No signs of give on US debt standoff

Associated Press
President Barack Obama walks away from the podium after a press conference in the Brady Briefing Room of the White House in Washington, Friday, July 15, 2011. (AP Photo/Pablo Martinez Monsivais)

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WASHINGTON (AP) — Tea Party-backed Republicans will likely dominate the House of Representatives this week, pushing a spending cut plan that stands little chance of passing either legislative chamber even though a potential U.S. default on its debt is just over two weeks away.

With the stalemate continuing and time growing short, House Republicans were gearing up to push even harder on their plan that dramatically cuts spending, rules out any tax increases, and calls for a balanced-budget amendment to the U.S. Constitution that would require the government to not spend more than it takes in. But such a plan is unlikely to be passed by the Democratic-controlled Senate.

That makes the effort primarily an opportunity for House Republicans, particularly dozens of new lawmakers elected with the support of the small government tea party movement, to symbolically show their steadfastness in demanding huge cuts in government spending, opposition to higher taxes and ideological purity in balancing the budget.

Obama has vowed to veto any legislative measure that does not include higher taxes for America's wealthiest citizens and corporations, including the elimination of tax breaks for hugely profitable oil companies. He appears to be gaining ground with voters, especially pivotal independents.

His so-called balanced approach of spending cuts and tax increases has the backing of 69 percent of Americans, according to a recent Gallup poll. And among those who aren't wed to an entrenched party view, pragmatism seems to be gaining traction over ideology.

A poll from the Pew Research Center found that among independent voters — coveted by both political parties looking ahead to the 2012 presidential and congressional elections — concern has shifted from fear that raising the debt ceiling would increase government spending to worry about the impact of the failure to raise the debt ceiling,

Two months ago Pew found that independents, by a 49 percent to 34 percent margin, were more concerned that raising the debt ceiling would lead to higher government spending, as opposed to chiefly fearing the harmful effects of keeping the ceiling unchanged. This month, independents split evenly on the question.

If the current $14.3 trillion debt ceiling isn't increased by Aug. 2 — which past Congresses have done as a matter of course no matter which party was in control — it will have far-reaching consequences.

Default likely would produce higher interest rates for consumers on mortgages, car loans and credit cards. It also would make U.S. government borrowing more expensive and could stop government checks from going out to elderly Social Security recipients. All that holds the potential for turmoil not only domestically but also in world financial markets and international economies.

Among some voters, there is suspicion that the talks in Washington are infused with the politics of the 2012 election in which the state of the economy will likely determine whether Obama wins a second term.

With no give in sight on either side, White House budget director Jack Lew remained optimistic on Sunday, saying time remained to "get something big done" before the Aug. 2 deadline. President Barack Obama is pushing for a grand deal that would raise the country's $14.3 trillion debt ceiling — the amount that Congress allows the government to borrow — while reducing federal budget deficits over the next decade. The big stumbling block remains Obama's insistence on closing tax loopholes that benefit the rich.

Republicans in the House of Representatives, especially those elected last year on pledges to shrink government and cut taxes, will dominate House activity in the coming week to emphasize their insistence that they will not back an increase in the debt ceiling without deep spending cuts to justify it. They say that raising taxes for anyone, even millionaires, is off the table.

"Let's let the American people decide," Republican Rep. Jim Jordan of Ohio said on Fox News. "Do they want something common sense as cutting spending, capping the growth in government and requiring a balanced budget amendment to the Constitution?"

Democrats fear that huge cuts in spending will devastate public education and safety net programs they have advocated for decades — the national Social Security pension system and the government-funded health care plans for the elderly and poor, Medicare and Medicaid.

Some public opinion polls show that voters like the idea of a balanced budget, but the government faces such massive budget gaps — it now borrows more than 40 cents of every dollar it spends — that the cuts required to eliminate the deficit were too draconian for even the Republican-dominated House to endorse balancing the budget anytime soon. The House Republican budget still leaves deficits in the $400 billion range after 10 years.

Lew, nevertheless, said on NBC television that he was encouraged "that the leaders in Congress seem to have all agreed that we can't push to a default. So I think that there are many conversations going on in order to make sure that doesn't happen."

Former Treasury Secretary Lawrence Summers blamed Republicans for the impasse and said it was difficult to take their positions seriously given that former President George W. Bush took over from Bill Clinton with a budget surplus and turned that into a major deficit made even worse by the Great Recession that began during Bush's tenure.

The problem now, Summers said, is reinvigorating the still lagging economy.

"Look, the most important determinant of where the deficit is going to be three or four years from now is how fast the economy grows," he said on CNN. "If the economy stagnates, no matter what we do with deficit deals, that deficit is going to be in a terrible place. And that's why growing the economy is so important."

There was no word of progress late Sunday after White House and congressional aides labored to find a way out of the impasse. They were at work after the failure of five straight days of talks at the White House between Obama and congressional leaders.

In the face of the approaching deadline, Lew said, "I think there's still time to get something big done."

The House Republican demand on adopting a balanced-budget constitutional amendment would likely prove more symbolic than real. An amendment requires a two-thirds majority vote in both the House of Representatives and the Senate, and then must be ratified by three-fourths of the 50 states — a lengthy and difficult process.

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