As deadline drew near, leaders worked with sense they are hurtling toward crisis.
WASHINGTON - The Federal Reserve chairman, Ben 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.
And the latest bipartisan negotiating session on Wednesday evening ended in heightened tension if not outright discord. Republicans said 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 Obama and the Democrats.
For months, Republican leaders have 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 talks stalled and a potential default by the U.S. 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.
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.
Potential last-minute options were being gamed out. Senate Republicans were pushing their House counterparts 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 Sen. 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, allowing the president to raise the debt ceiling via a successful veto of the disapproval if it came to that.
Despite resistance from conservatives, the McConnell gambit was gaining credence as the best escape hatch. While the White House said it was not the preferable option, it was viewed as a real option nonetheless, even if it would transfer to Obama and his party all the political responsibility for a debt limit increase.
But with House Republicans showing little to no appetite for McConnell's plan, top lawmakers in both parties were looking for ways to sweeten the deal, perhaps by adding required spending cuts or somehow forcing consideration of a deficit-reduction package.
McConnell portrayed his proposal as a last-stand way to spare Republicans from being blamed for a default if no alternative plan could be approved.
After the meeting at the White House, Republicans and Democrats offered differing versions of what by all accounts was a tense session.
Rep. Eric Cantor, the House majority leader, said he raised the idea of taking what savings could be achieved now -- roughly $1.4 trillion -- and then having additional votes to raise the debt limit again before the elections in November 2012, with Republicans ultimately seeking a total of at least $2.4 trillion in cuts with no tax increases. At this, Cantor said, the president "got very agitated seemingly." He quoted the president as saying: "Eric, don't call my bluff. I'm going to the American people with this."
Then, Cantor said, "He shoved back and said, 'I'll see you tomorrow' and walked out. I was a little taken aback."
Democrats said Obama's departure was not abrupt, but that he had forcefully made a case that Republicans had been unwilling to compromise. "Enough's enough," one Democrat quoted Obama as saying.
Democrats said Obama had set a deadline of Friday for the two sides to determine whether they could reach a broad budget deal. If not, he said, they will turn to finding an accord over how to raise the debt limit without agreement on taxes and spending.