WASHINGTON - President Barack Obama on Tuesday endorsed a rejuvenated Senate plan that cuts spending and raises taxes in return for congressional approval to raise the U.S. debt ceiling and avoid a default on American obligations.
Obama spoke briefly in the White House press room just hours after a bipartisan group of six senators resumed negotiating the plan. The senators said they were close to agreement on an immediate $500 billion "down payment" on cutting the deficit as the starting point toward cuts of more than $4 trillion over the coming decade that would be finalized in a second piece of legislation.
The plan also would raise revenues by about $1 trillion over 10 years through a major overhaul of the tax code and cuts to popular benefit programs like Medicare and Medicaid, the federal programs that subsidize health care for the elderly and poor. There was no assurance such a plan would win support in the Republican-controlled House where most members have vowed not to increase taxes.
The plan largely mirrors one put forward months ago by Obama's debt commission and he said on Tuesday that it "is broadly consistent with what I've proposed."
Congress faces an Aug. 2 deadline for raising the debt limit above the current $14.3 trillion level. Failure to do that would leave the Treasury Department unable to pay all the government's bills that come due. The government would face hard choices of whether to make payments to holders of Treasury bonds or send out checks to retirees relying on Social Security, the government-run pension plan.
That could create turmoil in financial markets and hobble global economies that are still struggling to recover from the deep recession that began in 2008.
Obama's announced backing for the plan taking shape among the so-called Gang of Six quickly overshadowed a vote in the House of Representatives later Tuesday on a bill proposed by tea party Republicans that calls for deep spending cuts, a cap on government spending and congressional passage of a bill calling for amending the constitution to require the federal government to spend no more than it collects in taxes and other fees. It does not include any tax increases, something that many of the new House members elected with tea party support pledged they would never allow.
While that measure is expected to easily pass in the House, it is seen as largely symbolic because it would fail in the Senate and Obama has vowed the measure should it ever reach his desk.
Once the House bill stalled in the Senate, the upper chamber was then expected to have tried to move forward with yet another bipartisan plan that would give Obama sweeping powers to increase the debt limit. That measure which has been in the works for several days has been shepherded in the Democratic-controlled Senate by Majority Leader Harry Reid and Republican leader Mitch McConnell. While that backup measure faces furious opposition among many conservatives, it nonetheless had been seen as probably the most viable option for avoiding a catastrophic default. It calls for modest spending cuts and no tax increases.
Tuesday's vote in the House, together with the Reid-McConnell Senate plan, was expected to give lawmakers from conservative districts some political cover for allowing the debt limit increase. The House bill would allow them to vote for sweeping spending cuts and the balanced budget amendment. And the Senate plan, through its complicated structure, could allow them to eventually vote against the debt increase, without actually blocking it.
But Obama all along has continued battling for a Grand Bargain of huge spending cuts combined with tax increases and that seems to be coming together among the Gang of Six senators, three from each party.
Obama called it "a very significant step."
It remained unclear, however, if that plan could find sufficient support in the House.
Therefore, Obama said, the Reid-McConnell measure "remains necessary approach as a bare minimum."
But, he added, "we continue to believe we can achieve more."
