The Senate's top leaders said the chamber will remain in sessionuntil lawmakers hammer out an agreement to raise the U.S. debtlimit, as President Barack Obama threatened to veto a proposal torequire the government to balance its budget as part of a debtdeal.

“We're going to stay in session every day, including Saturdaysand Sundays, until Congress passes legislation that prevents theUnited States from defaulting on our obligations,” Senate MajorityLeader Harry Reid, a Nevada Democrat, said on the chamber's floortoday.

His Republican counterpart, Mitch McConnell of Kentucky, calledit a “mutual decision” for the Senate to stay in session “until weresolve this crisis confronting our country.”

Both sides in the dispute talked during the weekend in an effortto resolve the stalemate by an Aug. 2 deadline the administrationhas set for raising the $14.3 trillion debt limit. House SpeakerJohn Boehner, an Ohio Republican, and Majority Leader Eric Cantor,a Virginia Republican, held an unannounced meeting yesterday withObama at the White House.

The discussions were aimed at reaching an agreement on adeficit-cutting deal that Republicans have made a prerequisite forapproving a debt increase.

'Gang of Six'
Senator Kent Conrad said thefive remaining members of what began as a “Gang of Six” group inthe chamber will present an almost $4 trillion budget-cutting planto their colleagues tomorrow.

“We're going to ask people if they're interested in pursuingthis,” said Conrad, a North Dakota Democrat who said about 50senators have indicated they will attend the private briefing.

He said his group doesn't plan to publicly release its proposal,nor will he or the others focus on trying to attach it tolegislation lifting the debt limit.

“We were never about dealing with the debt limit,” Conrad toldreporters. “Our assignment, as we saw it, was to come up with aplan to control the debt. Now if people want to join it, that's aseparate matter.”

House Vote
The House is slated to votetomorrow on a proposal known as the Cut, Cap and Balance Act thatcalls for a deal to include future caps on government spending anda constitutional amendment to require the government to balance itsbudget.

The proposal is certain to die in the Democratic-controlledSenate. Still, the administration outlined its objections to theidea today in its veto threat, saying “neither setting arbitraryspending levels nor amending the Constitution is necessary torestore fiscal responsibility.”

Meanwhile, Reid and McConnell are working behind closed doors ona plan they aim to release this week that may allow a debt limitincrease. They are amending a proposal to give Obama the power toraise the debt limit in response to complaints that the plan,offered by McConnell last week, does little to reduce thedeficit.

They are considering having House Republicans attach spendingcuts to the legislation, according to a congressional aide, as wellas provisions creating a committee of lawmakers charged withfinding additional savings later.

'Escape the Crisis'
“The good news is thatMajority Leader Harry Reid and Senator Mitch McConnell are sittingdown and working out an approach that we are going to try to tacklethis week,” Senator Dick Durbin of Illinois, the chamber's No. 2Democrat, said on CBS's “Face the Nation” yesterday. “We are goingto be working toward a way to escape the crisis that would come ifwe default on America's national debt.”

The administration sought to downplay the risk the U.S. would beunable to pay its bills, even with a deal not immediately insight.

“Americans should not be concerned” about the prospects of agovernment default, White House press secretary Jay Carney said.“Progress has been made” by the administration and congressionalleaders from both parties, he said.

Still, Carney added that congressional leaders this week must“crystallize what the options are and what we are going topursue.”

Reid, in his remarks today, said Treasury Secretary TimothyGeithner warned Senate Democrats last week that failing to raisethe U.S. debt limit by Aug. 2 would hamstring an economy strugglingto recover from the worst recession since the Great Depression.

'A Plague'
“Default would be a plague thatwould haunt our nation for years to come,” Reid said. “Our creditrating would take years to rebuild, and the country would neverever be the same.”

Reid also said some Republicans are “playing chicken” with thedebt-limit debate and are wrong when they discount the results of adefault.

McConnell promoted the House measure, saying, “The Cut, Cap andBalance plan is the kind of strong medicine Washington needs andthe American people want.”

McConnell also said Republicans “have tried to persuade thepresident of the need for a course correction, but weeks ofnegotiations have shown that his commitment to big government issimply too great to lead to the kind of long-term reforms we needto put us” on the right economic path.

Lawmakers are trying to devise a deficit-reduction plan thatwould give colleagues the political cover they want to cast anunpopular vote to raise the legal limit on governmentborrowing.

Treasury Warnings
The Treasury Departmentwarns the debt ceiling must be lifted by Aug. 2 to avoid default,which it says would drive up borrowing costs for the government aswell as millions of Americans seeking consumer loans linked toTreasury rates. Standard & Poor's Ratings Services and Moody'sInvestors Service are threatening to downgrade the government'scredit rating if Congress doesn't act.

Raising the debt ceiling “is not some abstract issue,” Obamasaid at a news conference last week. “These are obligations thatthe United States has taken on in the past. Congress has run up thecredit card, and we now have an obligation to pay our bills.

McConnell Plan
McConnell proposed acomplex plan last week that would let Obama raise the debt limithimself without requiring spending cuts or Republicans to castvotes to lift the cap.

The proposal was aimed at breaking a stalemate over mutuallyincompatible demands by Republicans and Democrats. Republicans saidany plan would have to cut spending by at least as much as itraised the debt limit and couldn't include tax increases.

Obama wants a debt limit high enough to accommodate governmentborrowing through next year's elections — roughly $2.4 trillion —and said he would agree to that much in savings only if it includedtax increases. He also has ruled out a smaller debt limitincrease.

McConnell's proposal ran into criticism from lawmakers in bothparties who said it would do nothing to reduce red ink. Solawmakers are considering having House Republicans add what wouldamount to a down payment in cuts to the McConnell plan once itclears the Senate, the congressional aide said.

A panel of a dozen lawmakers, equally divided between theparties, would be responsible for finding additional cuts,according to the aide. The panel's plan would need the approval ofa majority of its members, the aide said, and couldn't be amendedonce it reached the floors of the House and Senate.

Coburn Plan
Senator Tom Coburn, anOklahoma Republican who had been a “Gang of Six” member, releasedhis own 600-page plan today that he said would balance the budgetwithin a decade. It would raise taxes by $1 trillion by eliminatingor cutting individual tax preferences. Defense spending would becut by $1 trillion and $3 trillion would come out of entitlementprograms such as Medicare and Social Security. He estimated theplan would save more than $1 trillion in projected interestpayments on the debt.

Coburn dropped out of the “Gang of Six” negotiations in May.Aside from Conrad, its members are Durbin and Senators Mark Warnerof Virginia, a Democrat, and Saxby Chambliss of Georgia and MikeCrapo of Idaho, both Republicans.

Bloomberg News

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