Scolded by President Barack Obama, Congress scrambled on Saturday to produce a deficit plan within 48 hours that keeps the United States from a catastrophic debt default now days away.
A day after talks collapsed in finger-pointing acrimony, President Obama held an emergency meeting with congressional leaders at the White House and told them to find areas of agreement in the bitter dispute over budget spending cuts and taxes.
A Republican leadership aide said lawmakers are working on a plan for $3 trillion to $4 trillion in savings over 10 years, but another high-ranking Republican official said no numbers had been settled. Republican leaders want “to show progress” by 4 p.m. EDT (2000 GMT) on Sunday, the aide said.
It was unclear whether Republicans would include steps to raise tax revenue to reduce the deficit, as President Obama demands.
Underscoring the threat facing America’s credit rating and standing in the financial markets, House of Representatives Speaker John Boehner told fellow House Republicans that leaders hope to show signs of progress by Sunday afternoon, to avoid spooking Asian financial markets opening at that time.
“We need to have something posted online by Monday,” a Republican congressional aide said.
Congressional leaders are supposed to give President Obama a progress report by 5 p.m. EDT (2100 GMT) on Saturday, a Democratic aide said.
Saturday’s emergency meeting lasted a bare 50 minutes, a day after President Obama complained that Mr. Boehner had left him at the altar and refused to return his phone calls.
The mood around the table in the White House Cabinet Room appeared strained.
In the talks, President Obama warned lawmakers not to pursue a short-term extension of the $14.3 trillion US debt limit, as some want. He wants an extension that would allow for US borrowing to pay its bills through 2012, when he and most lawmakers are up for re-election.
“Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit,” White House spokesman Jay Carney said after the talks.
A short-term extension of mere months could cause Wall Street credit agencies to strip America of its gold-plated triple-A rating and increase interest rates for American consumers, President Obama told them.
Mr. Boehner, the top US Republican, promised that Congress this weekend “will forge a responsible path forward” and that House and Senate leaders will work to find a bipartisan solution to “significantly reduce Washington spending and preserve the full faith and credit of the United States.”
Senate Republican leader Mitch McConnell said after the meeting that congressional leaders were working on new legislation that will “prevent default while substantially reducing Washington spending.”
A senior Republican aide said a fallback option initially presented by Mr. McConnell would not be the basis of the new bill. New legislation would be aimed at cutting spending, preventing default and not raising taxes, the aide said.
With the world’s biggest economy set to run out of money to pay all of its bills on August 2, the window was closing fast for a “grand bargain” of spending cuts and tax increases in exchange for Congress raising the debt ceiling.
The fits and starts in the negotiations have left both sides fuming. President Obama has said he has agreed to deep spending cuts in social programs that make his own Democrats uneasy but that Republicans must allow some taxes to rise, a prospect they have rejected.
Financial markets are growing more edgy and US banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.
Credit rating agencies want spending restraints for the United States to keep its prized Triple-A rating that makes US Treasuries the solid foundation for global investors and lowers borrowing costs for state governments, businesses, homeowners and consumers.
Both Republicans and Democrats chafed at the compromises a far-reaching deal would require before the presidential and congressional elections in November 2012, with each side accusing the other of not doing enough and demanding too much.
Closed-door talks last week between President Obama and Mr. Boehner collapsed Friday largely over how much revenue would be raised through tax reform – with President Obama wanting $1.2 trillion over 10 years and Mr. Boehner putting $800 billion on the table.
Mr. Boehner has to overcome resistance from Tea Party movement conservatives in his own party and could run into problems for having signaled a willingness to give ground on revenue increases in closed-door talks at the White House.
“If not reversed within the next few days through crisis negotiations, this breakdown will be highly detrimental to the already fragile health of both the US and global economies,” Mohamed El-Erian, co-chief investment officer at Pimco, the world’s top bond fund manager, told Reuters.