McConnell: $3 Trillion Debt Deal in the Works

Updated at 6:3e0 a.m. edt

Democrats and Republicans yesterday agreed to a $1 trillion deal for starters to settle the debt crisis that threatened to tank the global economy.

The Congress and White House are expected to vote today for the deal that will raise the $14.3 trillion federal debt limit.

Updated at 3:30 p.m. edt

The Senate killed a Democratic debt reduction bill on a procedural vote this afternoon, but do-or-die talks jump-started overnight has leaders on both sides cautiously optimistic a deal can get done to avoid a default by a Tuesday deadline.

A 50-49 vote failed to end a GOP filibuster, as Democrats fell 10 votes short of the 60 needed to move Senate Democratic Harry Reid's bill to a final vote. It was seen mostly as a symbolic vote, since it was expected to fail.

All hope of beating the clock and raising the $14.3 trillion debt limit comes down to $3 trillion in spending cuts being negotiated by Senate GOP leader Mitch McConnell and President Obama.

"Despite all the reporting, no deal has been reached, there are still (important) issues to work out, and a lot of bad info is floating out there," White House Communications Director Dan Pfeiffer said in an early afternoon Twitter dispatch.

Democratic leaders from both chambers huddled in House Democratic leader Nancy Pelosi's office to plot their strategy. Outside that session Reid told reporters, deal is "a lot closer than yesterday but we still have a ways to go."

Some House Democrats were concerned that Obama would give away too much in his negotiations, and then ask them to help pass a lousy deal. "We've carried his water before, but sooner or later we'll drop the bucket if he keeps playing us like a patsy," said a senior House Democratic staffer.

Some Demnocreats are still miffed at Obama for deciding against letting the Bush-era tax cuts for the wealthiest Americans expire in the budget negotiations last December, arguing that it would help spur the economy by continuing to give the richest Americans a free ride. Those Democrats note the economy is worse now than it was then.

On the morning talks shows, McConnell explained the framework of a deal would include two waves of spending cuts, but would avoid a messy vote and replay of this ordeal over the holidays, as House Speaker John Boehner had wanted. 

The first wave of cuts would include $1 trillion in set-in-stone reductions to discretionary spending, but a bipartisan "super congressional committee" would need to determine the second round of cuts by Thanksgiving of 2012.

There would be automatic "trigger" with cuts to the Pentagon and entitlements if Congress does not act on the super committee's recommendations.

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With a Tuesday deadline looming, Democratic and Republican negotiators made strides overnight on a potential $3 trillion debt-reduction deal, Senate GOP leader Mitch McConnell said this morning.

"We're very close," McConnell said on CNN's "State of the Union" program, predicting a deal could be reached "soon."

The framework includes cuts in discretionary spending and caps on spending increases over 10 years, McConnell said. It calls for creation of a bipartisan debt-cuttting committtee made up of lawmakers, and includes a provision agreeing to a separate vote on creating a balanced-budget amendment to the constitution, he said.

The White House has said a deal must scrap the House GOP plan that calls for another debt debate and a vote in six months. "We're working on the accommodations that will get us there," McConnell said.

Sen. Chuck Schumer (D-N.Y.), the No. 3 Democrat in the Senate, cautioned that there is no deal as of yet, but he is very optimistic that the U.S. will not for the first-time ever default on its loan payments.

An apparent breakthrough came after Senate Democratic leader Harry Reid agreed to delay a 1 a.m. edt vote on his debt-reduction resolution in order to give negotiators time to see if they could move their talks forward. Reid rescheduled the vote for 1 p.m. today, but if a deal is close he may be persuaded to back up the vote again and amend or replace his legislation.

The hard part may come after a deal is reached. Even if the leaders have an agreement they still have to sell it to their rank and file, including the obstructionist Tea Party faction and contentious House liberals.

GOP & Dems Talking, But No Closer to a Debt Reduction Deal

The fate of raising the $14.3 debt ceiling will be decided behind closed doors now as the Democratic and Republican leadership engage in a final attempt to reach a deal that will keep the U.S. from defaulting on its loans for the first time in its history.

However, with a little more than two days until the default deadline, there was plenty of evidence of political gamesmanship in play, particularly between the GOP and Democratic leaders of the Senate.

