Obama Debt Ceiling Talks: President Addresses Nation About Debt Limit Negotiations, Economy

WASHINGTON (AP/The Huffington Post) -- Decrying a "partisan three-ring circus" in the nation's capital, President Barack Obama criticized a newly minted Republican plan to avert an unprecedented government default Monday night and said congressional leaders must produce a compromise that can reach his desk before the Aug. 2 deadline.

"The American people may have voted for divided government, but they didn't vote for a dysfunctional government," the president said in a hastily arranged prime-time speech. He appealed to the public to contact lawmakers and demand "a balanced approach" to reducing federal deficits.

"It is a dangerous game we've never played before," Obama said, "and we can't afford to play it now."

Obama stepped to the microphones a few hours after first Republicans, then Democrats drafted rival fallback legislation Monday to avert a potentially devastating government default in little more than a week.

Obama said the approach unveiled earlier in the day by House Speaker John Boehner would raise the nation's debt limit only long enough to push off the threat of default for six months. "In other words, it doesn't solve the problem," he said.

The president had scarcely completed his remarks when Boehner made an extraordinary rebuttal carried live on the nation's networks.

"The president has often said we need a `balanced' approach, which in Washington means we spend more, you pay more," the Ohio Republican said, speaking from a room just off the House floor.

"The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. That is just not going to happen."

Directly challenging the president, Boehner said there "is no stalemate in Congress."

He said the Republicans' newest legislation would clear the House, could clear the Senate and then would be sent to Obama for his signature.

The back-to-back televised speeches did little to suggest that a compromise was in the offing, and the next steps appeared to be votes in the House and Senate on the rival plans by mid-week.

Despite warnings to the contrary, U.S. financial markets have appeared to take the political maneuvering in stride - so far. Wall Street posted losses Monday but with no indication of panic among investors.

Without signed legislation by day's end on Aug. 2, the Treasury will be unable to pay all its bills, possibly triggering an unprecedented default that officials warn could badly harm a national economy struggling to recover from the worst recession in decades.

Obama wants legislation that will raise the nation's debt limit by at least $2.4 trillion in one vote, enough to avoid a recurrence of the acrimonious current struggle until after the 2012 elections.

Republicans want a two-step process that would require a second vote in the midst of a campaign for control of the White House and both houses of Congress.

There were concessions from both sides embedded in the competing legislation, but they were largely obscured by the partisan rhetoric of the day.

A Senate Republican leader Mitch McConnell of Kentucky urged Obama to shift his position rather than "veto the country into default."

And Reid jabbed at tea party-backed Republicans who make up a significant portion of the House GOP rank and file. The Nevada Democrat warned against allowing "these extremists" to dictate the country's course."

The measure Boehner and the GOP leadership drafted in the House called for spending cuts and an increase in the debt limit to tide the Treasury over until sometime next year. A second increase in borrowing authority would hinge on approval of additional spending cuts sometime during the election year.

Across the Capitol, Reid wrote legislation that drew the president's backing, praise from House Democratic leader Nancy Pelosi - and criticism from Republicans.

By design or not, the two sides' harsh remarks obscured concessions that narrowed the differences among the nation's political leaders as they groped for a way to resolve the economic crisis.

With their revised plan, House Republicans backed off an earlier insistence on $6 trillion in spending cuts to raise the debt limit.

And Obama jettisoned his longstanding call for increased government revenues as part of any deficit reduction plan.

Pending the president's televised speech, the White House also declined repeatedly to say whether Obama would veto the revised House measure.

White House communications director Dan Pfeiffer called the proposal "not a serious attempt to avert default because it has no chance of passing the Senate."

Not all Republicans were happy with their leadership's decision to scale back legislation that had cleared the House last week, only to die in the Senate.

Among House conservatives who have provided the political muscle for the Republican drive to cut spending, the revised legislation was a disappointment. "I cannot support the plan," said Rep. Jim Jordan of Ohio, one of the leading advocates of legislation that cleared the House last week and died in the Senate.

But two rank-and-file Republicans said their constituents were voicing concerns other than the rising federal debt.

Rep. Tom Rooney, R-Fla., said his office is getting calls from constituents saying, "If I don't get my Social Security check, it's your fault."

Rep. Tom Reed, a New York freshman, said many of his constituents are telling him to stand firm in his drive to cut spending. "But I will admit there's some anxiety in the district" about Social Security and other programs, he added.

As Boehner readied his legislation, Senate Democratic leaders called a news conference to announce their own next steps.

The Democrats' measure would cut $2.7 trillion in federal spending and raise the debt limit by $2.4 trillion in one step - enough borrowing authority to meet Obama's bottom-line demand.

The cuts include $1.2 trillion from across a range of hundreds of government programs and $1 trillion in savings assumed to derive from the end of the wars in Afghanistan and Iraq.

Boehner ridiculed the $1 trillion in war savings as gimmicky, but in fact, they were contained in the budget the House passed earlier in the year.

The legislation also assumes creation of a special joint congressional committee to recommend additional savings with a guaranteed vote by Congress by the end of 2011.

