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He said default would drive up interest costs on the $14.3 trillion debt and reduce government revenues by slowing economic growth and could “throw the financial system potentially into chaos.”

None of the back-and-forth was a promising prelude to Thursday’s talks at the White House. With less than three weeks left before the deadline for increasing the government’s borrowing authority, the day’s meeting was to focus on the touchy matters of how to cut spending on Medicare and Medicaid and raise more tax revenue.

Behind the scenes, legislators and White House officials continued to work on a more limited backup plan offered by McConnell that would give Obama new powers to overcome Republican opposition to raising the debt ceiling.

The GOP leader’s plan was welcomed by Democrats on Capitol Hill and at the White House as at least as a recognition that default was unthinkable.

“I think everyone who is concerned about lifting the debt ceiling is saying bravo for Senator McConnell,” said House Democratic leader Nancy Pelosi.

But Carney said the White House would rather do something more substantial, a “grand bargain” to significantly cut spending and raise more revenue.

The financial world was watching with growing jitters.

“No one can tell me with certainty that a U.S. default wouldn’t cause catastrophe and wouldn’t severely damage the U.S. or global economy,” Jamie Dimon, CEO of JPMorgan Chase & Co., told reporters Thursday. “And it would be irresponsible to take that chance.”

Already, Moody’s Investors Service is reviewing the government’s credit rating, saying there is a small but rising risk that it will default on its debt. If Moody’s were to lower the rating, the consequences could ripple through the economy, pushing up rates for mortgages, car loans and other debts. A Chinese rating agency, Dagong Global Credit Rating Co., also warned of a possible downgrade.

Reid sketched the potential consequences of default in dire terms, saying Social Security checks, veterans’ benefits and paychecks for troops would stop. “Millions of Americans could lose their jobs,” he added.

A Reid spokesman later clarified that Social Security benefits “could” stop, as Obama previously had warned, but it wouldn’t be a certainty.

Republicans have called such statements scare tactics.

In the cauldron of the White House Cabinet Room, Obama and top lawmakers bargained for nearly two hours late Wednesday. Obama curtly ended the session when Cantor, R-Va., urged him to accept a short, monthslong increase in debt instead of one that would last through next year’s presidential election.

“Enough is enough. … I’ll see you all tomorrow,” Obama said, rising from the negotiating table and leaving the room, according to several officials familiar with the session.

Reid said that while other Republican leaders were willing to negotiate in good faith, Cantor “has shown he shouldn’t even be at the table.”

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