WASHINGTON — President Barack Obama, saying "we need to" resolve the debt reduction issue quickly, held a 75-minute meeting with congressional leaders Sunday that failed to end the impasse over how to dramatically cut deficits.
The bipartisan group did agree to reconvene Monday afternoon at the White House.
Congressional sources said the sides remain fixed: Democrats want a big, perhaps $4 trillion, deal that includes tax increases as well as spending cuts, but Republicans want any tax increases offset by other tax cuts.
Obama is scheduled to take his case for a sweeping fix to the American public early Monday at a news conference — his second on the issue in as many weeks. House Speaker John Boehner's Saturday night decision to abandon efforts to seek the kind of grand bargain Obama wanted has not only thrown the talks into some turmoil, but has made it appear that Republicans are setting the agenda.
Boehner wants a deal that builds from savings discussed in the May/June talks headed by Vice President Joe Biden. Though no agreement was reached, the group is believed to have discussed packages of at least $1 trillion. The negotiators are expected to discuss those savings Monday.
Obama aides on Sunday sought to raise the stakes, with Treasury Secretary Tim Geithner warning that failing to reach a deal on raising the U.S. debt ceiling could cause "catastrophic damage" to the American and global economies.
U.S. credit could be downgraded if a deal isn't reached by Aug. 2, Geithner said, complicating the government's ability to cut checks for Medicare and Social Security recipients.
Failure to reach a deal would affect "the value of all Americans' savings, the capacity of businesses to borrow to put people back to work," Geithner said on NBC's "Meet the Press." And it could affect the 80 million checks a month the government writes, "including people who depend on those checks to go out and buy food to meet their basic needs."
Geithner's stark warning came hours before members of Congress arrived at the White House for the second round of closed-door talks that were further complicated late Saturday when Boehner rejected Obama's call for a sweeping deal that would include higher taxes.
A spokesman for Senate Republican leader Mitch McConnell of Kentucky said the group would meet but that it was "disappointing that the president is unable to bring his own party around to the entitlement reform that he put on the table."
"And it's baffling that the president and his party continue to insist on massive tax hikes in the middle of a jobs crisis while refusing to take significant action on spending reductions at a time of record deficits," spokesman Don Stewart said.
House Democratic leader Nancy Pelosi said her side arrived at the White House on Sunday "with the prospect that we could achieve a grand bargain.ï¿½ We are still hopeful for a large bipartisan agreement, which means more stability for our economy, more growth and jobs, and more deficit reduction over a longer period of time.
"This package must do no harm to the middle class or to economic growth.ï¿½ It must also protect Medicare and Social Security beneficiaries, and we continue to have serious concerns about shifting billions in Medicaid costs to the states."
The White House has said it wants a deal in place by July 22, which would presumably calm increasingly nervous financial markets and also give Congress enough time to consider legislation.
Until Boehner's surprise announcement late Saturday, there had been optimism that negotiators could at least agree on the parameters of a deal to reduce federal deficits over the next 10 years — and lift the debt ceiling.
The White House wants a $4 trillion plan with a mix of spending cuts and higher taxes. Republicans — especially those elected in November with support from anti-tax tea party supporters — have refused to consider raising taxes.
Any deal would be attached to legislation to raise the nation's debt limit, now $14.3 trillion. Geithner has said that if the limit is not raised by Aug. 2, the government would lose its ability to borrow money and could default, triggering an economic crisis.
South Carolina Republican Sen. Jim DeMint accused Geithner of being "irresponsible" and said he was "playing Chicken Little."
"The fact is, we will pay our debts if it's the last dollar we have," DeMint said on "Fox News Sunday." "There would certainly be disruption, but this is not a deadline that we should rush and make a bad deal."
But Geithner's caution was echoed Sunday by Christine Lagarde, the newly elected chair of the International Monetary Fund, who said failing to reach a compromise would be "real shock, and it would be bad news for the U.S. economy."
"I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also of the rest of the world," she said on ABC's "This Week," warning of "real nasty consequences, not just for the United States, but for the entire global economy," if the U.S. were to default on its loans.
The biggest challenge now is time. McConnell said Sunday on "Fox News Sunday," "There's always a contingency plan." He wouldn't give details. But, he said, "nobody is talking about not raising the debt ceiling."
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