Washington – Last-ditch budget talks between top Congressional Republicans and President Obama continued on Sunday, as the top Senate Republican and Democrat both expressed optimism that a $3 trillion deal could be reached to avert the economic and political calamity of a potential federal default.
But without a compromise in hand, the divided Senate could not move ahead and wearily resumed its desultory debate.
Senator Harry Reid, the majority leader, convened the Senate at noon, then moved to a symbolic procedural voteon his own proposal for raising the debt ceiling. Senate Republicans have been filibustering that plan, which House Republicans rejected on Saturday, and the procedural vote on breaking the filibuster fell 10 votes short of the 60 votes needed under Senate rules.Even so, Mr. Reid said before the cloture vote that he was “cautiously optimistic” that an agreement could be reached today that would make it possible for the Senate to amend his bill and gain bipartisan approval in both chambers.
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But Mr. Reid said that “there are a number of issues that must be resolved.”
“Our optimism in days past has been really stomped on,” he said.
Senator Mitch McConnell of Kentucky, the Republican leader, said Sunday that he was “very close” to recommending to his members that they sign on to a debt deal with President Obama and the Democrats.
Speaking on the CNN program “State of the Union,” Mr. McConnell said the emerging deal included as much as $3 trillion in cuts over the next 10 years, with much of that to be decided later this year by the joint Congressional committee. Senator Charles E. Schumer of New York, a top Democratic leader, also sounded optimistic in an appearance on the same news program, but he had some reservations.
“I feel a lot better today about the ability to avoid default than I did even yesterday morning,” he said. “And default would have such disastrous consequences for our nation for decades to come,” he continued. “The fact that our leaders are talking, though hardly anyone agrees with everything that’s come up, is a good thing.”
The first indication that the hard lines were softening came Saturday afternoon, when the two leading Congressional Republicans announced that they had reopened fiscal talks with the White House and expected their last-ditch drive to produce a compromise. Following the House’s sharp rejection of Mr. Reid’s proposal, Mr. McConnell said he and Speaker John A. Boehner were “now fully engaged” in efforts with the White House to find a resolution that would tie an increase in the debt limit to spending cuts and other conditions.
“I’m confident and optimistic that we’re going to get an agreement in the very near future and resolve this crisis in the best interests of the American people,” said Mr. McConnell, who noted that he was personally talking to both Mr. Obama and Vice President Joseph R. Biden Jr., a favorite partner in past negotiations.
Mr. Boehner, who would have to steer a compromise through the House, said he based his confidence on the sense that “we’re dealing with reasonable, responsible people who want this crisis to end as quickly as possible.”
A Democratic official with knowledge of the talks said that Mr. McConnell called Mr. Biden early Saturday afternoon, the first conversation between the two men since Wednesday. The official said they talked at least four more times on Saturday as they tried to work out an agreement.
The deal they were discussing, this person said, resembled the bill that Mr. Boehner pushed through the House the House on Friday more than it did the one that Mr. Reid had proposed.
It would immediately raise the debt ceiling by about $1 trillion, accompanied by a similar range of spending cuts, and set up a bipartisan committee that would work to find deeper reductions in the deficit in exchange for a second debt limit increase that would extend through the 2012 elections.
In this version, which was still being negotiated overnight, the new committee’s failure to win enactment of its proposal could set off automatic spending cuts across the board, including to entitlement programs. But how that “trigger” would work was a sticking point, and other ideas were swirling around the Capitol as lawmakers searched for a way to avoid default. One of Mr. Reid’s top lieutenants said he saw at least a glimmer of hope.
But anxiety was building in many corners, including among Wall Street investors worried about the effects on the markets, and active-duty soldiers concerned about their paychecks.
After Mr. McConnell sounded a hopeful note on Saturday, Mr. Reid called the senators to the floor to hear him dispute assertions by his Republican counterpart and accuse Republicans of failing to enter into serious negotiations even as the Treasury risked running out of money to pay all its bills after Tuesday.
