The Senate’s top leaders said the chamber will remain in session until lawmakers hammer out an agreement to raise the U.S. debt limit, as President Barack Obama threatened to veto a proposal to require the government to balance its budget as part of a debt deal.

“We’re going to stay in session every day, including Saturdays and Sundays, until Congress passes legislation that prevents the United States from defaulting on our obligations,” Senate Majority Leader Harry Reid, a Nevada Democrat, said on the chamber’s floor today.

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

Both sides in the dispute talked during the weekend in an effort to resolve the stalemate by an Aug. 2 deadline the administration has set for raising the $14.3 trillion debt limit. House Speaker John Boehner, an Ohio Republican, and Majority Leader Eric Cantor, a Virginia Republican, held an unannounced meeting yesterday with Obama at the White House.

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


‘Gang of Six’
Senator Kent Conrad said the five remaining members of what began as a “Gang of Six” group in the chamber will present an almost $4 trillion budget-cutting plan to their colleagues tomorrow.

“We’re going to ask people if they’re interested in pursuing this,” said Conrad, a North Dakota Democrat who said about 50 senators 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 to legislation lifting the debt limit.

“We were never about dealing with the debt limit,” Conrad told reporters. “Our assignment, as we saw it, was to come up with a plan to control the debt. Now if people want to join it, that’s a separate matter.”


House Vote
The House is slated to vote tomorrow on a proposal known as the Cut, Cap and Balance Act that calls for a deal to include future caps on government spending and a constitutional amendment to require the government to balance its budget.

The proposal is certain to die in the Democratic-controlled Senate. Still, the administration outlined its objections to the idea today in its veto threat, saying “neither setting arbitrary spending levels nor amending the Constitution is necessary to restore fiscal responsibility.”

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

They are considering having House Republicans attach spending cuts to the legislation, according to a congressional aide, as well as provisions creating a committee of lawmakers charged with finding additional savings later.


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

The administration sought to downplay the risk the U.S. would be unable to pay its bills, even with a deal not immediately in sight.

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

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

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


‘A Plague’
“Default would be a plague that would haunt our nation for years to come,” Reid said. “Our credit rating would take years to rebuild, and the country would never ever be the same.”

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

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

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

Lawmakers are trying to devise a deficit-reduction plan that would give colleagues the political cover they want to cast an unpopular vote to raise the legal limit on government borrowing.


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

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


McConnell Plan
McConnell proposed a complex plan last week that would let Obama raise the debt limit himself without requiring spending cuts or Republicans to cast votes to lift the cap.

The proposal was aimed at breaking a stalemate over mutually incompatible demands by Republicans and Democrats. Republicans said any plan would have to cut spending by at least as much as it raised the debt limit and couldn’t include tax increases.

Obama wants a debt limit high enough to accommodate government borrowing through next year’s elections — roughly $2.4 trillion — and said he would agree to that much in savings only if it included tax increases. He also has ruled out a smaller debt limit increase.

McConnell’s proposal ran into criticism from lawmakers in both parties who said it would do nothing to reduce red ink. So lawmakers are considering having House Republicans add what would amount to a down payment in cuts to the McConnell plan once it clears the Senate, the congressional aide said.

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


Coburn Plan
Senator Tom Coburn, an Oklahoma Republican who had been a “Gang of Six” member, released his own 600-page plan today that he said would balance the budget within a decade. It would raise taxes by $1 trillion by eliminating or cutting individual tax preferences. Defense spending would be cut by $1 trillion and $3 trillion would come out of entitlement programs such as Medicare and Social Security. He estimated the plan would save more than $1 trillion in projected interest payments on the debt.

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



Bloomberg News


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