WASHINGTON -- Testy lawmakers and President Barack Obama headed back for a fifth day of debt-limit negotiations Thursday, pointing fingers at each other while trying to stave off a government financial default. No “hallelujah moment” was likely by day’s end, White House spokesman Jay Carney said, with today shaping up as an important decision day.
As the negotiations entered a perilous endgame. Federal Reserve Chairman Ben Bernanke warned of economic damage and an anxious Wall Street envisioned catastrophe if the United States defaulted on its obligations.
As legislators squabbled, Treasury Secretary Tim Geithner served notice there was no finessing the Aug. 2 deadline for solving the debt crisis.
“We have looked at all available options and we have no way to give Congress more time to solve this problem,” he said. “We’re running out of time.”
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But the president’s blunt declaration that “enough is enough” as the previous evening’s talks ended did nothing to quell the rancor as a new day of positioning and posturing played out.
Senate Majority Leader Harry Reid stood on the Senate floor and sniped that House Majority Leader Eric Cantor shouldn’t even be part of the talks anymore, noting that the Virginia Republican has been called “childish.”
Cantor shrugged off the criticism, and drew a show of support from Speaker John Boehner, despite evident differences between the two men over the course of negotiations.
“We have been in this fight together,” Boehner said at a news conference, placing his arm around Cantor for emphasis. “We’re in the foxhole.”
At the White House, Carney for the first time indicated that the administration was prepared to move beyond the negotiations on deficit reduction and seek some other path toward increasing the debt limit, with today looming as a decision day.
“The president views Friday as an important moment where we can make an assessment about whether we are moving toward a significant bipartisan agreement on deficit reduction or not,” Carney said. “And if we are moving in that direction, and he sincerely hopes we are, then we will continue toward that goal. “
“If we’re not, then we have to begin looking at making sure that we fulfill our obligations to uphold the credit rating of the United States.”
He did not elaborate.
For his part, Senate Republican Leader Mitch McConnell said the debt problem belonged squarely in Obama’s lap
“Republicans will not be reduced to being the tax collectors for the Obama economy,” McConnell said. “Don’t expect any more cover from Republicans on it than you got on health care. None.”
Federal Reserve Chairman Ben Bernanke, testifying on Capitol Hill, warned legislators that failing to raise the debt limit in time to avoid default would only end up increasing the federal deficit, calling that a “self-inflicted” wound.
He said default would drive up interest costs on the $14.3 trillion debt and reduce government revenues by slowing economic growth and could “throw the financial system potentially into chaos.”
None of the back-and-forth was a promising prelude to Thursday’s talks at the White House. With less than three weeks left before the deadline for increasing the government’s borrowing authority, the day’s meeting was to focus on the touchy matters of how to cut spending on Medicare and Medicaid and raise more tax revenue.
Behind the scenes, legislators and White House officials continued to work on a more limited backup plan offered by McConnell that would give Obama new powers to overcome Republican opposition to raising the debt ceiling.
The GOP leader’s plan was welcomed by Democrats on Capitol Hill and at the White House as at least as a recognition that default was unthinkable.
“I think everyone who is concerned about lifting the debt ceiling is saying bravo for Senator McConnell,” said House Democratic leader Nancy Pelosi.
But Carney said the White House would rather do something more substantial, a “grand bargain” to significantly cut spending and raise more revenue.
The financial world was watching with growing jitters.
“No one can tell me with certainty that a U.S. default wouldn’t cause catastrophe and wouldn’t severely damage the U.S. or global economy,” Jamie Dimon, CEO of JPMorgan Chase & Co., told reporters Thursday. “And it would be irresponsible to take that chance.”
Already, Moody’s Investors Service is reviewing the government’s credit rating, saying there is a small but rising risk that it will default on its debt. If Moody’s were to lower the rating, the consequences could ripple through the economy, pushing up rates for mortgages, car loans and other debts. A Chinese rating agency, Dagong Global Credit Rating Co., also warned of a possible downgrade.
Reid sketched the potential consequences of default in dire terms, saying Social Security checks, veterans’ benefits and paychecks for troops would stop. “Millions of Americans could lose their jobs,” he added.
A Reid spokesman later clarified that Social Security benefits “could” stop, as Obama previously had warned, but it wouldn’t be a certainty.
Republicans have called such statements scare tactics.
In the cauldron of the White House Cabinet Room, Obama and top lawmakers bargained for nearly two hours late Wednesday. Obama curtly ended the session when Cantor, R-Va., urged him to accept a short, monthslong increase in debt instead of one that would last through next year’s presidential election.
“Enough is enough. ... I’ll see you all tomorrow,” Obama said, rising from the negotiating table and leaving the room, according to several officials familiar with the session.
Reid said that while other Republican leaders were willing to negotiate in good faith, Cantor “has shown he shouldn’t even be at the table.”
The United States hit its current $14.3 trillion debt ceiling in May and the Obama administration says the government will default on its obligations if the debt limit is not increased by Aug. 2. For a new debt ceiling to last to the end of 2012 would require raising it by about $2.4 trillion.
Republicans, in control of the House of Representatives in part because of the support of tea party activists, say they will not vote to raise the limit if Obama doesn’t agree to at least an equal amount of deficit reductions over 10 years.
Despite the heightened tensions that have been on display, the White House said there was no talk of shaking up the negotiation process or changing the participants -- including the top eight House and Senate leaders.