Analysis: Debt differences narrowing, despite talk

[July 27, 2011]  WASHINGTON (AP) -- Pitched partisan rhetoric aside, the differences are narrowing, not widening, as the divided U.S. government struggles to avert a financial default that neither President Barack Obama nor the leaders of Congress say they want.

Which helps explain why day-old legislation unveiled by the House Republican leadership pulled off something of a political trifecta on Tuesday.

Several rank-and-file conservatives in Speaker John Boehner's Republican party attacked it from the right.

From other points on the political spectrum, Senate Majority Leader Harry Reid labeled it "dead on arrival" in his Democratic-controlled chamber. And moments later the White House said if the measure somehow managed to clear Congress, "the president's senior advisers would recommend that he veto this bill."

Yet the legislation also represents significant movement from a bill the House passed last week, with roughly half of its mandated spending cuts, for example. Just as Reid no longer is insisting on having tax increases as part of any plan to cut deficits.

"We have a bill that is reasonable and responsible," said Boehner's spokesman, Michael Steel.

Clearly, not everyone sees it that way. So the crisis continues, and efforts to avoid a market-shattering default could yet falter in the run-up to an Aug. 2 deadline.

The main sticking point remains how many trillions of dollars to cut -- and particularly when -- from federal deficits in exchange for a critical increase in the government's $14.3 trillion debt limit.

One step or two? The second occurring in the shadow of the 2012 elections.

Obama says one, calling it a matter of good government.

"There's no point putting the economy at risk by kicking the can down the road," he said in his nationally televised White House speech Monday evening.

Republicans say two, belittling the president as concerned principally for his own political future.

"With all due respect to the president, we have more important things to worry about than getting through the next election," Sen. Mitch McConnell, the Republican leader, said.

This was the same issue on which Obama told House Majority Leader Eric Cantor "don't call my bluff" a few weeks ago at the White House, and it has bedeviled negotiations ever since.

But there's reason for optimism, too. In the intervening weeks, both sides have been edging toward a possible deal.

Despite calling for a "balanced plan," Obama effectively jettisoned that goal this week when the White House announced he backed an approach by Reid that relies on $2.7 trillion in spending cuts and no tax increases to reduce deficits.

Boehner, in his rebuttal to Obama on Monday night, said that in Washington, a balanced approach means "we spend more, you pay more."

Within hours, Reid conceded tax increases were off the table in a way that suggested Republicans should concede something in exchange.

"The Republicans have hung tight on no revenues. Fine. But we are not going to have a short-term extension of this debt because it would mean that we would come back in early October and be right where we are again," he said.

A few hours before Reid backed off on taxes on Monday, Boehner unveiled a fallback plan of his own that differed markedly from the one that passed the House last week. Readying his rank and file for the change, he told them it was "going to require some of you to make some sacrifices."

For one, it shelved a requirement for Congress to approve a constitutional balanced budget amendment as a condition for raising the debt limit. And an earlier demand for $6 trillion in spending cuts in exchange for a $2.4 trillion increase in the debt limit came down to less than half that amount.

Both of those events followed a weekend in which senior aides to Boehner, Reid and Senate Republican leader Mitch McConnell spent hours closeted in a room in the Capitol negotiating over a compromise that could clear both houses.

Republicans said afterward there was a deal, Democrats denied it.

The efforts ran into difficulty over the same issue that plagued Obama's abortive negotiations with Boehner -- a disagreement over whether the same debt crisis controversy now bedeviling Washington should be allowed to recur during the 2012 election year.

But in the meantime, they had resolved numerous other issues, according to officials familiar with the talks, and the two bills now pending in the House and Senate share features in common.

With one week remaining until a threatened default, Reid told reporters, "There are conversations going on."

McConnell added, "I'm prepared to accept something less than perfect, because perfect is not achievable."

[Associated Press; By DAVID ESPO]

David Espo is AP's chief congressional correspondent.

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