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Obama, Boehner clash on TV on debt endgame

The United States edged closer on Tuesday to a devastating default as Republicans and Democrats deadlocked over competing plans to raise the debt ceiling, one week before a deadline to act.
/ Source: msnbc.com staff and news service reports

The United States edged closer on Tuesday to a devastating default as Republicans and Democrats deadlocked over competing plans to raise the debt ceiling, one week before a deadline to act.

With Washington mired in a stalemate over the looming debt crisis and a fierce budget fight, President Barack Obama and House Speaker John Boehner took the battle into prime time Monday night, sharpening the differences between their two parties and leaving the endgame more uncertain than ever.

The president took to the national airwaves in an effort to shift the debate. He called the recent weeks of negotiations over raising the debt ceiling a “three-ring circus” and asked the public to rally behind his effort to avoid a debt crisis, both temporarily and through the next presidential election.

"The American people may have voted for divided government, but they didn't vote for a dysfunctional government," Obama said in a nod to Republican victories in last fall’s elections.

Boehner, once considered an ally of the president in his quest to find a long-term deal, followed the president on television immediately afterward to proclaim that Republican efforts to find an agreement with the president had fallen short. 

'Sincere effort' to work with Obama
“I want you to know I made a sincere effort to work with the president," Boehner said, adding “the sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. That is just not going to happen."

In his address, Obama endorsed a plan by Senate Majority Leader Harry Reid to cut the deficit by $2.7 trillion over the next decade, calling it “a much better approach” than the one put forward by Boehner.  Obama rejected the House plan, saying it would “force us to once again face the threat of default just six months from now” by requiring two votes in Congress on raising the government’s borrowing limit.

The president argued that it was important to reassure financial markets by promptly increasing the debt limit, not to have two separate votes this year and next year.

And defaulting on the government debt, he said, would be “a reckless and irresponsible outcome to this debate” — leading to soaring interest rates and risking “a deep economic crisis.”

He said he was confident that he and congressional leaders can reach a compromise in the next few days, as an Aug. 2 debt deadline approaches.  “Despite our disagreements, Republican leaders and I have found common ground before,” he said.

He acknowledged that many of the Republicans elected to Congress last November do not agree with him on many issues, but he said “we were each elected by some of the same Americans for some of the same reasons.”

Reverting to earlier themes
Despite essentially having given up on tax increases for the time being, Obama reverted to themes he’d often discussed in past speeches and press conferences, denouncing tax preferences for corporate jet owners and asking for what he called “a balanced approach” of spending cuts and tax increases.

He criticized congressional Republicans for not asking “the wealthiest Americans or biggest corporations to contribute anything at all. And because nothing is asked of those at the top of the income scale, such an approach would close the deficit only with more severe cuts to programs we all care about, cuts that place a greater burden on working families.”

But Boehner, who followed Obama with a five-minute response, said all Obama needed to do was sign the House GOP bill and “the crisis atmosphere that he has created will simply disappear.”

The House speaker said Obama’s call for a “balanced approach” simply meant “we spend more, and you pay more.”

He accused Obama of going to Congress last January and requesting “business as usual — yet another routine increase in the national debt. But we in the House said, ‘not so fast.’ Here was the president asking for the largest debt increase in American history on the heels of the largest spending binge in American history.”

GOP bid to 'do something dramatic'
The GOP leader said he’d asked Obama to “do something dramatic to change the fiscal trajectory of our country” and added, “I gave it my all” in an attempt to work with Obama.

Boehner also got in rhetorical shots at Obama’s health care overhaul and his $830 billion stimulus program — “more effective in producing material for late night comedians than it was in producing jobs.”

Perhaps the most remarkable aspect of the debt struggle as it stood Monday night is that neither Boehner’s plan nor the Senate Democrats’ — endorsed by Obama — would call for increased tax revenues. That's a substantial change from what Obama and some congressional Democrats had been demanding.

As recently as Friday night, Obama said he wanted $1.2 trillion in additional revenues from eliminating tax deductions and preferences.

“If you don’t have (additional) revenues, the entire thing ends up being tilted on the backs of the poor and middle-class families,” Obama contended Friday.

Obama endorsed Reid’s plan Monday, so he has, in effect, conceded on tax increases, until after the 2012 elections, at least.

What GOP plan would do
Boehner’s plan would cut and limit non-entitlement spending (that is, exempting Medicaid, Medicare, Social Security and federal retiree benefits), aiming to save $1.2 trillion over 10 years.

His plan would also set up a new joint congressional committee that would be required to report legislation by November that would aim to reduce cumulative deficits by an additional $1.8 trillion over 10 years.

In all Boehner would aim for $3 trillion in cumulative deficit cuts, about a 23 percent reduction in cumulative deficits, according to the Congressional Budget Office’s most plausible budget forecast.

According to the Center on Budget and Policy Priorities, a liberal-leaning think tank, virtually all of the additional $1.8 trillion in Boehner’s cuts would have to come from entitlement programs since Boehner’s plan would have already made big cuts in non-entitlement spending.

That “would require draconian policy changes” in entitlement benefits, said CBPP Robert Greenstein.

The spending cuts would be required before Obama could request — in two separate votes — that Congress increase the debt ceiling by $2.6 trillion, an 18 percent increase in the limit on government borrowing.

In contrast, the Senate Democrats would give Obama the entire increase in the debt limit in one vote and aim for $2 trillion in savings, most of which would come from cuts to non-entitlement outlays, and some of which would come from pursuing tax underpayments and fraud in disability and other benefit programs.

The differences between the plans
So the differences in the two plans come down to two: Boehner’s plan would require two votes to increase the debt limit, while Reid’s would require one. And his plan would mean cuts in entitlement outlays while Reid would exempt entitlements.

But by omitting entitlements, the Reid plan would do nothing to restrain the fastest growing part of federal outlays, other than interest costs: Social Security, Medicaid and Medicare, which CBO projects will grow at an average annual rate over more than 7 percent over the next 10 years, compared to only 2 percent average annual growth in non-entitlement spending.

Treasury Secretary Tim Geithner has not said what the administration’s back-up plan is if Congress does not vote to increase the borrowing limit before Aug. 2.

"We will do everything we can to mitigate the damage," he said Sunday, noting that the United States sends out 80 million checks a month to government contractors, Social Security recipients, and others With the government unable to borrow and needing to rely mostly on the daily cash influx from tax payments, the Treasury would need to decide which bills to pay.

Among the payments scheduled to be paid on Aug. 3 is $23 billion to more than 50 million Social Security recipients.