Washington – Hoping to reassure markets in the wake of an angry breakdown in the federal budget negotiations, Congressional leaders raced Saturday to reach a new deficit-reduction agreement that Speaker John A. Boehner told colleagues could cut $3 trillion to $4 trillion in spending over 10 years.
“We are working, and I’m confident there will be resolution,” Mr. Boehner told fellow House Republicans on an afternoon conference call, according to participants. “There has to be.”
Mr. Boehner’s comments came a little more than a week before the federal government risks defaulting on its debts, a fate that could be avoided if Congress agrees to increase the $14.3 trillion debt ceiling.
The speaker, who abruptly broke off budget talks withPresident Obama on Friday evening, said he hoped the plan could be finished within 24 hours. He said the savings would most likely be achieved in two stages and would meet Republican fiscal demands that have led to a Congressional cliffhanger on the debt limit.
He spoke with his colleagues after Congressional leaders met at the White House on Saturday morning at the request of Mr. Obama. The meeting broke up without resolution just before noon, after about an hour of discussion.
Lawmakers and top aides said privately that despite the White House session, the search for a solution was now focused on Capitol Hill, where senior advisers gathered Saturday afternoon to exchange ideas on a plan that could get the go-ahead from top members of Congress.
In a statement after the White House session, Senator Mitch McConnell of Kentucky, the Republican leader, indicated that he and his leadership counterparts were trying to devise a fallback measure to assure the borrowing ceiling was raised in time.
“The president wanted to know that there was a plan for preventing national default. The bipartisan leadership in Congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending,” Mr. McConnell said.
The White House, in its own statement, said Mr. Obama reiterated his opposition to a short-term extension of the ceiling — he wants a level that would carry the Treasury through the 2012 elections — because it would hurt the economy, prompt rating agencies to downgrade the nation’s credit rating and drive up interest rates for all Americans.
“As the current situation makes clear, it would be irresponsible to put our country and economy at risk again in just a few short months with another battle over raising the debt ceiling,” the White House statement said.
Conversations were to continue through Saturday, the White House said. But Congressional aides said that talks between senior advisers to House and Senate leaders began Friday as soon as it became clear that negotiations between President Obama and Speaker John A. Boehner over a major budget agreement had broken down, leaving Congress with no clear route to a debt limit increase and time running short.
The rancorous ending to the debt discussions on Friday means that leaders of the House and Senate now have only days to find a debt limit solution that has eluded them for months, gaming out ways to get a debt increase through a Republican-controlled House packed with conservatives demanding deep cuts and no new revenues.
They must do so in a way that calms markets that may be jittery after the halt in the talks just days before the Aug. 2 deadline. The drama played out in real time on television Friday night in extraordinary exchanges between Mr. Obama and Mr. Boehner, who has told his colleagues that the House needs to begin moving by Monday to give the Senate time to act.
In his weekly address on Saturday, Mr. Obama urged Republicans to accept additional new revenues — a key sticking point in the negotiations — as a way to balance the cuts he described as substantial.
“We can come together for the good of the country and reach a compromise; we can strengthen our economy and leave for our children a more secure future,” he said. “Or we can issue insults and demands and ultimatums at each another, withdraw to our partisan corners, and achieve nothing.”
Republicans countered that the emphasis needed to be on cutting government spending.
“If we’re going to avoid any type of default and downgrade — if we’re going to resume job creation in America — the president and his allies need to listen to the people and work with Republicans to cut up the credit cards once and for all,” said Representative Jeb Hensarling of Texas, a member of the Republican leadership, who delivered his party’s weekly address.
Still, lawmakers and top aides said they remained optimistic that they could find a resolution because of the procedural skill of the Senate and House leadership and the stated determination by all involved to prevent the United States from being unable to pay all its bills come Aug. 3.
Mr. Boehner said on Saturday: “As I said last night, over this weekend Congress will forge a responsible path forward. House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States.”
The chiefs of staff to Mr. Boehner and Senator Harry Reid, the Nevada Democrat and majority leader, have already cut one deal together this year as they negotiated the details of the spending bill that prevented a government shutdown. The top Senate leaders, Mr. Reid and Mr. McConnell, were already at work on a fallback plan even before the White House talks collapsed, though they had set it aside when it appeared the speaker and president might have a deal.
Mr. Reid has another incentive to come up with an alternative to the agreement Mr. Boehner and Mr. Obama were negotiating. Many Congressional Democrats were uneasy with that emerging compromise because of its potential for steep cuts in social programs like Medicare, an approach that they felt might rob them of a potent political issue in next year’s elections.
Senate aides said that since discussions were in the early phase, it was hard to predict what the legislative approach would be or how it would differ from an earlier plan offered by Mr. McConnell that would allow Congress to clear a debt increase through a procedural maneuver.
Under that approach, Congress could vote to disapprove the debt increase but allow Mr. Obama to veto the plan and get a rise in the ceiling if the House or Senate failed to override the veto, a very likely outcome.
To meet Republican demands for dollar-for-dollar cuts to correspond with any rise in the borrowing authority, Congressional aides said there were discussions about extending the debt ceiling for a period of months tied directly to cuts, with a second installment then subject to the McConnell process.
Democrats and Mr. Obama were insistent that the increase be guaranteed to take the Treasury Department through 2012 without another fight.
“The markets have made clear that a short-term extension is not sufficient and would result in very serious consequences,” said Representative Steny H. Hoyer of Maryland, the No. 2 Democrat in the House.
In weeks of negotiations, House and Senate members have identified more than $1 trillion in savings that they could agree on, including cuts in federal agency budgets, farm subsidies, federal pension benefits and Medicaid. Those savings are likely to be the foundation for cuts in a new plan.
If the new talks collapse, House Republicans could ultimately devise an extension based on cuts they identify and send it to the Senate, daring lawmakers to reject it or the president to veto it.