- Associated Press - Monday, July 25, 2011

WASHINGTON — In a fresh challenge to President Barack Obama, House Republicans unveiled reworked legislation Monday to avert a potentially devastating government default in barely a week — but along lines the White House has already rejected.

Democrats countered quickly with an alternative that drew presidential backing, and Obama readied a prime-time, nationally televised speech on short notice.

Despite warnings to the contrary, U.S. financial markets appeared to take the political maneuvering in stride. Wall Street posted losses but with no indication of panic among investors.

Without signed legislation by day’s end on Aug. 2, the Treasury will be unable to pay all its bills, possibly triggering an unprecedented default that officials warn could badly damage a national economy struggling to recover from the worst recession in decades.

On a day of political jousting, Senate Republican leader Mitch McConnell urged Obama to shift his position rather than “veto the country into default.”

As Congressional leaders try to reach an accord to avert a debt-ceiling crisis, House Speaker John Boehner, Ohio Republican, walks from his office to the House Chamber on Capitol Hill on July 25, 2011, following a morning meeting with other GOP leaders. (Associated Press)
As Congressional leaders try to reach an accord to avert a debt-ceiling ... more >

On the other side, Senate Majority Leader Harry Reid jabbed at tea party-backed Republicans who make up a significant portion of the House GOP rank and file. The Nevada Democrat warned against allowing “these extremists” to dictate the country’s course.

Obama wants legislation that will raise the nation’s debt limit by at least $2.4 trillion in one vote, enough to avoid a recurrence of the acrimonious current struggle until after the 2013 elections.

By design or not, the two sides’ harsh remarks obscured concessions that narrowed the differences among the nation’s political leaders as they groped for a way to resolve the economic crisis.

With their revised plan, House Republicans backed off an earlier insistence on $6 trillion in spending cuts to raise the debt limit.

And Obama jettisoned his longstanding call for increased government revenues as part of any deficit reduction plan.

Pending the president’s televised speech, the White House also declined repeatedly to say whether Obama would veto the revised House measure.

House Speaker John Boehner’s legislation would provide for an immediate $1 trillion increase in the government’s $14.3 trillion debt limit in exchange for $1.2 trillion in cuts in federal spending.

It also envisions Congress approving a second round of spending cuts of $1.8 trillion or more in 2012, passage of which would trigger an additional $1.6 trillion in increased borrowing authority.

The two-step approach runs afoul of Obama’s insistence that lawmakers solve the current crisis in a way that avoids a politically charged rerun next year in the middle of the election campaign.

Stopping short of a veto threat, White House communications director Dan Pfeiffer called the proposal “not a serious attempt to avert default because it has no chance of passing the Senate.”

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