“The speaker and Republican leader should know that merely saying you have an agreement in front of television cameras doesn’t make it so,” Mr. Reid said after returning from a visit to the White House with Representative Nancy Pelosi of California, the Democratic leader in the House.
Trying to build momentum for his own proposal, Mr. Reid and fellow Democrats were working to win over Republican senators to support his plan to raise the debt ceiling through 2012 and circumvent Mr. McConnell.
“Americans are watching us and demanding a result that is balanced,” Mr. Reid said.
The Senate Democrats’ efforts were set back Saturday when 43 of the 47 Republican senators signed a letter to Mr. Reid saying they would not back his proposal, which would allow a $2.4 trillion increase in the debt ceiling in two stages while establishing a new Congressional committee to explore deeper spending cuts. The numbers signaled that without changes in the plan, Mr. Reid would not be able to overcome a Republican filibuster, which requires 60 votes.
House Republicans signaled their disapproval of the Reid plan by holding a symbolic vote on Saturday, rejecting it by a 246 to 173 vote, in a move intended to show it had no chance of passing in that chamber. About a dozen Democrats joined Republicans in rejecting the Reid plan.
The pre-emptive vote could strengthen Mr. McConnell’s hand as he seeks to shape any final compromise.
At the White House and in talks in Congressional offices and corridors, most of the attention was focused on finding a way to define the precise conditions under which the president could get a second increase in the debt limit that would be needed early in 2012 under both Republican and Democratic proposals. Officials in both parties said another idea that had surfaced was to require a change in Social Security policy if the new committee deadlocked, providing an incentive for the new committee to act on its own.
Under the proposal that the Congressional Budget Office said could save more than $100 billion over 10 years, a different measure of inflation would be used to calculate the annual cost-of-living adjustment in Social Security benefits. Supporters say the alternative measure of inflation is more accurate because it reflects what happens when prices rise; advocates for the elderly say the proposal is a backdoor way of cutting benefits.
Members of both parties took the floor to push for compromise, noting that the two sides were not far apart on major elements of their deficit-reduction plans.
“Failure should not be an option for us in this case, and it’s time we started finding common ground,” said Senator Johnny Isakson, Republican of Georgia.
The unusual Saturday session followed a week of brinkmanship on Capitol Hill. On Friday, Mr. Boehner managed to pass his own House bill, along party lines, just a day after suspending the vote as the Republican leadership tried frantically to line up enough support for passage. But the Senate swiftly rejected that plan late Friday.
While some of the back and forth between the House and Senate and the party leaders was typical of the late stages of a negotiation, the combative and unyielding tone in both chambers created pessimism among the rank and file about the prospects that a final agreement could be struck and cleared before Tuesday.
Even if a measure is able to win significant bipartisan endorsement in the Senate, the reception in the House could be different. But how to push a plan by House conservatives remained a major question mark.
At the Treasury Department, Secretary Timothy F. Geithner met with top advisers on Saturday to discuss contingency plans for managing the financial consequences of Congressional inaction. “No one will be pleased,” said one adviser, who spoke on the condition of anonymity.
The Treasury Department calculates that the government will exhaust its ability to borrow money at the end of Tuesday and will be forced to pay its bills from a dwindling pile of cash. Independent analysts estimate the government has enough money on hand to cover all of its bills for another week, more or less, before it starts missing payments.
Mr. Obama has repeatedly called on Congress to raise the borrowing limit, known as the debt ceiling, by Tuesday to avoid any uncertainty about the government’s ability to meet its obligations. Financial markets are particularly concerned about the payment of interest on the federal debt. A default on those obligations could precipitate a global financial crisis.
The painful negotiations to resolve the crisis have caught the attention of troops in Afghanistan, where Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, was quizzed repeatedly on Saturday by soldiers and Marines who wanted to know if they would be paid.
In Kandahar and Helmand Provinces, Admiral Mullen said it remained uncertain where money would be found if the government defaulted. Regardless of budget talks in Washington, the mission for American troops in Afghanistan would not halt, he said.
“We’re going to continue to come to work,” he said.