US parties hopeful for debt deal

31 July 2011 Last updated at 03:57 GMT Senator Harry Reid: ''There are many elements to be finalised and there is still a distance to go"

Democrats and Republicans have expressed cautious optimism about the chances of raising the US debt limit by Tuesday and averting possible default.

Republican Senate leader Mitch McConnell said there was "a level of seriousness with the right people at the table" as talks continued.

Senior Senate Democrat Richard Durbin spoke of "a more positive feeling".

In a sign of the level of anxiety over the issue, troops in Afghanistan asked Adm Mike Mullen if they would be paid.

The admiral, who as chairman of the Joint Chiefs of Staff is on a visit to southern Afghanistan, said he did not know whether that would be the case if the US fails to raise the $14.3tn (?8.7tn) limit by 2 August.

Democrats and Republicans have so far rejected each others' proposals for cutting spending and raising the debt limit.

President Barack Obama backs Democratic Senate Majority Leader Harry Reid's proposal, which would cut $2.2tn from deficits and raise the debt ceiling by $2.7tn, meaning the issue would not have to be revisited until after the 2012 elections.

Late on Saturday, Mr Reid said he was postponing a planned procedural vote on his bill in the Senate - the latest stage in a series of Congressional stand-offs between the two parties.

"There are negotiations going on at the White House to avert a catastrophic default on the nation's debt. There are many elements to be finalised and there is still a distance to go," he said.

The vote, which had been expected at 0100 (0500 GMT) on Sunday, will now be held at 1300 (1700 GMT), he added.

Mr Reid's deputy, Richard Durbin, said: "We're a long way from any kind of a negotiated agreement, but there is certainly a more positive feeling about reaching an agreement this evening than I've felt in a long time."

'Reasonable people'

The House of Representatives, where Republicans have a majority, already rejected the bill 246-173 on Saturday afternoon, even before the Senate had voted on it.

Continue reading the main story Lyse Doucet BBC News, southern Afghanistan

The chairman of the Joint Chiefs of Staff, Adm Mike Mullen, wanted the troops to let him know what problems they faced in this war. They were more worried about other battles - the political ones far away in Washington.

One after another, the soldiers asked: "If the government defaults on its debt, will we still get paid?" The first time it was raised, the admiral paused for a long moment then said: "I don't know the answer to that question." That raised worried eyebrows across the room.

For President Obama's top military adviser knows this is a minefield he must avoid. Tell the troops there is a plan and Republican critics back home will attack the president's doomsday scenarios if they don't reach a deal. He told his troops he understood their families were living "pay check to pay check" but added: "You should still keep showing up for work here."

Senate Democrats had hoped to pass the bill by Sunday morning so that it could go to the House by Monday.

Following Saturday's House vote, President Barack Obama summoned Mr Reid and Democratic House leader Nancy Pelosi for talks.

Republicans said they were confident a deal could be reached.

Referring to the Senate bill, Senate Republican leader Mitch McConnell called on Democrats to "end this charade" so that negotiations could be pursued with the president.

"We are now fully engaged with the one person in America out of 307 million people who can sign this bill into law," he said.

The BBC's Paul Adams in Washington says the Treasury is already drawing up emergency plans in case a deal is not reached.

The US Treasury estimates that the government will no longer be able to borrow money to pay all its bills unless its borrowing limit is increased by Tuesday.

Experts say the government has enough cash to keep functioning for another week or so after that.

Republican plan

Politicians have had a little breathing space over the weekend to negotiate before Asian financial markets open on Monday morning, which will be Sunday afternoon in the US capital.

Mitch McConnell: ''My view is we ought to end the charade and get serious''

The House of Representatives passed its own plan on Friday evening by 218-210, with 22 Republicans and every Democrat voting against.

The plan, drawn up by House speaker John Boehner, includes some $900bn of spending cuts and would raise the debt ceiling by a similar amount.

However, it would require another vote during mid-2012 - in the midst of next year's presidential campaign - and includes language in support of a so-called "balanced budget amendment" to the US constitution. Both are rejected by the White House and the Senate leadership.

Shortly after the House passed its bill, the Democratic-led Senate voted to reject the Boehner plan.

In a weekly radio address, Mr Obama reiterated that any solution on a default had to be bipartisan.

"There are multiple ways to resolve this problem," he said.

"Congress must find common ground on a plan that can get support from both parties in the House and in the Senate. And it has to be a plan that I can sign by Tuesday."

