Washington, D.C. — Testy lawmakers pointed fingers at one another and President Barack Obama on Thursday as negotiations over raising the national debt limited entered a perilous endgame. Wall Street eyed the standoff with growing anxiety, warning of catastrophe if the U.S. defaults on its obligations.
Obama's blunt declaration that "enough is enough" as Wednesday's talks ended did nothing to quell the rancor as a new day of positioning and posturing began.
Senate Majority Leader Harry Reid took to the Senate floor early in the day to snipe that House Republican Leader Eric Cantor shouldn't even be part of the talks anymore, calling him "childish." And not long after, Senate Republican Leader Mitch McConnell stood to serve notice that 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."
None of it was a promising prelude to negotiations scheduled to resume at the White House on Thursday afternoon, less than three weeks before an Aug. 2 deadline for increasing the government's borrowing authority.
Obama is demanding that budget negotiators find common ground by week's end, as the financial world watches with increasing anxiety.
"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."
Moody's Investors Service said Wednesday it will review the government's credit rating, noting there is a small but rising risk that the government will default on its debt. If Moody's were to lower the ratings, the consequences would 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.
Federal Reserve Chairman Ben Bernanke, addressing lawmakers, warned Wednesday that not increasing the nation's debt ceiling and allowing the nation to default on its debt would send "shock waves through the entire financial system."
In the cauldron of the White House Cabinet Room, Obama and top lawmakers bargained for nearly two hours Wednesday on spending cuts. 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.
Obama and the top eight House and Senate leaders met for the fourth time in as many days Wednesday, and, despite the tense ending, agreed to meet again Thursday. Cantor, speaking to reporters after Wednesday's meeting broke up, said the White House had been lowering the amount of spending cuts it would put on the table, offering less than $1.4 trillion over 10 years, mostly in domestic and defense spending outside of the major benefits programs Medicare, Medicaid and Social Security.
The White House argued that the total was closer to $1.7 trillion over 10 years when counting about $240 billion in reduced interest payments from the lowered debt.
Earlier, in comments to a small group of reporters before the White House session, House Speaker John Boehner complained that negotiating with the White House "the last couple months has been like dealing with Jell-O."
Democratic officials have portrayed the White House as the more flexible party in the negotiations, willing to cut cherished programs like Medicare, Medicaid and Social Security, provided Republicans agree to some increases in revenue. Thursday's meeting was to focus on spending cuts in the two health care programs and on new tax revenue.
With talks reaching a critical stage without real breakthroughs, some Republican and Democratic lawmakers were looking at a plan proposed by McConnell that would give Obama new powers to overcome Republican opposition to raise the debt ceiling.
The proposal would place the burden on Obama to win debt ceiling increases up to three times, provided he was able to override congressional vetoes — a threshold Obama could manage to overcome even without a single Republican vote and without massive spending cuts. Conservatives promptly criticized the plan for giving up the leverage to reduce deficits. But the plan raised the prospect of combining it with some of the spending cuts already identified by the White House in order to win support from conservatives in the House.
In an interview with radio talk-show host Laura Ingraham, McConnell described his plan in stark political terms, warning fellow conservatives that failure to raise the debt limit would probably ensure Obama's re-election in 2012. He predicted that a default would allow Obama to argue that Republicans were making the economy worse.
"You know, it's an argument he has a good chance of winning, and all of a sudden we (Republicans) have co-ownership of a bad economy," McConnell said. "That is a very bad positioning going into an election."
The proposal won praise from two disparate points in the political spectrum — Republican Sen. John McCain of Arizona and Democratic leader Reid of Nevada.
"I am heartened by what I read," Reid said. "This is a serious proposal. And I commend the Republican leader for coming forward."
McConnell's plan was even winning some consideration in the White House. Democratic officials said that even as Obama confronted Cantor and Boehner in Wednesday's meeting, he commended McConnell.
"Sen. McConnell at least has put forth a proposal," a Democratic official quoted the president as saying. "It doesn't reduce the deficit and that's what we have to do. It just deals with the debt limit. Now Sen. McConnell wants me to wear the jacket for that."
The officials said Obama went on to say they all had a responsibility to find a compromise.
Associated Press writers Dave Espo, Laurie Kellman, Ben Feller and Erica Werner contributed to this report.
Copyright 2011 The Associated Press.