WASHINGTON — Senate Republican leader Mitch McConnell offered a plan Tuesday to increase the nation's debt limit in three stages — a plan aimed at ending the growing financial crisis and circumventing the ugly division between the political parties in deficit-reduction talks.
The Kentucky Republican's proposal would have President Barack Obama offer a plan lifting the debt ceiling by $700 billion before Aug. 2, the date the government is set to exhaust its borrowing authority. Separately, Obama also would recommend non-binding spending cuts exceeding that same amount, but they would be only a list, not legislation.
Obama's debt-ceiling increase proposal would be structured to go into effect unless Congress disapproves it, much like federal regulations often do.
Republicans likely would oppose the debt-ceiling increase because it wouldn't include the spending cuts they've insisted on. They'd offer a resolution of disapproval of the debt-ceiling hike. If it passed, it would go to Obama, who could veto it, and Democrats have enough votes in Congress to prevent his veto from being overridden.
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That way the higher debt limit would go into effect, avoiding an unprecedented U.S. default — which threatens to throw financial markets into chaos and the economy back into recession — while leaving Republicans free to complain that Democrats would not back dramatic spending cuts, framing their stand for the 2012 elections.
Under McConnell's plan, Obama then would offer two more debt limit increases, of $900 billion each, later this year or next year, under the same procedure. Those increases presumably would cover government debt through the end of Obama's term in January 2013. Obama is seeking a $2.4 trillion debt ceiling increase over that period.
Obama said flatly Monday that he would not back any short-term debt limit plan, though the White House had not yet commented on McConnell's new offer. The leaders were meeting Tuesday for the third day as both sides hardened their positions.
White House Press Secretary Jay Carney insisted that there was progress in the meeting despite heated talk at the Capitol, saying that "the process continues to move forward because despite elevated rhetoric, the fact is everyone recognizes that there is no alternative here to taking action."
He said that deals short of what Obama is seeking "are certainly possible," but he ruled out short-term fixes.
Ironically, McConnell's plan essentially would result in a "clean" debt limit hike, one without any of the deficit reduction now being discussed in the White House talks. Liberal Democrats have long urged a debt limit without such strings. Republicans have insisted until now that they will not raise the debt limit unless they also win deep spending cuts to reduce future deficits.
Obama and congressional leaders have been negotiating over proposals to shave trillions of dollars from projected budget deficits over the next decade. But Republicans insist on no tax increases, Democrats are adamant that Social Security and Medicare benefits remain intact, and there's been little apparent movement to close the gap between them.
McConnell's proposal came on a day when leaders of the U.S. business establishment joined together to push hard for a breakthrough. A joint letter from the U.S. Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, the Financial Services Forum and the Partnership for New York City called for the politicians "to put aside partisan differences and act in the nation's best interests. ... It is time to pull together rather than pull apart."
They called specifically to raise the debt limit and also for a long-term deficit reduction plan, but for that they offered no specifics.
Chamber president Thomas Donahue starkly outlined the stakes.
"An unprecedented default on the nation's bills would have dire consequences for our economy, our markets, and Main Street Americans," he said. "Businesses are interested in deficit reduction solutions that help unleash the investment potential of the private sector, leading to economic growth, job creation and enhanced revenues."
Added Business Roundtable president John Engler, a former governor of Michigan, "The business community in large numbers is saying to our leaders in Washington, 'Do your job.'"
At the White House, Obama warned Tuesday that he wouldn't be able to guarantee delivery of Social Security checks if the debt ceiling is not increased.
"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue," Obama said in an interview with CBS News. "There may simply not be the money in the coffers to do it."
White House spokesman Carney suggested that not raising the ceiling would spark "a kind of Sophie's choice situation where you have to decide what bills you can pay."
McConnell's offer did little to mollify conservative critics who oppose any raise of the debt ceiling. Conservative activist Brent Bozell charged McConnell with "caving" in to Obama's "appetite for out-of-control spending."
"If he is serious about giving Obama and the Democrats a free pass in exchange for not having to make the difficult decisions, he should look to John Boehner to see real courage," Bozell said.
Separately, Treasury Secretary Timothy Geithner reiterated the urgency of raising the nation's $14.3 trillion debt limit, while voicing confidence that it will be done.
"Failure is not an option," he said. "Both sides understand what is at stake and will come to an agreement. The question on the table is will that agreement be good for the economy?"
Much of Tuesday's public debate involved sharp partisan sniping. McConnell blasted Obama and Democrats for blocking any effort to reach a bipartisan deal, saying their proposed savings were "smoke and mirrors."
"I was one of those who had long hoped we could do something big for the country," the Kentucky Republican said in a Senate floor speech that illustrated how party lines are hardening.
"But in my view the president has presented us with three choices: smoke and mirrors, tax hikes or default. Republicans choose none of the above," McConnell said. "I hoped to do good; but I refuse to do harm.
"After years of discussions and months of negotiations," McConnell said. "I have little question that as long as this president is in the Oval Office, a real solution is unattainable."
Democrats fired back:
"It's time for Republican leaders to do some much-needed soul-searching," said Sen. Charles Schumer, D-N.Y. "Are they willing to risk an economic cataclysm just to mollify an extreme wing of their party and score political points against the president?"
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