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WASHINGTON (AP) — Democratic and Republican congressional leaders
shopped competing debt-crisis solutions and President Barack Obama
canceled fundraising appearances Monday, as a politically
gridlocked capital lurched into a climactic last full week before
the Aug. 2 default deadline.
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Even amid acknowledgments by U.S. leaders of the need to reassure
jittery investors, world markets fell and both the Dow Jones and
Standard & Poor’s 500 opened down at Wall Street’s opening bell
with the Aug. 2 deadline to raise the government’s borrowing limit
fast approaching.
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Efforts to break the impasse intensified Monday as Republican
Speaker John Boehner and Senate Democratic Leader Harry Reid
planned to lobby their deficit reduction plans with their
respective House and Senate caucuses after the Obama White House
and Congress made little apparent headway in private talks over a
long, steamy weekend.
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Boehner was set to meet with his chamber’s Republicans to discuss
the GOP’s clash with Obama over extending the government’s
borrowing authority. The Ohio Republican planned to unveil a new
debt ceiling plan at the GOP meeting and post it online later in
the day, a spokesman said.
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Aides said Boehner’s plan was a two-step process, with an immediate
$1.2 trillion in cuts and spending caps coupled with a $900 billion
debt ceiling increase, followed by creation of a congressional
committee charged with producing nearly $2 trillion in additional
cuts. The debt ceiling needs to be increased by about $2.4 trillion
to last until 2013, the time frame that Obama and Democrats are
insisting on, but which would not be immediately permitted under
Boehner’s plan.
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Instead Boehner’s plan would condition the full debt ceiling
increase until 2013 on congressional approval of his proposal.
Boehner’s plan also requires both the House and the Senate to vote
on a balanced budget amendment, a goal of conservatives. But the
increase in the debt limit is not directly tied to the balanced
budget amendment issue.
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Reid called Boehner’s proposal “a nonstarter in the Senate and with
the president” because it would permit only a short-term increase
of the sort that has already been rejected by Democrats. Boehner’s
office rejected that description.
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Reid, D-Nev., said Sunday that Boehner’s proposal “would not
provide the certainty the markets are looking for and risks many of
the same dire economic consequences that would be triggered by
default itself.”
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After meeting at the White House Sunday evening with Obama and
House Democratic Leader Nancy Pelosi, D-Calif., Reid said he was
crafting his own new $2.7 trillion package of spending cuts that
would also push the government’s borrowing authority through next
year, a timeline that Obama and top Democrats are demanding. It
would do so without any new revenues, Reid said, thus meeting GOP
demands for no new taxes.
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But Reid’s plan was already being privately rejected by Republicans
concerned that the cuts it contains would prove
illusory.
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Sen. Chuck Schumer, the No. 3 Democrat in the Senate leadership,
said Monday one difficult reality is that no debt-crisis solution
can be successful unless it has the support of five top players:
Obama, Boehner, Reid, Pelosi and Senate Minority Leader Mitch
McConnell. But Schumer also said he thought Reid’s proposal had the
best chance of succeeding.
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The competing plans were emerging after debt talks between Obama
and Boehner on an ambitious $4 trillion package of spending cuts
and revenue increases – the so-called “grand bargain” – collapsed
spectacularly when Boehner walked out Friday. The speaker at the
time accused Obama of moving the goalposts with demands for more
taxes. The White House disputed that, but the focus of the talks
has now largely moved from the White House to Capitol
Hill.
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The drama seemed certain to play out in nail-biting fashion, and it
consumed Washington, as Obama canceled planned appearances at two
Democratic fundraisers Monday night in Washington. He has barely
ventured from the White House all month, and additional fundraising
trips have also been canceled or postponed.
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If the government’s authority to borrow money isn’t renewed by Aug.
2 – its current $14.3 trillion limit having been reached – it won’t
have cash to pay all its bills. The administration and many others
say that scenario would risk a first-ever federal default, with
higher interest rates and other devastating effects cascading
through the entire economy.
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Both Boehner and Reid were hoping that by presenting their
competing plans, they would demonstrate a seriousness that could
prevent the world’s financial markets from panicking and punishing
the U.S. by demanding higher interest rates for the huge amounts of
cash it must constantly borrow. Speaking to the U.S. Chamber of
Commerce in Hong Kong early Monday, Secretary of State Hillary
Rodham Clinton tried to reassure financial markets that America’s
economy is sound and that a deal on the debt limit would be
reached.
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In a conference call with his colleagues on Sunday, Boehner said
that his new plan “is gonna require some of you to make some
sacrifices.”
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“If we stand together as a team, our leverage is maximized, and
they have to deal with us. If we’re divided, our leverage gets
minimized,” Boehner said, according to excerpts the speaker’s
office distributed to Republican offices.
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“I would prefer to have a bipartisan approach to solve this
problem,” Boehner said on Fox News Sunday. “If that is not
possible, I and my Republican colleagues in the House are prepared
to move on our own.”
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Administration officials took to the airwaves on Sunday to make
their case, with White House chief of staff William Daley saying
Obama would veto a bill that didn’t extend the borrowing limit into
2013.
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“The president believes that we must get this uncertainty in order,
to help the American economy and help the American people,” Daley
said on NBC’s “Meet the Press.”
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Treasury Secretary Timothy Geithner also underscored administration
opposition to a short-term extension of the debt ceiling. Reaching
out to investors, he said on CNN’s “State of the Union” that a U.S.
default was unthinkable, saying, “We never do that. It’s not going
to happen.”
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Schumer was interviewed Monday on MSBNC.
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—
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Associated Press writers David Espo, Ben Feller and Erica Werner
contributed to this report.
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