US Officials Scramble for Debt Deal as Clock Ticks

White House officials and Republican leaders scrambled on Sunday to reassure global markets the United States would avert a debt default but the two sides gave no sign they were moving closer to a deal.

"The leaders of Congress have said unequivocally ... not just Democrats — that we will meet our obligations. We are not going to default," U.S. Treasury Secretary Timothy Geithner told the ABC television news program "This Week."

With Asian markets set to open in a few hours, U.S. officials struggled to find a way to lift the $14.3 trillion limit on U.S. borrowing ahead of an Aug. 2 deadline.

White House chief of staff Bill Daley warned the talks were moving into "difficult days" and said it was crucial to the confidence of markets and businesspeople to get a deal soon.

But the path forward was murky, with Republicans talking of a short-term debt limit increase and the White House rejecting that approach.

Republican U.S. House of Representatives Speaker John Boehner promised to unveil a bipartisan deal to raise the debt ceiling. Republican leaders want to show progress by 4 p.m. EDT (2000 GMT) on Sunday, before trading gets under way in Asia, and have legislation to unveil on Monday.

UPDATE: House GOP Leaders To Hold Conference Call With Lawmakers To Update On Debt Talks At 4:30 PM EDT Sunday - Aide

"The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that's possible," Boehner told "Fox News Sunday."

"If that's not possible, I and my Republican colleagues in the House are prepared to move on our own," Boehner said.

The United States will run out of funds to service its debt on Aug. 2 if Congress does not approve additional borrowing.

Republicans have insisted the White House agree to deep spending cuts for long-term deficit reduction before they approve any increase in America's debt burden.

What we cannot do — because it would be irresponsible — is to leave the threat of default hanging over the American economy for a longer period of time.
US Treasury Secretary
Timothy Geithner

Negotiations toward that agreement have whipsawed for weeks, finally hitting a brick wall over taxes, one of the most ideologically divisive issues in U.S. politics.

Geithner and Daley said it was critical Congress approve a new debt ceiling that gets the country into 2013, past the November 2012 presidential election.

"It must be extended in a way that gives certainty to the economy through '13 and not some short-term gimmick where we're right back in this fix in six or eight months and the world looks at us once again and says ... these people can't get their act together," Daley told NBC's "Meet the Press."

Administration officials also said President Barack Obama would not accept a two-tiered proposal offered by Boehner that would lift the debt ceiling through the end of 2011 and then require another vote.

"What we cannot do — because it would be irresponsible — is to leave the threat of default hanging over the American economy for a longer period of time," Geithner said.

On Fox, Boehner said raising the debt ceiling and implementing major reforms would have to be done in two stages.

"There is going to be a two-stage process. It is not physically possible to do all of this in one step."

Administration officials said a far-reaching "grand bargain" that would combine a debt-limit increase with a 10-year plan to reduce the deficit by $4 trillion was still a possibility, despite Boehner's decision on Friday to walk away from talks with the White House on such a plan.


Boehner said his last offer to the White House on the larger deal was still on the table. That offer included some $800 billion in new tax revenue and massive spending cuts.

The frantic drive toward a deal began after closed-door talks between Obama and Boehner collapsed on Friday.

To pass any deal that includes additional tax revenue, Boehner must overcome stout resistance from Tea Party movement conservatives in his own party, who adamantly oppose any steps to raise taxes, most adamantly taxes on the rich.

Rating agencies say they will cut America's Triple-A credit rating if the United States fails to meet debt payments, likely triggering global market turmoil. Even if the United States does not default, its rating will be under pressure if Congress and the president fail to tackle long-term deficit reduction.

Financial markets are growing more edgy and U.S. 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.