress at stake.

Obama devoted his weekly radio and Internet address Saturday to the impasse, calling on Republicans to make a deal. "We can come together for the good of the country and reach a compromise; we can strengthen our economy and leave for our children a more secure future," the president said. "Or we can issue insults and demands and ultimatums at each another, withdraw to our partisan corners and achieve nothing."

Rep. Jeb Hensarling, R-Texas, pressed the Republicans' sharply opposing view in his party's weekly address. "If we're going to avoid any type of default and downgrade -- if we're going to resume job creation in America -- the president and his allies need to listen to the people and work with Republicans to cut up the credit cards once and for all," he said.

Private, sometimes-secret negotiations had veered uncertainly for weeks, generating reports as late as Thursday that the two sides were possibly closing in on an agreement to slash spending. That triggered a revolt among Democrats who expressed fears the president was giving away too much in terms of cuts to Medicare and Social Security while getting too little by way of additional revenues.

Obama said his only requirement for an agreement was legislation that provides the Treasury enough borrowing authority to tide the government over through the 2012 election. Boehner said he had little interest in a short-term extension either.

At the same time Obama and Boehner sought to define the clash to their political advantage, their aides provided details of the abortive talks.

Republican aides said Obama had upped his demand for higher taxes during the week. The aides said administration officials had tacitly agreed to $800 billion in new revenue over 10 years but that the White House backed away and wanted $400 billion more.

Additionally, aides said the two sides were not able to bridge their differences over the triggers designed to force Congress to enact both tax reform and cuts to Medicare and other benefit programs by early next year. Both sides also were apart on the size of cuts for Medicaid, the health care program for poor and disabled Americans.

Yet aides on both sides said the negotiations had yielded agreement for cuts of $250 billion from Medicare.

[Associated Press; By ERICA WERNER]

Associated Press writers David Espo, Ben Feller and Jim Kuhnhenn contributed to this report.

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