Obama open to short-term debt increase to buy time

The Obama Administration signalled yesterday it may accept a short-term increase in the United States debt limit only if lawmakers need a few days to finish work on a broader agreement to cut the deficit.

President Barack Obama "must have a firm commitment to something big" on cutting the deficit before he would sign a short-term rise in the debt ceiling, White House spokesman Jay Carney said at a briefing.

Later in a statement, he said Obama "does not support a short-term extension" unless "a few days" are needed "for a bill to work its way through the legislative process".

The President called congressional leaders to the White House yesterday as the August 2 deadline for raising the US$14.3 trillion ($16.7 trillion) debt limit nears.

Obama met for just under an hour with Senate majority leader Harry Reid, second-ranking Senate Democrat Dick Durbin, House minority leader Nancy Pelosi and second-ranking House Democrat Steny Hoyer. That meeting was followed by a session of about 90 minutes with Speaker John Boehner and majority leader Eric Cantor, the top two House Republicans. Obama spoke by telephone to congressional leaders from both parties on Wednesday, Carney said.

Durbin said afterward that it's "not practical" to write and pass legislation based on a US$3.7 trillion deficit-cutting plan proposed by a bipartisan group of senators in time to meet the debt-ceiling deadline.

"Let's be honest about this," Durbin said at the Capitol. "It's not written, it's not scored, and we are down to 13 days."

Reid was open to incorporating a plan in debt limit legislation "by reference", perhaps directing a later deficit-reduction vote or turning the matter over to a new joint committee.

Senator Tom Coburn, an Oklahoma Republican who helped negotiate the proposal, said he wanted Congress to "go all-out" to accomplish spending cuts and raising the debt limit.

He acknowledged the resistance the plan from the so-called Gang of Six senators faced within his own party: "We've made changes some people cannot accept."

Kent Conrad, a North Dakota Democrat and chairman of the Senate budget committee, said lawmakers had drafted legislation for the proposal that could advance more quickly than some observers believed.

The proposal, which calls for tax increases and spending cuts, was gaining momentum on Capitol Hill, where Republican lawmakers who've opposed using increased revenue to shrink the deficit said they were seriously looking at it.

"There are some good things in there," said Representative Dave Camp of Michigan, the Republican chairman of the tax-writing ways and means committee. "I certainly like the lower rates and a simpler tax code, but I do think revenue increases are an issue that we'll have to deal with. We're just not going to increase taxes."

- Bloomberg