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Boehner seeks debt-ceiling solution before Asian markets open

By the CNN Wire Staff
July 23, 2011 -- Updated 2142 GMT (0542 HKT)

Washington (CNN) -- House Speaker John Boehner wants to come up with a solution to the nation's debt-ceiling crisis in the next 24 hours to head off a negative reaction in Asian markets, a Republican aide said Saturday.

Boehner stated this goal in a Saturday-afternoon conference call with House Republicans, just hours after he and other congressional leaders met with President Barack Obama in the White House. That conference call also came a day after Boehner broke off talks with the Obama administration on how to prevent a national default.

Boehner favors a plan to cut spending by $3 trillion to $4 trillion in a two-step process, the aide said.

"He (Boehner) said he wanted to get something agreed to prior to Asian market trading (in the new week)," the aide told CNN. Asian markets are the first major market group to open worldwide each day.

Obama held a special one-hour meeting Saturday morning with congressional leaders following the collapse of direct talks between him and Boehner.

Participating in the meeting were Boehner, Senate Majority Leader Harry Reid; Sen. Mitch McConnell, the Republican Senate leader; and House Democratic Leader Nancy Pelosi. Vice President Joe Biden also attended. Treasury Secretary Tim Geithner and Jacob Lew, director of the Office of Management and Budget, joined after media cameras left the room.

One Democratic official involved in the talks said the meeting was not contentious, and the participants did not rehash what went wrong with the Obama-Boehner talks. Rather it was very focused on "just how do we fix it," and "everybody is pretty serious" about finding a way forward that prevents a default, the official said.

However, there was a recognition that the congressional leaders -- all of whom say they want to prevent default -- can only do so much about the opinions and actions of their caucuses, the official said.

"Different people put different ideas on the table" resulting in a mishmash of things that need to be sorted through to see what might be viable, the official said. Congressional staff will be sorting through the different ideas, the official added.

The president repeated his insistence that the debt ceiling be raised through the end of 2012, the source said.

Asked if Republicans pushed back on the idea of an extension through the end of 2012, the source said: "I just think it was an honest discussion about what might happen to this country if we default. It was like, everyone knows where everyone is at this point."

But a House GOP aide told CNN that Republicans are "considering calling the president's bluff" on his refusal to sign a bill that doesn't raise the debt ceiling beyond the November 2012 election.

The aide said that party members are "struggling to see how they reach an agreement with significant debt reduction without buying time to work out the details."

Boehner aide Michael Steele had earlier told reporters that "it would be terribly unfortunate if the president was willing to veto a debt-limit increase simply because its timing would not be ideal for his re-election campaign. We want the most significant deficit reduction possible, but linking the full faith and credit of the United States to presidential campaign politics is not a defensible position."

Reid, the Democrat Senate majority leader, reiterated Saturday afternoon that he sided with the president on rejecting any short-term extensions on debt-ceiling discussions.

"I will not support any short-term agreement, and neither will President Obama nor Leader Pelosi," Reid said in a statement. "We seek an extension of the debt ceiling through at least the end of 2012. We will not send a message of uncertainty to the world."

On Friday, Boehner walked away from debt talks with the Obama administration, saying he would take up the matter with congressional leaders.

"In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country," Boehner wrote in a letter to his fellow Republicans.

The House speaker said that "a deal was never reached, and was never really close."

Speaking to reporters soon after news of Boehner's decision broke, a visibly frustrated Obama said that he asked Republican and Democratic leaders in Congress to come to the White House on Saturday morning to "explain to me how we are going to avoid default" on the nation's debt.

The president said his administration had offered "an extraordinarily fair deal" to cut expenditures and raise revenues, in return for Congress agreeing to hike the nation's debt ceiling. But he said that Boehner "left (him) at the altar" by ending negotiations around 5:30 p.m. Friday.

"I remain confident that we will get an extension of the debt limit and we will not default. I am confident of that," Obama said. "I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits. That requires tough choices."

The negotiations -- necessary to stave off an unprecedented national default that could prove economically devastating -- are testing the ability of leaders on both sides of the aisle to legislate effectively in an era of increasingly shrill and unyielding partisanship.