Yet in the maneuvering it appeared another of the president's long-held conditions appeared to be in danger of rejection.

Neither Boehner's measure nor the one Reid was drafting included additional revenue, according to officials in both parties.

In addition to a two-step approach to raising the debt limit, the House measure would require lawmakers in both houses to vote later this year on a constitutional amendment requiring a balanced federal budget.

An earlier bill, passed in the House last week but then scuttled in the Senate, would have required Congress to approve an amendment and send it to the states for ratification.

That same bill would have made $6 trillion in spending cuts in exchange for raising the debt limit.

Obama promised to veto that bill even before the House voted on it.

Each side offered accounts of secret maneuvering designed to put the other side in a poor light.

Democratic officials said Obama called Boehner on Saturday night, one day after the collapse of compromise talks, and offered to reduce his demand for new tax revenue by $400 billion.

In return, Obama said that he wanted Republicans to abandon their demand to cancel parts of the year-old health care law if future deficit cuts did not materialize.

This official said Boehner rejected the proposal on Sunday.

Republicans disputed that account - and offered one of their own.

In their version of events, Reid agreed on Sunday night to a two-step approach to raising the debt limit that Obama has rejected.

Democrats denied it.

None of the officials involved would agree to be quoted by name.

Obama's full remarks, as prepared for delivery, are below:

Good evening. Tonight, I want to talk about the debate we've been having in Washington over the national debt - a debate that directly affects the lives of all Americans.

For the last decade, we have spent more money than we take in. In the year 2000, the government had a budget surplus. But instead of using it to pay off our debt, the money was spent on trillions of dollars in new tax cuts, while two wars and an expensive prescription drug program were simply added to our nation's credit card.

As a result, the deficit was on track to top $1 trillion the year I took office. To make matters worse, the recession meant that there was less money coming in, and it required us to spend even more - on tax cuts for middle-class families; on unemployment insurance; on aid to states so we could prevent more teachers and firefighters and police officers from being laid off. These emergency steps also added to the deficit.

Now, every family knows that a little credit card debt is manageable. But if we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy. More of our tax dollars will go toward paying off the interest on our loans. Businesses will be less likely to open up shop and hire workers in a country that can't balance its books. Interest rates could climb for everyone who borrows money - the homeowner with a mortgage, the student with a college loan, the corner store that wants to expand. And we won't have enough money to make job-creating investments in things like education and infrastructure, or pay for vital programs like Medicare and Medicaid.

Because neither party is blameless for the decisions that led to this problem, both parties have a responsibility to solve it. And over the last several months, that's what we've been trying to do. I won't bore you with the details of every plan or proposal, but basically, the debate has centered around two different approaches.

The first approach says, let's live within our means by making serious, historic cuts in government spending. Let's cut domestic spending to the lowest level it's been since Dwight Eisenhower was President. Let's cut defense spending at the Pentagon by hundreds of billions of dollars. Let's cut out the waste and fraud in health care programs like Medicare - and at the same time, let's make modest adjustments so that Medicare is still there for future generations. Finally, let's ask the wealthiest Americans and biggest corporations to give up some of their tax breaks and special deductions.

This balanced approach asks everyone to give a little without requiring anyone to sacrifice too much. It would reduce the deficit by around $4 trillion and put us on a path to pay down our debt. And the cuts wouldn't happen so abruptly that they'd be a drag on our economy, or prevent us from helping small business and middle-class families get back on their feet right now.

This approach is also bipartisan. While many in my own party aren't happy with the painful cuts it makes, enough will be willing to accept them if the burden is fairly shared. While Republicans might like to see deeper cuts and no revenue at all, there are many in the Senate who have said "Yes, I'm willing to put politics aside and consider this approach because I care about solving the problem." And to his credit, this is the kind of approach the Republican Speaker of the House, John Boehner, was working on with me over the last several weeks.

The only reason this balanced approach isn't on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a cuts-only approach - an approach that doesn't ask the wealthiest Americans or biggest corporations to contribute anything at all. And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about - cuts that place a greater burden on working families.

So the debate right now isn't about whether we need to make tough choices. Democrats and Republicans agree on the amount of deficit reduction we need. The debate is about how it should be done. Most Americans, regardless of political party, don't understand how we can ask a senior citizen to pay more for her Medicare before we ask corporate jet owners and oil companies to give up tax breaks that other companies don't get. How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries? How can we slash funding for education and clean energy before we ask people like me to give up tax breaks we don't need and didn't ask for?

That's not right. It's not fair. We all want a government that lives within its means, but there are still things we need to pay for as a country - things like new roads and bridges; weather satellites and food inspection; services to veterans and medical research.

Keep in mind that under a balanced approach, the 98% of Americans who make under $250,000 would see no tax increases at all. None. In fact, I want to extend the payroll tax cut for working families. What we're talking about under a balanced approach is asking Americans whose incomes have gone up the most over the last decade - millionaires and billionaires - to share in the sacrifice everyone else has to make. And I think these patriotic Americans are willing to pitch in. In fact, over the last few decades, they've pitched in every time we passed a bipartisan deal to reduce the deficit. The first time a deal passed, a predecessor of mine made the case for a balanced approach by saying this:

"Would you rather reduce deficits and interest rates by raising revenue from those who are not now paying their fair share, or would you rather accept larger budget deficits, higher interest rates, and higher unemployment? And I think I know your answer."

