Obama and Cantor clash in debt talks

WASHINGTON -- President Barack Obama bluntly told Republican congressional leaders yesterday they must compromise quickly if the government is to avoid an unprecedented default, adding, "Don't call my bluff" by passing a short-term debt limit increase he has threatened to veto.

The warning, directed at House Majority Leader Eric Cantor (R-Va.) marked an acrimonious end to a two-hour session at the White House that produced no evident progress toward a compromise.

With the talks scheduled to resume Thursday, two Democratic officials quoted Obama as telling Republicans, "Enough is enough. We have to be willing to compromise. It shouldn't be about positioning and politics, and I'll see you all tomorrow."

The threatened default is less than three weeks away and Moody's Investors Service announced it was reviewing the U.S. bond rating for a possible downgrade. The Treasury said the annual deficit was on a pace to exceed $1 trillion for the third year in a row.

With the negotiations at a seeming standstill, Republicans drew a warning of a different sort, from an unlikely source -- the party's Senate leader, Sen. Mitch McConnell of Kentucky.

In an interview with radio talk-show host Laura Ingraham, McConnell warned fellow conservatives that failure to raise the debt limit would probably ensure Obama's re-election in 2012.

"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."

Cantor, talking with reporters at the Capitol after he left the White House, said the president had backed away from spending cuts agreed to earlier because of pressure from Democrats in Congress. He said the two sides were far from agreement on deficit cuts that would allow the Treasury to borrow through the next election.

"He got very agitated seemingly and said he had sat here long enough and that no other president, Ronald Reagan wouldn't sit here like this," Cantor said of the president.

Democratic officials said that in fact, Cantor had twice earlier in the meeting raised the possibility of a short-term bill, and that he interrupted the president mid-sentence to do so a third time.

Federal Reserve Chairman Ben Bernanke warned lawmakers, meanwhile, that failure to raise the borrowing limit could trigger a major financial crisis. He said that if the government defaults on its debt, it would throw "shock waves through the entire financial system."

The Treasury Department said the federal deficit was on pace to break the $1 trillion mark for a third straight year. It totaled $971 billion for the first nine months of the budget year.