Tensions Escalate as Stakes Grow in Fiscal Clash

Doug Mills/The New York Times

President Obama with, from left, House Minority Leader Nancy Pelosi, House Speaker John A. Boehner, Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell and Sen. Dick Durbin.

By CARL HULSE

Published: July 13, 2011

WASHINGTON ? The Federal Reserve chairman, Ben S. Bernanke, warned on Wednesday of a ?huge financial calamity? if President Obama and the Republicans cannot agree on a budget deal that allows the federal debt ceiling to be increased. Moody?s, the ratings agency, threatened a credit downgrade, citing a ?rising possibility? that no deal would be reached before the government?s borrowing authority hits its limit on Aug. 2.

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And the latest bipartisan negotiating session on Wednesday evening ended in heightened tension. Republicans said Mr. Obama had abruptly walked out in an agitated state; Democrats described the president as having summed up with an impassioned case for action before bringing the meeting to a close and leaving.

Across Washington, officials were weighed down with a sense that they were hurtling toward a crisis. Grim-faced lawmakers spent the day shuttling from meeting to meeting in search of a way out of the fix.

The stakes are high, for the economy, the financial markets and both parties. But the pressure was particularly intense on Republican leaders, who only weeks ago seemed to be on the offensive and in a strong position to extract major concessions from Mr. Obama and the Democrats.

For months, the Republican leaders have emphatically pledged that there will be no increase in the federal debt ceiling absent huge cuts in government spending and fundamental changes in popular social programs, all without the whiff of a tax increase.

Now, with negotiations stalled and a potential default by the United States government just over the horizon, they are being held to those promises by their own rank-and-file, leaving them in a bind that is defying easy resolution and putting them at risk of being blamed if things end badly.

Behind closed doors and by phone, they groped for a solution and struggled to assert some kind of control over the situation as rank-and-file Republican members, especially in the House, grew more confrontational.

Panic had not yet set in, but the worry and tension were evident as seasoned lawmakers of both parties whose experience told them that Congress always finds a white-knuckle way to avert disaster wondered if this was going to be the time when it did not.

?Our problem is, we made a big deal about this for three months,? said Senator Lindsey Graham, Republican of South Carolina.

?How many Republicans have been on TV saying, ?I am not going to raise the debt limit,?�? said Mr. Graham, including himself in the mix of those who did so. ?We have no one to blame but ourselves.?

Potential last-minute options were being gamed out around Capitol Hill. Senate Republicans were pushing their counterparts in the House to deliver some legislation, which could take the form of a balanced budget plan due on the House floor next week. A bipartisan group that had been working on a major deficit-cutting plan in the Senate was trying again to produce a proposal.

And Senator Mitch McConnell of Kentucky, the Republican leader and procedural maestro, was pushing his plan that would allow a debt limit increase to clear Congress without Republican fingerprints ? and without the guaranteed cuts many in his party are demanding. He would establish an elaborate process where Congress would vote to disapprove instead of approve a debt limit request. That would allow the president to raise the debt ceiling via a successful veto of the disapproval if it came to that.

Despite resistance from conservatives and the initial unease many lawmakers expressed at such a slippery approach, the McConnell gambit was gaining credence as the best escape hatch. Senate Democrats went virtually silent on the idea for fear of jinxing it. While the White House said it was not the preferable option, it was viewed inside the West Wing as a real option nonetheless, even if it would transfer to Mr. Obama and his party all the political responsibility for a debt limit increase.

Some of Mr. McConnell?s colleagues were coming around to it as the reality of a possible default began to sink in.

Jackie Calmes, Robert Pear and Binyamin Appelbaum contributed reporting.

Source: http://www.nytimes.com/2011/07/14/us/politics/14fiscal.html?_r=3&partner=rss&emc=rss

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