Those words were spoken by Ronald Reagan. But today, many Republicans in the House refuse to consider this kind of balanced approach - an approach that was pursued not only by President Reagan, but by the first President Bush, President Clinton, myself, and many Democrats and Republicans in the United States Senate. So we are left with a stalemate.

Now, what makes today's stalemate so dangerous is that it has been tied to something known as the debt ceiling - a term that most people outside of Washington have probably never heard of before.

Understand - raising the debt ceiling does not allow Congress to spend more money. It simply gives our country the ability to pay the bills that Congress has already racked up. In the past, raising the debt ceiling was routine. Since the 1950s, Congress has always passed it, and every President has signed it. President Reagan did it 18 times. George W. Bush did it 7 times. And we have to do it by next Tuesday, August 2nd, or else we won't be able to pay all of our bills.

Unfortunately, for the past several weeks, Republican House members have essentially said that the only way they'll vote to prevent America's first-ever default is if the rest of us agree to their deep, spending cuts-only approach.

If that happens, and we default, we would not have enough money to pay all of our bills - bills that include monthly Social Security checks, veterans' benefits, and the government contracts we've signed with thousands of businesses.

For the first time in history, our country's Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis - one caused almost entirely by Washington.

Defaulting on our obligations is a reckless and irresponsible outcome to this debate. And Republican leaders say that they agree we must avoid default. But the new approach that Speaker Boehner unveiled today, which would temporarily extend the debt ceiling in exchange for spending cuts, would force us to once again face the threat of default just six months from now. In other words, it doesn't solve the problem.

First of all, a six-month extension of the debt ceiling might not be enough to avoid a credit downgrade and the higher interest rates that all Americans would have to pay as a result. We know what we have to do to reduce our deficits; there's no point in putting the economy at risk by kicking the can further down the road.

But there's an even greater danger to this approach. Based on what we've seen these past few weeks, we know what to expect six months from now. The House will once again refuse to prevent default unless the rest of us accept their cuts-only approach. Again, they will refuse to ask the wealthiest Americans to give up their tax cuts or deductions. Again, they will demand harsh cuts to programs like Medicare. And once again, the economy will be held captive unless they get their way.

That is no way to run the greatest country on Earth. It is a dangerous game we've never played before, and we can't afford to play it now. Not when the jobs and livelihoods of so many families are at stake. We can't allow the American people to become collateral damage to Washington's political warfare.

Congress now has one week left to act, and there are still paths forward. The Senate has introduced a plan to avoid default, which makes a down payment on deficit reduction and ensures that we don't have to go through this again in six months.

I think that's a much better path, although serious deficit reduction would still require us to tackle the tough challenges of entitlement and tax reform. Either way, I have told leaders of both parties that they must come up with a fair compromise in the next few days that can pass both houses of Congress - a compromise I can sign. And I am confident we can reach this compromise. Despite our disagreements, Republican leaders and I have found common ground before. And I believe that enough members of both parties will ultimately put politics aside and help us make progress.

I realize that a lot of the new members of Congress and I don't see eye-to-eye on many issues. But we were each elected by some of the same Americans for some of the same reasons. Yes, many want government to start living within its means. And many are fed up with a system in which the deck seems stacked against middle-class Americans in favor of the wealthiest few. But do you know what people are fed up with most of all?

They're fed up with a town where compromise has become a dirty word. They work all day long, many of them scraping by, just to put food on the table. And when these Americans come home at night, bone-tired, and turn on the news, all they see is the same partisan three-ring circus here in Washington. They see leaders who can't seem to come together and do what it takes to make life just a little bit better for ordinary Americans. They are offended by that. And they should be.

The American people may have voted for divided government, but they didn't vote for a dysfunctional government. So I'm asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your Member of Congress know. If you believe we can solve this problem through compromise, send that message.

America, after all, has always been a grand experiment in compromise. As a democracy made up of every race and religion, where every belief and point of view is welcomed, we have put to the test time and again the proposition at the heart of our founding: that out of many, we are one. We have engaged in fierce and passionate debates about the issues of the day, but from slavery to war, from civil liberties to questions of economic justice, we have tried to live by the words that Jefferson once wrote: "Every man cannot have his way in all things...Without this mutual disposition, we are disjointed individuals, but not a society."

History is scattered with the stories of those who held fast to rigid ideologies and refused to listen to those who disagreed. But those are not the Americans we remember. We remember the Americans who put country above self, and set personal grievances aside for the greater good. We remember the Americans who held this country together during its most difficult hours; who put aside pride and party to form a more perfect union.

That's who we remember. That's who we need to be right now. The entire world is watching. So let's seize this moment to show why the United States of America is still the greatest nation on Earth - not just because we can still keep our word and meet our obligations, but because we can still come together as one nation. Thank you, God bless you, and may God bless the United States of America.

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