Obama, Boehner take cases on debt limit to nation

United States edged closer on Tuesday to a devastating default as Republicans and Democrats were deadlocked over competing plans to raise the debt ceiling, one week before a deadline to act.

President Barack Obama, in a televised address aimed at rallying public support for a package proposed by Democrats, warned that failure to increase the U.S. borrowing limit would severely hurt the nation.

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One of the biggest obstacles remaining: the size of the debt limit increase. House Republicans want an increase of $1 trillion — enough to last about six months, with future increases tied to more cuts and a House and Senate vote on a balanced budget amendment.

The Senate wants $2.4 trillion, enough to get through the 2012 election.

"Based on what we've seen these past few weeks, we know what to expect six months from now," Obama said during a prime-time address to the nation, calling on Americans to urge Congress to compromise.

House Speaker John Boehner said he tried to work with Obama, but the president "would not take yes for an answer."

Sources: House Speaker; Senate Majority Leader

"The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today," Boehner said.

With a House vote scheduled for Wednesday on the Boehner plan and no timetable in the slower-paced Senate, few days would be left to reconcile the two before the government faces the prospect of default.

But there is movement: Both plans take tax hikes off the table, something Democrats had insisted upon as part of a grand deficit-reduction deal. Republicans have also softened their demand to make an increase in the debt limit subject to an immediate vote on a balanced budget amendment.

Both sides have settled on an immediate vote on at least $1.2 trillion in spending cuts. They've also agreed there should be a process to propose future cuts, and give them an up-or-down vote.

The House Republican plan is a modified version of the bill passed by the House, but rejected by the Senate last week. The vote on a balanced budget amendment would be delayed, and many of the spending cuts would be up to a congressional commission.

A number of conservatives said they won't support anything short of the original House position. "Washington wants a deal. Americans want a solution," said Rep. Jim Jordan, R-Ohio.

The Senate plan, by Majority Leader Harry Reid, D-Nev., proposes $2.7 trillion in cuts over 10 years, with no reductions in entitlement benefits such as Social Security or Medicare.

Reid said it also meets two Republican demands: No tax increases and spending cuts at least as large as the debt limit increase.

Boehner plan

• No tax increases.

• Increases the federal debt ceiling by up to $1 trillion coupled with $1.2 trillion in spending cuts in discretionary programs over 10 years.

• Requires a second vote to raise the debt ceiling in 2012.

• Caps future spending. Failure to remain below caps would trigger automatic across-the-board spending cuts.

• Requires a vote on a balanced budget amendment after Oct. 1 but before the end of the year.

• Creates joint congressional committee charged with determining at least $1.8 trillion in spending cuts in entitlement programs, such as Medicare and Social Security, over 10 years. The House and Senate would vote for proposal on an up-and-down basis with no amendments. If passed, the president would be authorized to seek a $1.6 trillion increase in the debt ceiling.

Reid plan

• No tax increases.

• Raises debt ceiling by $2.5 trillion through 2012.

• $1.2 trillion in spending cuts over 10 years.

• $100 billion in savings that include reduced fraud and abuse in mandatory programs, changes Fannie Mae and Freddie Mac, sales of the radio spectrum and changes in agricultural programs.

• $1 trillion in savings from winding down the wars in Iraq and Afghanistan.

• $400 billion in interest savings.

• Creates joint congressional committee to find future savings. The recommendations would receive an up-or-down vote by the end of 2011. Unlike Boehner’s plan, the increase in debt ceiling is not contingent on approval of this committee’s proposal.

Obama calls for compromise amid stalemate in debt talks

Rival Democratic and Republican plans to raise the government's borrowing ability have thrust Congress into a standoff just one week away from a potentially devastating debt crisis. President Barack Obama made a last ditch call for compromise, but House Speaker John Boehner said negotiations with the White House had been futile.

"We can't allow the American people to become collateral damage to Washington's political warfare," Obama declared Monday in a prime-time address to the nation.

Boehner, in a nationally televised rebuttal, said he had given "my all" to work out a deal with Obama.

"The president would not take yes for an answer," he said.

The extraordinary back-to-back appeals to the public gave no indication that weeks of brinkmanship and sputtering talks over long-term deficit reductions were on the verge of ending. With an Aug. 2 deadline rapidly closing, Congress and the White House had limited options to avoid a potential government default that could send the already weak economy into a damaging swoon.

Both Democrats and Republicans softened previous hardline positions and appeared ready to leave quarrels over entitlement programs and higher tax revenues for later. But continued bickering on Capitol Hill overshadowed any signs of emerging common ground.

Boehner, however, argued at an afternoon news conference that Reid's plan is "full of gimmicks."

The package "doesn't deal with the biggest drivers of our deficits and debt, and that's entitlement programs," Boehner said.

Boehner's plan would require two separate votes by Congress. The first would approve approximately $1.2 trillion in spending cuts over the next decade while raising the debt ceiling through the end of 2011, two GOP leadership aides told CNN. Any failure on the part of Congress to enact the mandated spending reductions would trigger automatic across-the-board budget cuts.

The second vote would raise the debt limit through 2012, but only if Congress approves a series of major tax reforms and entitlement changes outlined by a bipartisan committee composed of Senate and House members.

The proposed structural changes -- a focal point of intense ideological conflict in Washington -- would have to generate between $1.6 trillion and $1.8 trillion in savings, according to a House Republican aide familiar with the package.

Boehner's plan, while allowing a total debt-ceiling increase of roughly $2.6 trillion, also would require both a House and Senate vote on a balanced budget amendment to the Constitution between October 1 and the end of the year.

This plan is "less than perfect," Boehner said, but "reflects bipartisan negotiations" conducted with Senate Democrats over the weekend.

Democrats as a whole are vehemently opposed to the idea of holding more than one vote to raise the debt limit through the 2012 election, arguing that such a requirement is politically unrealistic and could prove to be economically destabilizing.

Republicans want to lock in long-term tax and spending changes, and argue that Obama is trying to avoid politically tough decisions in a presidential election year.

Meanwhile, top senators from each party said Monday night that behind-the-scenes talks continue to try to reach a deal that would avoid Congress voting on either the Reid or the Boehner proposals.

As leaders from the two parties continue to bicker, analysts warn that financial markets are growing increasingly nervous about the prospect of a national default. The Dow Jones Industrial Average dropped more than 100 points almost immediately after opening Monday morning, although it later cut that loss. Most Asian markets were trading higher on Tuesday.

As the debt ceiling debate drags on, a new CNN/ORC International Poll reveals a growing public exasperation and demand for compromise. Sixty-four percent of respondents to a July 18-20 survey preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions.

As in Congress, the public is sharply divided along partisan lines. Democrats and independents, according to the CNN/ORC Poll, are open to a number of different approaches because they think a failure to raise the debt ceiling would cause a crisis of major problems for the country. Republicans, however, draw the line at tax increases, and a narrow majority of them oppose raising the debt ceiling under any circumstances.

Fifty-two percent of Americans think Obama has acted responsibly in the debt ceiling talks so far, but nearly two-thirds say the Republicans in Congress have not acted responsibly. Fifty-one percent would blame the GOP if the debt ceiling is not raised; only three in 10 would blame Obama.