WASHINGTON – In a last-minute stab at compromise, Republican congressional leaders and the White House made significant progress Saturday night toward a deal to avert a government default threatened for early next week, according to officials familiar with the talks.
Under the plan, the nation's debt limit would rise in two steps by a total of about $2.4 trillion and spending would be cut by a slightly larger amount, these officials said. The first stage — about $1 trillion — would take place immediately and the second later in the year.
Congress would be required to vote on a balanced budget amendment to the Constitution, but none of the debt limit increase would be contingent on its approval.
One Republican official said the two sides had settled on general concepts, but added there were numerous details to be worked out, and no assurance of a final agreement. A Democratic official said the two sides were "not really" close to a deal, but added that one could come together quickly. They spoke only on condition of anonymity about the private negotiations.
Word of significant progress after weeks of stalemate offered the strongest indication yet that an economy-crippling default might be averted.
Without legislation in place by next Tuesday, administration officials say the Treasury will run out of funds to pay all the nation's bills. They say a subsequent default could prove catastrophic for the U.S. economy and send shockwaves around the world.
President Barack Obama is seeking legislation to raise the government's $14.3 trillion debt limit by about $2.4 trillion, enough to tide the Treasury over until after the 2012 elections. Over many weeks, he has agreed to Republican demands that deficits be cut — without a requirement for tax increases — in exchange for additional U.S. borrowing authority.
But President Barack Obama has threatened to veto any legislation that would require a second vote in Congress for any additional borrowing authority to take effect, saying that would invite a recurrence of the current crisis in the heat of next year's election campaigns.
First word of an effort to reach a compromise came at mid-afternoon from Senate Republican Leader Mitch McConnell and House Speaker John Boehner — Obama's principal Republican antagonist in a contentious new era of divided government. Both GOP leaders said they were in touch with the White House and hopeful of a deal.
Senate Majority Leader Harry Reid heatedly denied their claims of progress on the Senate floor a short while later, but several hours later said events had changed.
"There are many elements to be finalized...there is still a distance to go," he said in dramatic late-night remarks. "I'm glad to see this move toward cooperation and compromise," he added.
He said he was optimistic any agreement would not include a short-term extension of the nation's debt limit — a point on which Obama has insisted.
Officials familiar with the discussions said that while the first-step increase in borrowing authority and cuts in spending would happen at once, the next step would be somewhat more complicated.
The additional increase in borrowing authority, about $1.4 trillion, would be linked to creation of a special committee of lawmakers charged with recommending deficit cuts of a slightly larger size. If the panel failed to act, or its proposals were rejected in Congress, automatic spending cuts would take effect to slice spending by slightly more than $1.4 trillion, possibly affecting Medicare and the Pentagon.
The terms under discussion appeared to satisfy key demands made by both sides.
Obama would prevail on insisting that after the legislation is passed, Congress would not be required to vote for debt limit increases to take place. Republicans would win spending cuts slightly larger than any debt limit increase and avoid any higher taxes.
Reid said that at the request of White House officials, he was postponing a test vote set for shortly after midnight on his own legislation to raise the debt limit while cutting spending.
Republicans opposed his bill, and said in advance they had the votes to block its advance.
Halfway around the world, on a visit to Camp Leatherneck in Afghanistan, the nation's top military officer fielded questions from troops asking if they would be paid in the event of a default.
"I actually don't know the answer to that question," said Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, although he told them they would continue to go to work each day.
Obama, in his weekly radio and Internet address, said there were several ways out of the gridlock that has prevented action by Congress, then added, "There is very little time."
But to get to the endgame, Republicans and Democrats had to go through the formality of killing each other's bills — scoring their own political points — before they could turn to meaningful negotiations.
And a few hours after the president spoke, House Republican leaders engineered a vote to defeat the Reid-drafted proposal to raise the debt limit on a near-party line vote at mid-afternoon.
That was payback of sorts — Reid had arranged the rejection of a House-passed bill on Friday within minutes after it reached the Senate.
Individual lawmakers expressed anxiety about the prospect that faced the country if it were to default for the first time in history.
"I'm worried about Congress defaulting on our country," said Sen. Johnny Isakson, R-Ga., urging lawmakers to find common ground. He suggested that spending cuts take place automatically if necessary to ensure the debt limit does not expire before 2013.
With financial markets closed for the weekend, lawmakers had a little breathing room, but not much. Asian markets begin opening for the new work week when it is late Sunday afternoon in the capital.
In his remarks at a news conference, McConnell said Obama "needs to indicate what he will sign, and we are in those discussions."
He said later he had spoken several times during the day with Vice President Joe Biden, who played a prominent role in earlier attempts to break the gridlock that has pushed the country to the verge of an unprecedented default.
Boehner said that despite the partisanship of recent weeks, "I think we're dealing with reasonable, responsible people who want this crisis to end as quickly as possible and I'm confident it will."
The talk of compromise contrasted sharply with the day's earlier developments as both the House and Senate convened for unusual Saturday sessions.
The House voted down legislation drafted by Democrat Reid to raise the government's debt limit by $2.4 trillion and cut spending by the same amount.
The vote was 246-173, mostly along party lines and after debate filled with harsh, partisan remarks.
Republicans said the Reid spending-cuts plan was filled with gimmicks and would make unacceptable reductions in Pentagon accounts. "It offers no real solutions to the out-of-control spending problems," said Rep. Alan Nunnelee of Mississippi, part of a group of 87 first-term Republicans who have led the push for deeper spending cuts.
Not even Democrats seemed to like the legislation very much, although many emerged from a closed-door meeting of the rank and file saying they would vote for it.
Rep. Lloyd Doggett, D-Texas, called it "the least worst alternative to avoid default."
Yet with their votes, many Democrats signaled their readiness for compromise by voting to cut spending without raising taxes. Many Republicans insist taxes must not be raised to cut into federal deficits, even for the wealthiest Americans and for big oil companies.
House Democratic leader Nancy Pelosi said Boehner "chose to go to the dark side" when he changed his own legislation to satisfy tea party lawmakers and other critics.
There were catcalls from the Republican side of the aisle at that, and Pelosi responded by repeating that the speaker "chose to go to the dark side."
The House-passed bill provides for a $900 billion debt limit increase, coupled with $917 billion in federal spending cuts.
The last-minute change requires both houses of Congress to approve a Constitutional balanced budget amendment as a precondition for additional borrowing authority to take effect.
Republicans ridiculed Reid's legislation.
"Not only does it fail to address our spending and debt problem, it won't even prevent a downgrade of our credit rating," said Rep. Scott Garrett, R-N.J. "We need actual cuts to government spending to address our long-term debt crisis, not phantom cuts and accounting gimmicks."
Associated Press writers Donna Cassata and Matt Yancey in Washington and Lolita Baldor in Afghanistan contributed to this report.
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