The Associated Press July 20, 2011, 2:48PM ET

Fresh White House talks for debt negotiators

President Barack Obama summoned top Democratic and Republican lawmakers to the White House Wednesday to resume negotiations on averting a potentially crippling government default, as attention focused on a new bipartisan budget plan emerging in the Senate. But the congressional leaders were meeting separately with Obama, not with each other.

The White House also indicated Obama would be willing to sign a short-term debt limit increase -- something he's opposed -- if it's merely a stop-gap measure to allow time for a broader plan to be put into place. It's unlikely a broad deficit-cutting measure could be finished by the Aug. 2 deadline to increase the government's borrowing limit.

The meetings with congressional leaders marked at least a partial resumption of talks that ended last week after five days of Obama huddling with lawmakers from both parties, with little progress to show.

The announcement Tuesday of an emerging agreement by the bipartisan Senate "Gang of Six" on a budget plan was seized by Obama as a possible breakthrough. The president was taking a new tack Wednesday in his meetings with congressional leaders, meeting first with top House and Senate Democrats and then with House Speaker John Boehner and House Majority Leader Eric Cantor, as he focused on lawmakers he will need to win over if a big budget-cutting deal is to win approval.

Democrats must be persuaded to live with cuts to entitlement programs that the Gang of Six plan embraces, while House Republicans must relent on their opposition to any and all tax increases, something Republicans in the Senate have shown more flexibility on.

"We are in the 11th hour," said White House press secretary Jay Carney, repeating what Obama had said Tuesday. "We need to meet, talk, consult and narrow down in fairly short order what train we're riding into the station."

Carney also indicated that the president would be willing to support a short-term extension as a stop-gap measure.

"If both sides agree on something significant we will support the measures necessary to finalize the details," Carney said when asked about a short-term deal.

The plan by the Gang of Six senators, three from each party, is probably far too complicated and contentious to be approved before the Aug. 2 deadline to avoid a default that administration officials and outside experts warn would drive up interest rates and threaten to take the country back into a recession. But the plan's authors clearly hope it could serve as a template for a "grand bargain" later in the year that could erase perhaps $4 trillion from the deficit over the coming decade.

"This is a unique opportunity and we ought to seize it," Carney said, even while saying the White House still wanted to keep working on a less ambitious "Plan B" measure to increase the debt limit even if no big plan can be reached.

That was a sign administration officials were acutely aware of the obstacles that remain to a major deal. Carney said Obama spoke by phone Tuesday evening to the top four Democratic and Republican congressional leaders.

Even among Democrats, Rep. Chris Van Hollen, senior Democrat on the House Budget Committee, said lawmakers had too few details about the Gang of Six plan. He said that until they have a chance to see the fine print, it will be difficult to get their caucus to focus on it.

The top Democrat in the House, Minority Leader Nancy Pelosi, reacted positively Wednesday to the new plan, saying it "has some good principles in it." At the same time, a top House GOP military hawk said it would cut defense too much.

House Armed Services Committee Chairman Howard "Buck" McKeon, R-Calif., blasted the Gang of Six plan in a missive to his panel members, saying it would cut the Pentagon way too deeply and would unfairly curb military health and retirement benefits.

"This proposal raises serious implications for defense and would not allow us to perform our constitutional responsibility to provide for the safety and security of our country," McKeon wrote in a memo to panel Republicans.

Speaking on the Senate floor Wednesday morning, Democratic leader Harry Reid said he was confident Obama and congressional negotiators could avoid a government default, but he also said the Senate still needed to hear from the House.

"We have a plan to go forward over here so I await word from the speaker," said the Nevada lawmaker. Reid was referring to a plan he's working on with GOP leader Mitch McConnell of Kentucky to give Obama new powers to obtain an increase in the borrowing cap unless overridden by Congress -- the Plan B that the White House also wants.

In the House, majority Republicans won a 234-190 vote Tuesday on a "cut, cap and balance" plan conditioning any increase in the government's borrowing authority on congressional passage of a balanced budget constitutional amendment and a fresh wave of spending cuts. That reflected the strength of tea party forces elected in last year's midterm election. GOP conservatives reveled in their victory, however temporary it may be, since the plan faces a White House veto threat and is a dead letter in the Senate anyway.

The Gang of Six plan, meanwhile, promises almost $4 trillion in deficit cuts, including an immediate 10-year, $500 billion down payment that would come as Congress sets caps on the agency budgets it passes each year. It also requires an additional $500 billion in cost curbs on federal health care programs, cuts to federal employee pensions, curbs in the growth of military health care and retirement costs, and modest cuts to farm subsidies.

The plan also involves a major influx of new tax revenues as Congress overhauls the loophole-choked U.S. tax code. It calls for getting rid of myriad tax loopholes, preferences and deductions and using the savings to sharply lower income tax rates. But $1 trillion to $2 trillion would be skimmed off the top and used to reduce the deficit, depending on who does the calculations.

"On the positive side, the tax rates identified in the Gang's plan -- with a top rate of no more than 29 percent -- and the president's endorsement of them are a positive development and an improvement over previous discussions," said Cantor, R-Va. "That said, I am concerned with the Gang of Six's revenue target."

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Associated Press writers David Espo, Erica Werner, Jim Kuhnhenn, Julie Pace, Ben Feller and Darlene Superville contributed to this report.


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