Obama: 'Do something big' on debt ceiling

WASHINGTON -- Struggling to avert an unprecedented national default, congressional leaders jettisoned negotiations on a sweeping deficit-reduction package Friday despite a plea from President Barack Obama to "do something big" to stabilize America's finances.

Instead, lawmakers pursued rival fallback plans as a critical Aug. 2 deadline neared: a House version given little chance of success, even by some supporters, and a bipartisan Senate approach holding out more promise.

At the behest of conservatives, House Republicans announced plans to vote next week on legislation to raise the $14.3-trillion debt limit automatically if Congress approves a balanced-budget constitutional amendment. Senate approval of that amendment seemed extremely unlikely in a vote set for the next few days.

Senate leaders from both parties worked on their own measure that would allow Obama to raise the debt limit without a prior vote by lawmakers. That plan was likely to include limits on spending across thousands of government programs, and possibly a down payment on cuts.

As part of that proposal, a panel of lawmakers would recommend cuts in benefits programs by the end of the year, with the House and Senate required to hold a yes-or-no vote on the package without the possibility of changes.

"If they show me a serious plan I'm ready to move," Obama declared at his second news conference of the week, even though he said he wanted a far more sweeping deal that might even have raised the age of Medicare eligibility from 65 to 67 if Republicans would increase selected taxes. "We are obviously running out of time," he said.

Numerous officials have cautioned that a default will occur if the debt limit is not increased by Aug. 2, warning also of a calamitous effect on an economy struggling to recover from the worst recession in decades.

"Now the debate will move from a room in the White House to the House and Senate floors," said Senate Republican leader Mitch McConnell of Kentucky, indicating that the daily closed-door negotiations at the White House were over.

The House Republican rank-and-file were advised in a GOP meeting that, barring action by Congress, the government would be able to pay only about half its bills after Aug. 2, and separately that a default could cost the government trillions of dollars in the form of higher interest rates on the debt.

"No matter what 50 percent you choose to pay, there are things in that 50 percent you don't pay that would have really severe consequences," Rep. John Campbell (R-Calif.) said afterward.