Analysts predict a last-minute scramble for a compromise and razor-edge votes in both chambers, with the high-stakes game of legislative brinkmanship expected to continue all weekend.

The Boehner and Reid plans overlap in key ways, such as trimming spending over 10 years and shunning President Obama's call for tax increases on the wealthy and corporations.

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US debt talk parties 'far apart'

7 July 2011 Last updated at 19:57 GMT Mr Obama and top Congressional Democrats and Republicans met at the White House on Thursday Democrats and Republicans remain "far apart on a wide range of issues" in budget talks aimed at averting a looming default on US government debt, President Barack Obama has said.

Mr Obama spoke after concluding a meeting with congressional leaders and said talks would resume on Sunday.

The deadline to raise the $14.3tn (?8.9tn) US debt ceiling is 2 August.

Republicans have demanded steep reductions in the US budget deficit as the price of a debt increase.

"All the leaders came here in a spirit of compromise and of wanting to solve problems on behalf of the American people," Mr Obama told reporters on Thursday following morning discussions at the White House with senior Republican and Democratic House and Senate leaders.

"Everybody acknowledged that in order to do that, Democrats and Republicans are going to be required in each chamber" for an eventual vote.

Mr Obama said the sides had acknowledged they would suffer politically, "but our biggest obligation is to make sure we're doing the right thing by the American people."

Before the Sunday talks, leaders from both parties and their staffs would continue to meet, Mr Obama said.

Among other issues, the two sides are at odds over whether to force cuts in popular social programmes and whether and how to raise additional tax revenue to close the budget gap, which Republicans are resisting.

Soon after the Thursday morning meeting broke up, Democratic House Minority Leader Nancy Pelosi said cuts to the Social Security retirement programme and the Medicare healthcare programme for pensioners should not be considered.

Continue reading the main story

Mr Obama's latest offer of cuts is designed to make a specific argument - that he is willing to go the extra mile but that the Republicans are so entrenched in their narrow political foxhole that they would rather cause another economic crisis than make a single compromise”

End Quote Mark Mardell BBC North America editor

Read Mark's thoughts in full

"We are not going to balance the budget on the backs of seniors, women and people with disabilities," she told reporters after the meeting with Mr Obama and other Congressional leaders.

The US currently runs an estimated $1.5 trillion (?932bn) annual budget deficit, and has already exceeded the national debt limit of $14.3tn.

The US government's borrowing authority is limited by statute but has traditionally been raised as a matter of routine by Congress.

However, a newly empowered faction of conservative, anti-tax Republicans are keen to extract dramatic cuts in government spending as the price of raising the limit, analysts say.

At the White House on Thursday, Mr Obama met at a conference table with House and Senate leaders of both parties, including Republican House Speaker John Boehner, Republican Senate Leader Mitch McConnell, House Democratic Minority Leader Nancy Pelosi, Senate Democratic Majority Leader Harry Reid, and senior lieutenants on both sides.

Backbench resistance

Talks have proceeded in a halting fashion in recent months, with top Republican leaders walking out last month over Democrats' insistence on considering new sources of tax revenue, including closing loopholes in the tax code and eliminating tax breaks that primarily benefit the wealthy.

On Thursday, Mr Obama indicated the "hard bargaining" had yet even to begin.

Continue reading the main story US government currently runs a $1.5tn budget deficit, requiring it to issue debt in the form of treasury bills, bonds and other securitiesPublic debt was $14.3tn on 31 May, up from $10.6tn when Mr Obama took office in January 2009Most is held by the public, with the rest held in US government accountsCongress has voted to raise the US debt limit 10 times since 2001

Sources: US Treasury, Congressional Research Service, Congressional Budget Office

Mr Obama is reported to have proposed a $4tn deficit reduction package that could include money-saving changes in the social security and Medicare programmes for pensioners and the Medicaid programme for the poor, which Democrats had previously rejected.

Among other new developments, Republican Senator Jon Kyl has said his side had agreed to raising revenue by selling broadband spectrum and raising user fees, Reuters reported.

And Eric Cantor, a senior Republican Congressman, said Republicans could support eliminating some tax breaks in exchange for other tax cuts elsewhere.

"I can tell you one thing, that we are united as Republicans to say now is not the time to raise taxes," Mr Cantor said on MSNBC television on Thursday morning.

But even if the White House and congressional leaders of both parties strike an agreement, they will have to win approval from rank-and-file party members, who may be less interested in the bargain.

Without action in Congress to raise the debt limit, the US risks defaulting on its debt. A broad range of economists and political figures have warned that could trigger a global financial crisis.

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