President Obama said Sunday that "we need to" work out a debt deal within the next 10 days as he convened a meeting with congressional leaders, aiming to fashion a deficit reduction package that would allow the country to avoid first ever default on U.S. debt.
Obama and the eight top House and Senate leaders assembled in the White House Cabinet Room for about 90 minutes during a rare Sunday session, less than 24 hours after House Speaker John Boehner abandoned plans to negotiate a massive $4 trillion deal for reducing the debt. The president and congressional leaders will resume negotiations on Monday.
As the meeting opened, Obama and the leaders sat around the table in Sunday casual dress. Asked whether the White House and Congress could "work it out in 10 days," Obama replied, "We need to."
The Obama administration has warned that refusal by Congress to raise the $14.3 trillion debt limit could lead to the first time in history when the U.S. government could not pay its debts.
The International Monetary Fund's new chief, Christine Lagarde, said that if the U.S. fails to act, she foresees "interest hikes, stock markets taking a huge hit and real nasty consequences" for the American and global economies.
"I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also the rest of the world," she said.
Republicans have demanded that any plan to raise the debt limit be coupled with massive spending cuts to lighten the burden of government on the struggling economy. Higher taxes, Republicans have said from the start, are deal-killers if not offset elsewhere.
But Obama has a long way to go to satisfy lawmakers in his own party, too. Many Democrats are unnerved by the president's $4 trillion proposal because of its changes to Medicare and Medicaid.
Despite Boehner's preference for a smaller, $2 trillion plan for deficit reduction, White House aides said Sunday that Obama would press the lawmakers to accept the larger deal. Republicans object to its substantial tax increases and Democrats dislike its cuts to programs for seniors and the poor. The aides, however, left room for negotiations on a more modest approach.
"He's not someone to walk away from a tough fight," White House chief of staff William Daley said. "Everyone agrees that a number around $4 trillion is the number that will ... make a serious dent in our deficit." But embedded among the tough words was rhetoric that acknowledged the "big deal's" prospects had become uncertain at best.
"We're going to try to get the biggest deal possible," said Treasury Secretary Timothy Geithner.
It was an abrupt change from 24 hours earlier. Republicans late Saturday rejected the $4 trillion proposal, the largest of three under consideration, because its tax increases would doom it in the Republican-led House, Speaker John Boehner said.
The Ohio Republican informed Obama that a package of about $2 trillion, which bipartisan negotiators had identified but not agreed to, was more realistic.
The statements threw into question the extent to which the Sunday meeting would move the talks toward a resolution.
Geithner cautioned that a package about half the size of the one Obama prefers would be equally tough to negotiate because it, too, could require hundreds of billions in new tax revenue anathema to Republicans. Lawmakers said that previous bipartisan talks, led by Vice President Joe Biden, identified a fraction of cuts that would be needed even for the more modest packages.
Even so, Boehner insisted the smaller proposals had more realistic chances of passing. One would call for about $2 trillion in deficit reductions, most accomplished through spending cuts that have been identified but not signed off on by the Biden group.
The package of $2 trillion to $2.4 trillion in deficit reduction identified by the Biden-led negotiators would still require Republicans to accept some increase in tax revenue. Republicans walked out of those negotiations after they were unable to accept about $400 billion in new tax money that the White House proposed by closing loopholes, ending some corporate subsidies, and limiting the value of deductions for wealthy taxpayers.