December 9, 2019

Boehner Seeking Democrats’ Help on Fiscal Talks

In meetings with Democratic and Republican Congressional leaders on Thursday after a session with Treasury Secretary Jacob J. Lew on Wednesday, Mr. Boehner sought a resumption of negotiations that could keep the government running and yield a deficit-reduction deal that would persuade recalcitrant conservatives to raise the government’s borrowing limit.

Much of the federal government will shut down as of Oct. 1 unless Congress approves new spending bills to replace expiring ones, and by mid-October, the Treasury Department will lose the borrowing authority to finance the government and pay its debts.

“It’s time for the president’s party to show the courage to work with us to solve this problem,” said Mr. Boehner, who argued that budget deals have been part of past agreements to raise the debt limit

But a bloc of 43 House Republicans undercut the speaker’s deficit-reduction focus, introducing yearlong funding legislation that would increase Pentagon and veterans spending and delay President Obama’s health care law for a year — most likely adding to the budget deficit. That bloc is large enough to thwart any compromise that does not attract Democratic support.

“Obamacare is the most dangerous piece of legislation ever passed in Congress,” said Representative John Fleming, Republican of Louisiana. “It is the most existential threat to our economy” that the country has seen “since the Great Depression, so I think a little bit of additional deficit is nothing,” he added.

Just five scheduled legislative days stand between the House and a government shutdown that has loomed for months. As of now, Republican leaders appear to have no idea how to stop it. House members are preparing for the worst. Representative Scott Rigell, Republican of Virginia, began circulating a 14-page fact sheet on the impact of a government shutdown.

Mr. Lew and Congressional Democrats held firm that they would no longer negotiate on raising the debt ceiling, which they see as the duty of the party in power in the House. And they made it clear to the speaker that they would never accept Republican demands to repeal, defund or delay Mr. Obama’s signature health care law. White House officials dismissed it as “a nonstarter.”

“I had to be very candid with him and I told him directly, all these things they’re doing on Obamacare are just a waste of their time,” said Senator Harry Reid, Democrat of Nevada and the Senate majority leader. “Their direction is the direction toward shutting down the government.”

“I like John Boehner,” Mr. Reid added. “I do feel sorry for him.”

Earlier this week, Representative Eric Cantor of Virginia, the No. 2 House Republican, proposed a two-step resolution to the fiscal impasse that was temporarily pushed into the background by Mr. Obama’s request for approval to initiate a military strike on Syria, since delayed.

Under Mr. Cantor’s plan, the House would have voted this week on a stopgap spending bill to keep the government operating through mid-December at the current level, which reflects the sharp across-the-board cuts known as sequestration. That bill would have a companion resolution to withhold all money for the health care law, but the Senate could simply ignore that resolution and approve the short-term spending bill.

Then the House would vote to raise the debt ceiling enough for a year of borrowing, but demand a year’s delay in carrying out the health care law.

Within 24 hours, the House’s most ardent conservatives revolted, declaring the defunding resolution a gimmick that fell well short of their drive to undo the health care law. House Democrats said they would oppose not only stripping the health care law of money but also a spending level that maintains sequestration.

Article source: http://www.nytimes.com/2013/09/13/us/politics/at-meeting-with-treasury-secretary-boehner-pressed-for-debt-ceiling-deal.html?partner=rss&emc=rss

Today’s Economist: Bruce Bartlett: The Politics of the 14th Amendment and the Debt Limit

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Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

In 2011, Republicans in Congress drove the nation to the very brink of defaulting on the national debt. During that debate, a number of conservatives argued that default was no big deal — that the debt was so terrible that default was a reasonable option to be considered. Although few Republicans agreed with this position, probably all agreed with Senator Mitch McConnell of Kentucky, the Senate minority leader, that the debt limit was a hostage worth ransoming to force President Obama to surrender to their demands.

Today’s Economist

Perspectives from expert contributors.

The most recent debt-limit extension was enacted in January and expires on May 19. On March 12, Senator McConnell signaled that he again planned to hold it hostage to Republican demands that programs to aid the poor and elderly be slashed.

In a March 13 interview with the radio host Sean Hannity, the House speaker, John A. Boehner of Ohio, said repeal of the Affordable Care Act might be the ransom that will have to be paid for raising the debt limit. “Do you want to risk the full faith and credit of the United States government over Obamacare?” he said. “That’s a very tough argument to make.”

In 2011, a number of respected legal scholars asserted that a little-known provision of the 14th Amendment to the Constitution essentially invalidated the debt limit. That provision states:

Sec. 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Other scholars contended that this constitutional provision was archaic, that it related to factors specific to the post-Civil War period and had no present-day relevance. On the contrary, I believe a careful review of the circumstances surrounding enactment of the 14th Amendment shows a great deal of similarity to those today.

