(Updates with Obama remarks, comments by senators beginning in third paragraph.)
July 19 (Bloomberg) -- President Barack Obama endorsed a deficit-cutting proposal by a bipartisan group of senators as “broadly consistent” with the approach being worked on by his administration.
He called the revival of the so-called Gang of Six proposal “good news” that may help move negotiations on the deficit and raising the federal debt ceiling.
“We don’t have any more time to posture,” Obama said in remarks at the White House. Time is running out to raise the debt limit before Aug. 2, when the Treasury Department has said the U.S. risks going into default, a step that would roil financial markets, he said.
The plan to shave about $3.7 trillion from the debt over 10 years put forward by the senators is “a very significant step,” Obama said. While the administration hasn’t yet had a chance to review the Senate proposal in depth, “we’re in the same playing field,” he said.
Obama indicated that talks with congressional leaders from both parties would resume at the White House this week. Republicans have called for spending cuts to accompany any increase in the government’s borrowing authority.
About 50 senators attended a briefing on the Gang of Six plan at the Capitol today, an indication of potentially widespread support for a “grand bargain” -- of the sort Obama is seeking -- to reduce the debt through a combination of tax increases and entitlement cuts.
Yet the senators’ plan is at odds with what House Republicans are pushing. They plan a vote today on a proposal to condition a $2.4 trillion debt-ceiling increase on passage of a constitutional amendment to balance the budget. Senate Democrats oppose the idea and Obama said he would veto it.
The senators’ plan would immediately cut $500 billion from the deficit, said Democratic Senator Kent Conrad of North Dakota, the Budget Committee chairman and a member of the group. The plan includes $1 trillion of tax increases yet would count as a $1.5 trillion tax reduction because it would eliminate the alternative minimum tax, designed to limit the deductions and credits high earners can claim, according to Republican Senator Tom Coburn of Oklahoma.
“We were very pleased with the reaction; now we’ve got to figure out the way forward with this,” said Senator Saxby Chambliss of Georgia, the group’s Republican co-leader of the Gang of Six with Democratic Senator Mark Warner of Virginia.
“The significance here is that there’s some momentum behind the idea,” White House press secretary Jay Carney said. “This is an opportunity to do something big.”
Obama said Senate Majority Leader Harry Reid, a Nevada Democrat, and Minority Leader Mitch McConnell, a Kentucky Republican, should proceed with a separate framework to raise the debt ceiling without deeper deficit cuts.
“That continues to be a necessary approach to put forward in the event that we don’t get an agreement” on a bigger deficit cutting deal, the president said.
U.S. stocks extended gains as Obama’s statement spurred optimism that lawmakers will reach an agreement that will help the nation avoid default.
The Standard & Poor’s 500 Index climbed 1.3 percent to 1,322.16 at 1:39 p.m. in New York. The Dow Jones Industrial Average rallied 173.47 points, or 1.4 percent, to 12,558.63.
--With assistance from Julie Hirschfeld Davis and James Rowley in Washington. Editors: Joe Sobczyk, Laurie Asseo.
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