President Obama and House Speaker John Boehner were on a narrow and shrinking debt-ceiling collision course Sunday night, as Boehner began putting House GOP muscle behind a short-term tourniquet and Obama continued holding out for a comprehensive package that will extend borrowing authority beyond the 2012 elections.
Markets in Asia fell on Monday, as politicians in Washington failed to reach a deal. Japan's Nikkei average closed 0.8 percent lower, while Hong Kong's Hang Seng Index dropped 0.7 percent.
Simultaneously, Boehner was preparing an authorization for the federal government to raise its $14.3 trillion debt ceiling — the type of extension Obama has promised to veto.
By 11 p.m. Sunday, after a weekend of top-level negotiations in Washington failed to yield fruit, the U.S. dollar trended downward and gold futures were rising.
In a conference call with rank-and-file GOP House members on Sunday afternoon, Boehner, R-Ohio, said the House and Senate were nearing agreement on a six-month solution, according to one participant. Democrats have consistently ruled out such time-limited agreements. Boehner said he was ready to proceed with that short-term deal, without Obama's sign-off, the participant said.
Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif., met at the White House for a little over an hour Sunday evening. The meeting started shortly before 6 p.m., roughly an hour after the first of the Asian global markets opened. Boehner on Saturday had asked for a debt framework before then, intended to give the Asian markets time to process a last-ditch bid to ward off the market turmoil.
Reid said he brought to Obama a proposal for $2.7 trillion in spending cuts as part of a debt-ceiling deal, seeking Obama's approval, according to a statement. A White House official said Pelosi and Reid updated Obama on congressional negotiations and “reiterated” their shared opposition to short-term debt limit increases.
“Tonight, talks broke down over Republicans’ continued insistence on a short-term raise of the debt ceiling, which is something that President Obama, Leader Pelosi, and I have been clear we would not support," Reid said. "Speaker Boehner’s plan, no matter how he tries to dress it up, is simply a short-term plan, and is therefore a non-starter in the Senate and with the president."
Boehner’s remarks were described in interviews with lawmakers following the call, which began at about 4:30 p.m. Some of the lawmakers said he left them with a sense that some type of plan for how the House will proceed could still be finalized Sunday night, because he told them details of a bill would be coming Monday when they return to Washington. Boehner has said he wants a bill on the House floor by Wednesday, which would require House Rules Committee review by Monday night.
Appearing earlier in the day on Fox News Sunday, Boehner jabbed at Obama’s insistence on a long-term ceiling hike, “I know the president’s worried about his next election, but my God, shouldn’t we be worried about the country?”
Boehner said he would prefer a bipartisan pact, adding, “If that’s not possible, I and my Republican colleagues in the House are prepared to move forward on our own … today,” he said.
With Reid and Boehner are advancing plans to raise the debt ceiling, there is the potential for the two chambers to have dueling plans on their respective floors, even as deliberations behind a joint solution persist.
The biggest difference is that the Reid plan would increase the borrowing limit through at least the November 2012 elections, while the Boehner proposal would mandate two stages — with the debt ceiling increase coming early next year and contingent on matching spending cuts. Democrats have said that carrying the borrowing authorization past the election is a make-or-break provision. Republicans want two votes, saying they hope to wring more savings.
In the conference call, Boehner asked House Republicans, depicted by Democrats and large swaths of the media as obstructionists, to steady the ranks. He said compromises were necessary, but promised to use the “Cut, Cap, and Balance” amendment as a basis for any compromise, according to a source familiar with the call. Majority Leader Eric Cantor, R-Va., seen as playing a key role in reining in Boehner from earlier overtures toward a “grand bargain” with Obama, told members that Republicans were scrutinizing dollar-for-dollar cuts for future action.
"We’ve seen this coming all year long. But here’s the challenge: to stop [Obama], we need a vehicle that can pass in both houses," Boehner said on the call, according to the source.
Pointing out that the Senate had brushed aside the Cut, Cap and Balance amendment, Boehner said: “So the question becomes – if it’s not the Cut, Cap, and Balance Act itself – what can we pass that will protect our country from what the president is trying to orchestrate?"
According to the source, Boehner added: "And I think the leaders in both parties and both houses of Congress already agree that we need significant reductions. But if we stick together, I think we can win this for the American people ... because I do think there is a path. But it’s [going to] require us to stand together as a team. It’s [going to] require some of you to make some sacrifices. If we stand together as a team, our leverage is maximized, and they have to deal with us. If we’re divided, our leverage gets minimized."
The more Boehner’s plan relies on House GOP support, the less likely it would be to clear the Senate. Democrats in the House, Senate, and White House have all signaled unwillingness to sign off on a debt-ceiling hike that does not carry into 2013. Obama has vowed to veto an extension of borrowing authority that does not last into 2013 — after the presidential election.
The nation faces an August 2 deadline to boost its $14.3 trillion debt ceiling. Analysts have warned that even a short-term extension of the borrowing limit could still result in market turmoil. Standard & Poor’s has placed the odds of a U.S. credit rating downgrade, resulting in higher interest rates and rattling investor confidence, at 50/50.
Obama, for his part, had been “absolutely” still actively involved in debt-ceiling negotiations with Congress, Geithner said Sunday morning on CNN's State of the Union.
Geithner laid out two paths: a two-tiered approach involving a savings package followed by a tax code and entitlement reform, and another option that hews to the one-swipe “grand bargain” that Obama and Boehner had been hashing over before talks fell apart late on Friday.
The first and more likely path could establish a powerful special committee to devise a blueprint for additional savings and revenues, fanged with deadline authority and tools to circumvent the traditional legislative byways.
Geithner said that Obama had remained engaged with congressional leaders on Saturday, even after the public talks had shifted to congressional leaders in the Capitol.
“Both sides are getting a lot closer,” Geithner said.
On NBC's Meet the Press, White House Chief of Staff William Daley reaffirmed Obama’s veto threat against a ceiling lift that doesn’t extend into 2013. That stance drew scorn from Sen. Tom Coburn, R-Okla., a member of the "Gang of Six" that has been working towards a debt agreement.
“I think that’s a ridiculous position, because that’s what he’s going to get presented with,” said Coburn, later adding, “I understand why they’re saying they won’t say a short-term [deal], but I think they won’t have a choice.”
Daley also blamed House Republicans for being intractable, summarizing their attitude as “You either come our way, or chaos may reign.”
Major Garrett, Billy House, Dan Friedman, Katy O'Donnell, George E. Condon Jr., and Rebecca Kaplan contributed. contributed to this article.