US scrambles for debt deal to avert stock plunge

WASHINGTON (AP) – Precariously short of time, congressional leaders struggled in urgent, weekend-long talks to avert an unprecedented government default, desperate to show enough progress to head off a plunge in stock prices when Asian markets open ahead of the US workweek.

With the White House consigned to the periphery of negotiations, Republicans sought as much as $4 trillion in deficit cuts over a decade as a condition for raising the nation’s debt limit.

But after hours of staff negotiations followed by a meeting of Congress’ top four leaders, Senate Majority Leader Harry Reid accused GOP leaders of intransigence, adding he would not accept anything less than a deal that raised the debt limit through 2012.

“Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation,” he said in a sharply worded statement.

A spokesman for House Speaker John Boehner, Michael Steel, responded mildly. “Like the President and the entire bipartisan, bicameral Congressional leadership, we continue to believe that defaulting on the full faith and credit of the United States is not an option,” he said in a written statement.

Obama met earlier in the day with the Republican and Democratic leaders — but only briefly— the day after Boehner abruptly broke off his own once-promising compromise talks with the White House.

In talks through the afternoon in the Capitol, congressional aides were looking at an immediate debt limit increase of about $1 trillion, officials said, with slightly higher spending cuts to be locked into place simultaneously.

Another $1.4 trillion in additional borrowing authority would be needed to satisfy Obama’s demand that any deal extend into 2013. “A two-step process is inevitable,” Steel said, although and based on Reid’s accusation, it was clear the two sides had not yet been able to bridge their differences.

On one point, there was no disagreement — time is running out.

Congressional aides labored to produce a tentative agreement by Monday, congressional officials said. Even that would allow scarcely enough time for the House and Senate to clear legislation in time for Obama’s signature by the Aug. 2 deadline, a week from Tuesday.

More urgently, Boehner told rank-and-file Republicans in a conference call he hoped to be able to announce a “viable framework for progress” by 4 p.m. EDT on Sunday, before the stock markets open in Japan and elsewhere in Asia, according to two participants.

Lawmakers fear a big drop in investor confidence in stocks and bonds could start in Asia and sweep toward Europe and the Americas, causing US stock values to plunge on Monday.

Barring action by Aug. 2, the Treasury will run out of the money needed to pay all its bills, triggering a possible default that could seriously damage the domestic economy and send damaging waves across the globe. Obama has warned repeatedly of the possibility of a spike in interest rates that could affect Americans’ mortgages, credit cards and other forms of personal debt.

“The bipartisan leadership in Congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending,” McConnell said in a written statement not long after he, Boehner and Democratic leaders met with Obama at the White House.