Obama, lawmakers push plans to avoid default

Obama called on lawmakers Friday to approve a giant package that would not only prevent a default by raising the government's borrowing limit, but also slash trillions of dollars from the country's enormous deficit. He challenged lawmakers “to do something big.”

But opposition Republicans, who control the House of Representatives, reject Obama's proposal to raise some taxes in addition to cutting spending. They plan to vote next week on legislation that would tie an increase in the debt limit to a constitutional amendment requiring a balanced budget. Such an amendment is unlikely to get enacted.

Offering more promise is a bipartisan measure being worked on in the Democratic-led Senate that would allow Obama to raise the debt limit without a prior vote by lawmakers. That plan would likely include spending limits.

Even as he pushed for a more sweeping measure, Obama didn't rule out the Senate's more modest plan.

“We are obviously running out of time,” he said at White House news conference. It was his second news conference of the week, a testament to the overriding political and economic significance of the issue that has convulsed Washington this summer.

Numerous officials have cautioned that a default will occur if the debt limit is not increased by Aug. 2, warning also of a calamitous effect on an economy struggling to recover from the worst recession in decades.

The president urged lawmakers to cut trillions from deficits at the same time they raise the debt limit, saying he favored a balanced approach that included spending cuts, changes to huge government benefit programs and higher taxes on wealthy individuals and certain industries.

It was an offer Republicans refused.

Republican House Speaker John Boehner had earlier shown some flexibility on closing tax loopholes as part of an unprecedented deal with Obama, but many Republican lawmakers are adamant that deficit reductions be limited to spending cuts.

“There are going to be no tax hikes because tax hikes destroy jobs,” Boehner said.

House Republicans announced plans to vote next week on legislation to permit more borrowing automatically if Congress approves a balanced-budget constitutional amendment. Senate approval of that amendment seemed extremely unlikely.

At the same time, Senate leaders from both parties worked on their own fallback measure that would allow Obama to raise the debt limit without a prior vote by lawmakers, discussions that now have expanded to include House officials and top White House aides.

That plan was likely to include limits on spending across thousands of government programs, and possibly a down payment on cuts, as well.

Both parties want to resolve the debt crisis ahead of next year's congressional and presidential elections. Obama is seen as a candidate that is tough to beat, but voters' fears over the economy have been dragging down his numbers.

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