- The Washington Times - Tuesday, July 19, 2011

President Obama on Tuesday seized on a new debt-reduction plan by a bipartisan group of senators that calls for a mix of entitlement reforms and tax revenues, as the clock winds down to an early August deadline to raise the nation’s debt ceiling.

The president’s endorsement of the “Gang of Six” plan came hours before the Republican-led House voted 234-190 to pass a mostly symbolic debt-reduction measure that included a balanced-budget constitutional amendment.

Mr. Obama, addressing reporters in the White House briefing room, reiterated his threat to veto the House Republican proposal to “cut, cap and balance” the nation’s budget and raise the $14.29 trillion debt ceiling by $2.4 trillion.

The president said that while he understood the need for the Republican caucus to vote on their measure Tuesday evening, he stressed that Washington now finds itself in the “eleventh hour” and needs to compromise — and quick.

“We have a Democratic president and administration that is prepared to sign a tough package that includes both spending cuts, modifications to Social Security, Medicaid and Medicare … and would include a revenue component,” Mr. Obama said. “We now have a bipartisan group of senators who agree with that balanced approach. And we’ve got the American people who agree with that balanced approach.”

With the House measure facing almost no chance of survival outside the chamber, House Speaker John A. Boehner, Ohio Republican, said he was exploring other alternatives to avoid a default on the nation’s sovereign debt.

“I do think it’s responsible for us to look at what Plan B would look like,” Mr. Boehner said a few hours before the opening of debate on the legislation backed by conservative lawmakers.

The Gang of Six blueprint is similar in scope to Mr. Obama’s push for a “grand bargain” debt deal that would cut spending by more than $4 trillion over 10 years. To accomplish this, the plan would raise taxes on corporations and wealthy individuals by $1 trillion.

Moderate Democrats generally say they like what they see in the bipartisan Senate proposal.

“This is a really positive development after several weeks of bad news and partisan bickering, where it looked like we wouldn’t be able to do more than kick the can down the road,” said Sen. Mark Udall, Colorado Democrat. “Even though I don’t agree with everything in this plan, I say, ‘Count me in.’ “

House Majority Leader Eric Cantor, Virginia Republican, said while there are some portions of the proposal that are unclear and need more detail, “this bipartisan plan does seem to include some constructive ideas to deal with our debt.”

“At first glance, it seems as though the Gang of Six proposal includes some of the reforms that we have already discussed with the president and vice president,” Mr. Cantor said.

But the Senate plan faces significant criticism from opposing ends of the political spectrum.

“This terrible plan could cut Medicare and Medicaid to unsustainably low levels and put seniors’ well-being at risk,” said Rep. Raul M. Grijalva, Arizona Democrat and co-chairman of the liberal Congressional Progressive Caucus.

The plan’s provision to raise taxes also may be too much for many anti-tax Republicans to accept.

“Taxes would dampen the economy and provide an excuse for lawmakers to continue wasteful spending,” said Sen. Jeff Sessions of Alabama, the senior Republican on the Senate Budget Committee.

Congress has less than two weeks to hammer out a deal before the Treasury Department’s Aug. 2 deadline to raise the nation’s debt ceiling — the government’s legal limit on how much money it can borrow to pay for operations and its debt obligations.

Failure to raise the debt limit could result in the government’s defaulting on its debt, a scenario many say could trigger a serious national and possibly global economic crisis. If the U.S. didn’t default, the federal government would have to cut spending immediately by almost 40 percent.

The House GOP plan, which is expected to stall indefinitely in the Democrat-controlled Senate, proposes $111 billion in cuts to the $3.6 trillion the federal government is projected to spend next year.

It calls for a gradual decrease, or “cap,” in federal spending during the next decade — from 22.5 percent of the gross domestic product (GDP) next year to 19.9 percent in 2021.

The measure also would require Congress to balance the federal budget every year, permanently cap government spending at 18 percent of GDP after a phase-in period and require a two-thirds vote of the House and Senate to increase taxes.

“At a time when our government borrows 40 cents of every dollar it spends, we have no choice but to cut spending and begin living within our means,” Mr. Cantor said earlier in the day.

But Democrats say the Republican plan would make it easy for Republican-controlled Congresses to cut entitlement programs for seniors, middle-income Americans and the nation’s most vulnerable while protecting tax breaks for corporations and the wealthy.

“Our Republican colleagues are playing a very dangerous game with the American economy and with American jobs,” said Rep. Chris Van Hollen of Maryland, the senior Democrat on the House Budget Committee.

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