Republicans, who have railed against the growth of government, remain staunchly opposed to any tax increases. Democrats are trying to protect some of their party's primary legacies -- entitlements such as Social Security and Medicare, programs forged at the height of the New Deal and Great Society.

Republicans and Democrats agreed on a number of points, including $800 billion in revenue increases and certain entitlement reforms, the officials said. They disagreed over an additional $400 billion in revenue hikes and how deep cuts to Medicaid should be, they added.

"Obviously this paper is not going in the shredder," said one senior White House official, suggesting the proposal could be revived.

House Republican leadership aides told reporters that the White House and Boehner had been discussing a plan that would have tied between $3 trillion and $3.5 trillion in new savings over the next decade to an increase in the debt ceiling, not including revenue.

They stressed that whatever deal moves forward must meet two criteria. Any increase in the debt limit will need to be accompanied by spending cuts or reforms greater than the debt increase, and taxes must not be raised, they said.

If Congress fails to raise the $14.3 trillion debt limit by August 2, Americans could face rising interest rates, a declining dollar and increasingly jittery financial markets, among other problems.

"Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem," Obama wrote in an op-ed that appeared in Friday's USA Today. "That's what the American people expect of us."

It is unclear -- even if a deal is reached -- that any sweeping package can be approved by the August 2 deadline.

A Republican source familiar with the negotiations said Boehner told Republican lawmakers Friday that to get the debt ceiling raised by August 2, the House must vote on legislation by next Wednesday -- and that means it must be posted online Monday.

White House Press Secretary Jay Carney signaled to reporters earlier in the week that the president may now be willing to sign a short-term debt-limit extension if Democratic and Republican leaders are close to agreement on a broad plan that includes both tax hikes and spending reforms.

Obama previously indicated he would veto any short-term extension.

Meanwhile, lawmakers are also continuing discussions focused on the $3.7 trillion debt-reduction blueprint put forward by the "Gang of Six," a group of three Democratic and three Republican senators.

Under the group's proposal, $500 billion in budget savings would be immediately imposed, with marginal income tax rates reduced and the controversial alternative minimum tax ultimately abolished.

The plan would create three tax brackets with rates from 8% to 12%, 14% to 22%, and 23% to 29% -- part of a new structure designed to generate an additional $1 trillion in revenue. It would require cost changes to Medicare's growth rate formula as well as $80 billion in Pentagon cuts.

Obama has praised the plan, calling it "broadly consistent" with his approach to debt reduction because it mixes tax changes, entitlement reforms and spending reductions.

The proposal, however, has been hit with a barrage of criticism from both the right and the left. Conservatives have complained about some of the plan's tax changes, while liberals have warned it would cut entitlement benefits too deeply.

If all else fails, party leaders could still turn to a fallback plan initially put forward by Senate Minority Leader McConnell. The measure would give Obama the power to raise the borrowing limit by a total of $2.5 trillion, but also require three congressional votes on the issue before the 2012 general election.

Specifically, Obama would be required to submit three requests for debt-ceiling hikes -- a $700 billion increase and two $900 billion increases. Along with each request, the president would have to submit a list of recommended spending cuts exceeding the debt-ceiling increase. The cuts would not need to be enacted in order for the ceiling to rise.

Congress would vote on -- and presumably pass -- "resolutions of disapproval" for each request. Obama would likely veto each resolution. Unless Congress manages to override the president's vetoes -- considered highly unlikely -- the debt ceiling would increase.

The unusual scheme would allow most Republicans and some more conservative Democrats to vote against any debt-ceiling hike while still allowing it to clear.

McConnell and Reid are also working on two critical additions to the plan, according to congressional aides in both parties. One would add up to roughly $1.5 trillion in spending cuts agreed to in earlier talks led by Biden; the other would create a commission meant to find more major spending cuts, tax increases and entitlement reforms.

Changes agreed to by the commission -- composed of an equal number of House and Senate Democrats and Republicans -- would be subject to a strict up-or-down vote by Congress. No amendments would be allowed.

Sources say the panel would be modeled after the Base Closing and Realignment Commission, which managed to close hundreds of military bases that Congress could not otherwise bring itself to shut down.

CNN's Brianna Keilar, Jessica Yellin, Dan Lothian, Deirdre Walsh, Ted Barrett, Alan Silverleib and Michael Martinez contributed to this report.