WASHINGTON — Racing to avoid a government default, President Barack Obama and Republican congressional leaders reached urgently for a compromise Sunday to permit vital borrowing by the Treasury in exchange for more than $2 trillion in long-term spending cuts. Senate Republican Leader Mitch McConnell said the two sides were "really, really close" to a deal after months of partisan fighting.
But that was met by conspicuous silence from the White House, McConnell and House Speaker John Boehner's office, two days before a deadline to raise the federal debt limit and enable the government to keep paying its bills.
Privately, officials said a final sticking point concerned possible cuts in the nation's defense budget in the next two years. Republicans wanted less. Democrats pressed for more in an attempt to shield domestic accounts from greater reductions. [See photos of the Obamas behind the scenes.]
As contemplated in talks that McConnell and Vice President Joe Biden were negotiating, the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.
Big cuts in government spending would be phased in over a decade. Thousands of programs — the Park Service, Labor Department and housing among them — could be trimmed to levels last seen years ago.
No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise. [See a collection of political cartoons on the budget and deficit.]
Any agreement would have to be passed by the Democratic-controlled Senate and Republican-controlled House before going to the White House for Obama's signature. With precious little time remaining, both houses were on standby throughout the day, and Speaker John Boehner was in his office.
Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy. [Check out editorial cartoons about the economy.]
If approved, though, a compromise would presumably preserve America's sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.
Senate Majority Leader Harry Reid, D-Nev., said he was "hopeful and confident" a deal would come together. But in a possible hint of dissatisfaction, he pointedly made no mention of congressional Democrats when he said negotiations were between McConnell and the White House and unnamed others.
Officials familiar with the negotiations said that McConnell had been in frequent contact with Vice President Joe Biden, who has played an influential role across months of negotiations.
The talks were proceeding toward a two-step system for raising the debt limit and cutting spending.
The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.
That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.
If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.
If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.