The White House retreated Wednesday from President Obama’s vow to veto any short-term increase in the nation’s debt limit, opening the door wider to a bipartisan Senate compromise plan to boost borrowing for now in exchange for a promise by Congress to cut spending later.
“If both sides agree to something significant, we will support the measures needed to finalize details,” said presidential spokesman Jay Carney. “We believe a short-term extension absent an agreement to a larger deal is unacceptable.”
Last week, Mr. Obama declared unequivocally that he would not sign a temporary extension of the debt ceiling. He called the interim approach a shaky way for the U.S. to “manage our affairs.”
When House Majority Leader Eric Cantor, Virginia Republican, urged the president in a meeting two days later to reconsider because the government is nearing default, Mr. Obama retorted, “Eric, don’t call my bluff.”
But minimal progress has been made in almost daily talks toward a deal with congressional Republicans to raise the debt ceiling of $14.29 trillion by the deadline of Aug. 2. The president’s rough deadline is Friday for reaching an agreement that can move through Congress in time.
Treasury Secretary Timothy F. Geithner and a number of private business groups have warned of disastrous consequences for the government’s credit rating and for the economy as a whole if the debt ceiling is not raised. Many Republicans opposed to increasing the government’s borrowing limit say the fears are overblown.
The president is seeking a deal that would raise the debt limit by $2.5 trillion through the 2012 elections while cutting spending as much as $4 trillion over 10 years and raising taxes by more than $1 trillion. Asked whether a short-term hike in the debt limit would reduce the chances of significant long-term deficit reduction, Mr. Carney said, “That would be a shame. We believe that we can get more than that. If we do not, we are going to continue to fight for that, because we have to deal with our deficits, we have to deal with our debt, and we have to do it in a balanced way.”
Mr. Obama summoned House and Senate Democratic leaders to the White House on Wednesday afternoon for more talks, a day after House Republicans approved a measure - strongly backed by tea party activists - to cut next year’s budget by $111 billion, cap spending and mandate balanced federal budgets. GOP leaders were expected to meet with the president separately later in the day.
The House-approved “cut, cap and balance” plan, which would raise the debt limit by $2.4 trillion, faces almost certain failure in the Democrat-controlled Senate when it comes up for a vote Saturday, and Mr. Obama has promised a veto if the measure reaches his desk. Although more senators are rallying to a bipartisan “Gang of Six” proposal to cut spending by $4 trillion over 10 years and raise taxes more than $1 trillion, House Republicans have little appetite for that approach.
Mr. Obama endorsed the framework of the Gang of Six proposal on Tuesday, but his spokesman cautioned Wednesday that not all the details are known.
“If the will is there, we can get down to negotiating the details,” Mr. Carney said.
One detail that’s firm is a feature that would lower the top marginal tax rate from 35 percent to 29 percent. In the debt discussions, however, Mr. Obama consistently has pushed for an increase in taxes for top wage earners.
Mr. Cantor’s office issued a statement Wednesday claiming that Mr. Obama had “endorsed” the lower tax rates. Asked whether Mr. Obama is willing to cut tax rates for the wealthiest Americans, Mr. Carney insisted that the president hadn’t endorsed any details of the “Gang of Six” plan.
“I’m not going to get into the itemized specifics of their proposal,” Mr. Carney said. “The president does support tax reform.”
The new tone from the White House on Wednesday on a temporary deal also appeared to boost the prospects of a “fail-safe” plan advanced by Senate Minority Leader Mitch McConnell, Kentucky Republican, and Senate Majority Leader Harry Reid, Nevada Democrat, to boost borrowing without firm spending cuts attached. Their proposal would effectively authorize the president to raise the debt limit by $2.5 trillion in three phases by the end of 2012.