GOP House Speaker John Boehner and Senate GOP leader Mitch McConnell reopened the negotiating channels with President Obama in the past 24 hours, ending a stalemate created when Boehner walked away from the table.

McConnell spoke to Obama shortly before the President summoned the House and Senate Democratic leaders to the White House this afternoon.

"We are now fully engaged, the Speaker and I, with the one person in America out of 307 million people who can sign a bill into law," McConnell said. "I'm confident and optimistic that we're going to get an agreement in the very near future and resolve this crisis in the best interest of the American people."

Senate Democratic leader Harry Reid accused McConnell of grandstanding by saying both sides were close to agreement, saying they were no closer to a deal after meeting along with House Democratic leader Nancy Pelosi at the White House with Obama.

"Republican leaders still refuse to negotiate in good faith," Reid said.  "The process has not been moved forward during this day."

In the only action today in the public eye, the GOP-controlled House voted 246 to 173 to reject a plan by  Reid that would cut the deficit by more than $2.2 trillion over 10 years and raise the debt limit automatically in three stages, but without further votes in Congress.

There still may be a Senate vote on the Reid measure at 1 a.m. tomorrow just to get it into the record as a negotiating point.

The Republicans, led by its powerful extremist Tea Party wing, passed a bill in the House yesterday that would require Congress hold another debt ceiling vote over the Christmas holidays. The Senate rejected the measure.

Democrats charge it is a purely political move meant to embarrass President Obama and boost GOP presidential candidates ahead of the 2012 elections.

Obama and the Democrats call that idea, along with a nearly impossible provision requiring passage of a balanced-budget amendment to the constitution, a non-starter.

Pelosi accused Boehner of selling out a  $4 trillion grand bargain offered by Obama by abandoning negotiations to pander to the obstructionist Tea Party Republicans.  

"He chose to go to the dark side," Pelosi said to boos from the GOP on the House floor, which only prompted her to repeat the line. "He chose to go to the dark side."

Obama likes Gang of Six Proposal; House GOP Moves on Draconian Plan

Updated 9 p.m.

The House passed the Tea Party-backed "Cut, Cap and Balance" plan 234-190 this evening as expected, but the measure will now die a certain death in the Senate, with President Obama's promised veto a final backstop to kill the measure.

"I think everyone's estimation is, is that that is not an approach that could pass both chambers, it's not an approach that I would sign and it's not balanced, but I understand the need for them to test that proposition," Obama said ahead of the vote.

Meanwhile, the latest polls show the GOP hardline approach is turning off a lot of Americans and is bolstering Obama's approach. An NBC/Wall Street Journal poll shows more Americans would blame the GOP if the U.S. does not raise the debt ceiling and defaults on its bills.

The same poll shows an overwhelming majority of Americans want the Democrats and Republicans to compromise -- something the House GOP, led by House Republican leader Eric Cantor of Virginia, has refused to do.

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The House GOP is set to approve today its dead-on-arrival "Cut, Cap and Balance" plan to raise the debt ceiling, but the more mainstream Republicans in the newly reformed bipartisan Senate Gang of Six are proposing a popular $4 trillion in cuts over the next decade.

President Obama called the Gang of Six plan "a very significant step" because it appears to take a balanced approach to making significant cuts while increasing the revenue stream by eliminating some corporate tax loopholes, as well.

"We now have a bipartisan group of senators who agree with that balanced approach," Obama said at an afternoon appearance today in the White House briefing room.

"We are now in the same playing field," Obama added, noting there is still a long way to go before a final agreement is reached.

The Gang of Six, which is calling in its plan for $500 billion in immediate cuts as a down payment, re-convened after Sen. Tom Coburn (R-Okla,) succeeded in getting the group to agree to some cuts in health care programs. Coburn had left the group in May over disputes in how to cut into the $14.3 trillion debt.

Some Senate Republicans and Democrats have signaled they like so far what they see form the Gang of Six. Other senators from both parties say they want to hear more before endorsing the newly emerging plan.

The Gang of Six -- Coburn, Kent Conrad (D-N.D.), Mark Warner (D-Va.), Mike Crapo (R-Idaho), Saxby Chambliss (R-Ga.) and Dick Durbin (D-Ill.) -- presented an outline of the plan top 49 senators this morning.

