Obama Open to Short-Term Debt Extension as Part of Bigger Pact

Obama promotes new Senate plan to avoid U.S. default

President Barack Obama discusses the continuing budget talks, Tuesday, July 19, 2011, in the the briefing room of the White House in Washington. (AP / Manuel Balce Ceneta)

WASHINGTON — President Barack Obama on Tuesday endorsed a rejuvenated Senate plan that cuts spending and raises taxes in return for congressional approval to raise the U.S. debt ceiling and avoid a default on American obligations.
Obama spoke briefly in the White House press room just hours after a bipartisan group of six senators resumed negotiating the plan. The senators said they were close to agreement on an immediate $500 billion "down payment" on cutting the deficit as the starting point toward cuts of more than $4 trillion over the coming decade that would be finalized in a second piece of legislation.
The plan also would raise revenues by about $1 trillion over 10 years through a major overhaul of the tax code and cuts to popular benefit programs like Medicare and Medicaid, the federal programs that subsidize health care for the elderly and poor. There was no assurance such a plan would win support in the Republican-controlled House where most members have vowed not to increase taxes.
The plan largely mirrors one put forward months ago by Obama's debt commission and he said on Tuesday that it "is broadly consistent with what I've proposed."
Congress faces an Aug. 2 deadline for raising the debt limit above the current $14.3 trillion level. Failure to do that would leave the Treasury Department unable to pay all the government's bills that come due. The government would face hard choices of whether to make payments to holders of Treasury bonds or send out checks to retirees relying on Social Security, the government-run pension plan.
That could create turmoil in financial markets and hobble global economies that are still struggling to recover from the deep recession that began in 2008.
Obama's announced backing for the plan taking shape among the so-called Gang of Six quickly overshadowed a vote in the House of Representatives later Tuesday on a bill proposed by tea party Republicans that calls for deep spending cuts, a cap on government spending and congressional passage of a bill calling for amending the constitution to require the federal government to spend no more than it collects in taxes and other fees. It does not include any tax increases, something that many of the new House members elected with tea party support pledged they would never allow.
While that measure is expected to easily pass in the House, it is seen as largely symbolic because it would fail in the Senate and Obama has vowed the measure should it ever reach his desk.Read more...