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Stalemate persists over raising debt limit

The White House budget director, Jacob Lew, and Republican lawmakers appearing on various TV news programs yesterday said they want to avoid pushing the United States into default. The White House budget director, Jacob Lew, and Republican lawmakers appearing on various TV news programs yesterday said they want to avoid pushing the United States into default. (William B. Plowman/ NBC News/ Associated Press)
By Donovan Slack
Globe Staff / July 18, 2011

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WASHINGTON - The debate over how to raise the country’s legal borrowing limit continued to roil the nation’s capital yesterday as White House officials put the onus for action squarely on a Congress that remains bitterly divided just 15 days before the administration says the country will run out of money.

The White House budget director, Jacob Lew, said the president has put everything on the table and it is now up to Congress to reach consensus on an acceptable plan.

“Leadership takes partnership as well,’’ Lew said on ABC’s “This Week with Christiane Amanpour.’’ “The president has shown a willingness to go there. We need a partner to work with.’’

Some Republican congressional leaders, meanwhile, said President Obama is being unreasonable by asking them to pass tax increases when the economy is so fragile.

“It’s not a revenue problem, it’s a spending problem, and everyone understands that point,’’ Representative Jim Jordan of Ohio, chairman of the Republican Study Committee, said on “Fox News Sunday.’’

Both the Obama administration and Republican lawmakers said yesterday that they do not intend to put the country in default, but neither side outlined a plan that is considered likely to pass.

There were no formal meetings at the White House over the weekend, but talks continued behind the scenes on Capitol Hill on multiple possible solutions.

Democrats continued pushing what the White House has called a “grand bargain,’’ which would cut spending by some $4 trillion over the next 10 years but also eliminate subsidies for oil and gas companies and tax breaks for the wealthiest 2 percent of Americans that were passed under President George W. Bush and extended last year by Congress and Obama.

That deal also would include changes to entitlement programs like Medicare. Although the White House has declined to detail those changes publicly, the president said Friday that they could include raising the eligibility age and increasing the amount that wealthier seniors pay for health care.

Republicans so far have dismissed any plan that includes tax increases. Yesterday, Senator Jon Kyl, an Arizona Republican who is minority whip and has been involved in negotiations with the White House, said Obama needs to “get off of his absolute obsession with raising taxes.’’

“Republicans are not going to agree to do anything that will harm our economy and job-killing taxes will harm our economy,’’ Kyl said on “This Week.’’

House Republicans, meanwhile, have been working on a plan they are calling “Cut, cap, and balance’’ that would cut spending next year by $111 billion, cap spending as a percent of gross domestic product at 20 percent, and pass a constitutional amendment that would require a balanced federal budget. Such an amendment would require ratification by the states.

“I’m not sure why the president’s standing in the way of that,’’ Representative Raul Labrador, an Idaho Republican who was elected with Tea Party support, said on “This Week.’’

The House is expected to vote on that plan tomorrow. The president, however, has already said that he wouldn’t support the legislation because the cuts it would require would be too dire, slashing Social Security and Medicare substantially.

“I think it’s important for everybody to understand that all of us believe that we need to get to a point where eventually we can balance the budget. We don’t need a constitutional amendment to do that; what we need to do is to do our jobs,’’ he said Friday. “And we have to do it the same way a family would do it. A family, if they get overextended and their credit card is too high, they don’t just stop paying their bills.’’

A fallback option under discussion in the Senate and introduced by minority leader Mitch McConnell, a Republican from Kentucky, would allow the president to raise the debt ceiling without congressional approval, meaning Republicans wouldn’t have to vote for increasing debt. It would also create a commission that would identify spending cuts going forward.

That plan had seemed the more promising alternative going into the weekend, but Jordan, of the Republican Study Committee - a caucus of conservative members of the GOP - said yesterday that it would not have the 218-vote majority needed in the Republican-dominated House.

“Who knows if there’s a combination of Rs and Ds who will go for it, but I’m telling you House conservative members, members of the Republican [Party], they’re not going to support the McConnell plan,’’ he said.

Treasury Secretary Timothy Geithner and independent analysts have said the country will reach its debt limit of $14.3 trillion Aug. 2 and will not be able to pay all its bills after that, including Social Security checks, veterans and unemployment benefits, and military salaries.

Democrats and Republicans have been locked in bitter negotiations to raise the limit for weeks. Similar standoffs have consumed Washington before - under President Ronald Reagan in the 1980s and President Bill Clinton in the 1990s.

But political analysts say the situation is different - and the stakes greater - this time.

“What’s different this time is, one, it’s a precarious financial situation that we’re in after the greatest recession since the Great Depression,’’ said Thomas Mann, a congressional scholar and senior fellow at the Brookings Institution. “And two, is the position of one of the two major parties: Many of its members have no compunction about contributing to a default.’’

A vocal faction of conservative Republicans, including presidential candidate Michele Bachmann of Minnesota, have said they would not raise the debt limit, forcing the country to default on some of its obligations.

Yesterday, Lew, of the White House Office of Management and Budget, sought to tamp down talk of default, although he acknowledged “there are some extreme voices that are saying we should push it over the edge.

“I think the risk of taking that path is just enormous - the president referred to it as an Armageddon - it would mean higher interest rates, which are a tax on all Americans, it would undermine our standing in the world and it could have a cloud for a long time over the United States.’’

Donovan Slack can be reached at dslack@globe.com. Follow her on Twitter @DonovanSlack.