"I cannot suggest they all signed up," Durbin told the Senate. "I would never expect that to happen, but it is significant that at this moment in our history so many felt positive towards what we are doing."

The Senate was prompted to take the lead in the debt-ceiling debate after House Republicans, led by GOP leader Rep. Eric Cantor (R-Va.), gridlocked the negotiations with a refusal to allow any new revenue streams to be created as part of a deal.

The two leaders of the Senate, Sens. Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), are still working on emergency contingency legislation that would only ensure the Aug. 2 debt limit deadline is not crossed. The Reid-McConnell measure would not cut the deficit.

House Republicans, committed to appeasing Tea Party supporters, put forward a controversial plan that would cut spending by $111 billion in 2012 and cap future spending at 19.9% of the nation's gross domestic output. The proposal requires that Congress pass a balanced-budget constitutional amendment and send it to the states for the lengthy ratification process.

That "Cut, Cap and Balance" plan does not have enough support to pass in the Senate, but even if it did, Obama has said he will veto it.

Reid & McConnell Try to Find Debt Deal; Pouty Cantor Sent to His Corner

The adults apparently are attempting to settle the looming debt crisis that is already rocking the financial markets and is threatening to put the nation in the same ugly economic position it found itself in the summer of 2008.

With GOP House Speaker John Boehner apparently unable to rein in his obstructionist second-in-command, Rep. Eric Cantor (R-Va.), the top leaders in the Senate are trying to come up with a compromise that will avoid the federal government defaulting on its debts by a drop-dead Aug. 2 deadline.

"Cantor has shown he shouldn't even be at the table, and Republicans agree he shouldn't be at the table," said Senate Democratic leader Harry Reid.

Reid (D-Nev.) called Cantor "childish" over his pouty explanation of how President Obama dressed him down during yesterday's negotiating session at the White House.

Boehner, nonetheless, stuck by Cantor.

"We're in the foxhole," Boehner said in support of Cantor. "I'm glad Eric's there."

So with Boehner (R-Ohio) virtually muted by Cantor's mouthy negotiating style, Reid said he is trying to see if the framework of an alternative plan put forward by Senate GOP leader Mitch McConnell is a path to a potential deal.

But like Boehner, McConnell (R-Ky) is wearing a partisan game face today -- at least in public.

"We refuse to let this President use the threat of a debt limit deadline to get us to cave on tax hikes or phony spending cuts," McConnell said.

The negotiators are about to sit down to talks again today very shortly, and the odds are Cantor will be on his best behavior.

Cantor is a dandy from Richmond who may have miscalculated Obama's strength -- the same mistake some people in the Virginia capital made a century and half ago about another President from Illinois.

In this case, Cantor showed up at 1600 Pennsylvania Avenue with a Ziplock bag full of checkers only to discover that the current resident is playing chess.

Obama: 70M Social Security, Vets & Disability Checks at Risk if No Deal

Same story, different day as the debt negotiations go on.

The congressional leaders from both parties are back late this afternoon at the White House, but this time facing a stark warning from President Obama, who  says he cannot guarantee that Social Security, veterans benefits or disability checks will go out on Aug. 3 if no deal is reached by Aug. 2.

"I cannot guarantee that those checks go out on Aug. 3 if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it," Obama said in an interview with CBS Evening News anchor Scott Pelley set to air tonight.

Obama, who apparently has not played his lkast wild card in the high-stakes game of political poker, was asked specifically about Social Security, but said the problem is much bigger that that.

"This is not just a matter of Social Security checks. These are veterans checks, these are folks on disability and their checks. There are about 70 million checks that go out," Obama said.

As it stands, Obama won't do a short-term deal and the Republicans say they won't do a deal that includes tax increases.

There is evidence that the showdown over raising the debt ceiling is beginning to take a toll on the financial markets, as analysts blame a downturn in most of the global markets overnight, including Wall Street the past two days, on two main concerns: The growing debt crisis in Europe and the debt shenanigans in Washington.

Meanwhile, Senate GOP leader Mitch McConnell (R-Ky), is offering up a scheme that may allow Obama to raise the debt ceiling with a vote, a veto and override vote.

It is a complex plan that the Democrats will first have to review, but at face value it appears to require something that neither side has for the other: Trust.