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Boehner, Reid preparing to move on debt limit

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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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Associated Press writers David Espo, Ben Feller and Erica Werner

contributed to this report.

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