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Obama threatens to veto tea party plan for debt ceiling

WASHINGTON (AP) - The White House weighed in with a veto threat
Monday against a tea party-backed plan to let the government borrow
another $2.4 trillion, a measure conditioned on big and immediate
spending cuts and adoption by Congress of a constitutional
amendment to balance the federal budget.
At the same time, President Barack Obama said the two sides are
"making progress" after a series of back-channel conversations
with Republicans like House Speaker John Boehner of Ohio and
Majority Leader Eric Cantor of Virginia, with whom Obama met on
Sunday morning.
Boehner called the veto threat "unfortunate," and in a
statement Monday said Obama's threat "should make clear that the
issue is not congressional inaction, but rather the President's
unwillingness to cut spending and restrain the future growth of our
government."
"If we are going to raise the debt limit and avoid default, the
White House must be willing to demonstrate more courage than we
have seen to date," Boehner said.
A Boehner aide said the "cut, cap and balance" plan is still
"the best path forward" and declined to characterize the
hush-hush talks with Obama. Another spokesman, Brendan Buck, said
"there is nothing to report in terms of an agreement or
progress."
The House set to pass the plan on Tuesday but it's sure to stall
in the Senate, where majority Democrats say it would lead to
decimating budget cuts and make it harder to pass tax increases on
the wealthy. The White House weighed in Monday, calling the bill an
"empty political statement" that President Barack Obama would
veto.
And even if the scheme could pass, there's no way Congress will
adopt a balanced budget amendment, which requires a two-thirds vote
in both House and Senate.
Tea party lawmakers are insisting on the effort to try to put
their stamp on the debate over the so-called debt limit, and GOP
leaders - lacking other ideas that might win a majority in the
Republican dominated House - were quick to give their OK at a
spirited closed-door meeting on Friday.
Major rating agencies such as Moody's and Standard and Poor's
have signaled they're poised to lower the nation's coveted Triple-A
credit ratings if no agreement is reached on the nation's debt.
On Monday, Moody's issued a report suggesting that the U.S.
could eliminate the threat to its credit rating by removing the
legal limit on the debt.
Tuesday's House vote on the cut, cap and balance plan comes
after more than a week of White House talks with congressional
leaders failed to produce a breakthrough. The tally will be held
exactly two weeks before an Aug. 2 deadline to avoid a potentially
devastating default on U.S. obligations like payments to
bondholders and senior citizens receiving Social Security.
The plan doesn't actually include any spending cuts; rather, it
endorses a spending cap on agency operating budgets for next year
that the House is already working toward. The new plan promises to
cut $35 billion more from so-called mandatory programs like farm
subsidies, food stamps and Medicaid, the health program for the
poor and disabled, but doesn't say where they would fall.
In a statement, the White House warned that such an approach
could force significant cuts in education, research, Medicare and
Social Security, and "put at risk the retirement security for tens
of millions of Americans."
After the House exercise and a failed Senate vote on a balanced
budget amendment to the Constitution, Plan B appears to be to have
the Senate vote to give Obama sweeping power to order increases in
the debt limit totaling $2.5 trillion over the coming year without
approval by lawmakers.
The hope appears to be that after trying it their way, enough
House Republicans will be able to stomach the emerging Senate plan
to allow it to pass, though it's plain there will have to be plenty
of Democrats voting for it as well to make up for dozens of
unyielding lawmakers unwilling to abandon their tea party promises.
For their part, Senate Republicans are demanding a vote this
week on a balanced budget constitutional amendment, though they
have zero chance of winning the required 67 votes in a chamber
where they control just 47.
Public opinion polls show that voters like the idea of a
balanced budget, but the government faces such massive budget gaps
- it now borrows more than 40 cents of every dollar it spends -
that the cuts required to eliminate the deficit were too draconian
for even the GOP-dominated House to endorse balancing the budget
anytime soon. The House Republican budget still leaves deficits in
the $400 billion range after 10 years.
The immediate issue is allowing the government to continue to
borrow from investors and foreign countries like China to pay its
bills - which include a $23 billion batch of Social Security
payments set to go
The report Moody's issued Monday said the need for the U.S. to
raise its debt limit by enacting legislation creates the
possibility of default that wouldn't exist otherwise. Removing the
legal limit on the debt would eliminate the risk that threatens the
government's credit rating, the report said. "We would reduce our
assessment of event risk if the government changed its framework
for managing government debt to lessen or eliminate that
uncertainty," said the Moody's report.
With the deadline just over two weeks away and with a recent
round of White House talks failing to generate a breakthrough, Sen.
Mitch McConnell, R-Ky., the cagey leader of his party in the
Senate, has proposed a plan that would allow Obama to automatically
win a large enough increase in the debt to keep the government
afloat until 2013 unless both House and Senate override him by
veto-proof margins.
McConnell's plan has political advantages but has come under
assault from many conservatives eager to take advantage of the
current opportunity to use the need to lift the debt ceiling to
force deficit cuts now. But Republicans refuse to consider any tax
revenue increases demanded by Obama and Democrats to balance any
budget package, and Democrats won't go along with significant cuts
to benefits programs like Medicare and Medicaid unless tax
increases on the wealthy are a part of the package.
That leaves lawmakers well short of the $2 trillion-plus in
deficit cuts required to offset a debt increase that's big enough
to solve the problem through next year's elections.
Majority Leader Harry Reid, D-Nev. wants to add a plan to create
yet another deficit panel, comprised entirely of lawmakers and
evenly divided between the two parties, that would try to break the
deadlock by the end of the year.
It's also expected that a package of spending cuts, perhaps in
the $1.5 trillion range over the coming decade, would be attached
to the McConnell-Reid measure, perhaps in the House.

(Copyright 2011 by The Associated Press. All Rights Reserved.)


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