Such a review was recently done by Franklin Noll, a historian who is a consultant to the Treasury Department’s Bureau of Engraving and Printing, and posted on the Web site of the Social Science Research Network.

Mr. Noll points out that there was strong support for repudiating the Civil War debt among Democrats, who were closely aligned with the Confederate South. They were angered that Congress had explicitly repudiated all the Confederate debt, and had refused to compensate slave owners for freeing their valuable slaves, and Southerners had no desire to help pay the Union’s debts.

One problem for Republicans was that the 13th Amendment abolished the clause in the Constitution that counted slaves as three-fifths of a man for the purpose of apportioning seats in the House of Representatives. The ironic result was to increase the South’s representation in the House. The 11 states of the Confederacy saw their representatives rise to 73 in 1870 from 61 in 1860. They would also have 22 of the Senate’s 74 seats.

It was feared that readmission of the Southern states, together with Democrats from the north, would provide enough votes to prevent passage of legislation to fund the debt. Hence Republicans believed it was essential to have constitutional protection for the national debt.

The forces of repudiation found strong support in the departing President Andrew Johnson, a Democrat from Tennessee whom Abraham Lincoln put on the Republican ticket in 1864 in a spirit of unity to save the Union. In his last State of the Union address, on Dec. 9, 1868, Johnson contended that the cost of the debt was so high that repudiation was justified. He declared:

This vast debt, if permitted to become permanent and increasing, must eventually be gathered into the hands of a few, and enable them to exert a dangerous and controlling power in the affairs of the government. The borrowers would become servants to the lenders, the lenders the masters of the people. We now pride ourselves upon having given freedom to 4,000,000 of the colored race; it will then be our shame that 40,000,000 of people, by their own toleration of usurpation and profligacy, have suffered themselves to become enslaved, and merely exchanged slave owners for new taskmasters in the shape of bondholders and tax gatherers.

Johnson proposed that the Treasury cease paying interest on a large portion of the debt and instead use that money to retire the debt. “The lessons of the past admonish the lender that it is not well to be over-anxious in exacting from the borrower rigid compliance with the letter of the bond,” he said.

Supporters of repudiation, however, had two big political problems to overcome. First, much of the Civil War debt was owned by average people. Historically, financial institutions had bought almost all the Treasury’s bonds, but the amount of bonds needed to be sold during the war required creation of a mass market for Treasury securities.

Second, the debt was closely identified in the public mind with the war itself. As Mr. Noll explains: “The wartime debt became inextricably entwined with the patriotism and moral purpose of the Civil War. To attack the public debt was therefore an attack on the wartime sacrifices and the righteousness of the war to preserve the Union and abolish slavery.”

For this reason, people were willing to bear a much heavier burden of taxation than existed before the war, making the promises of tax relief from debt repudiation fall on deaf ears.

The purpose of the debt provision of the 14th Amendment was to say that national debt was beyond the realm of politics. In the words Jack Balkin, a Yale law professor: “It was stated in broad terms in order to prevent future majorities in Congress from repudiating the federal debt to gain political advantage, to seek political revenge or to try to disavow previous financial obligations because of changed policy priorities.”

Republican threats to hold the debt limit hostage to their agenda today present precisely the sort of political situation contemplated by the authors of the 14th Amendment.

Article source: http://economix.blogs.nytimes.com/2013/03/19/the-politics-of-the-14th-amendment-and-the-debt-limit/?partner=rss&emc=rss

Obama to Ask Congress for Power to Merge Agencies

Mr. Obama called on lawmakers to grant him broad new authority to propose mergers of government agencies, which the Congress would have to approve or reject in an up-or-down vote.

The president, announcing the plan at the White House, said he would begin his pruning exercise by folding the Small Business Administration and five other agencies involved in trade and business, into a single agency that would replace the Commerce Department.

The White House said the consolidation would save $3 billion over 10 years and result in the elimination of 1,000 to 2,000 jobs, though he said those reductions would occur through attrition rather than layoffs.

“From the moment I got here, I saw up close what many of you know to be true: the government we have is not the government we need,” Mr. Obama told an audience of small business owners.

It is not clear whether Congress, which has blocked the bulk of Mr. Obama’s legislative agenda, will go along with the initiative. White House officials said that no president since Ronald Reagan has had the so-called “consolidation authority” Mr. Obama is seeking.

Republicans were immediately skeptical. They suggested that the White House was more interested in honing its re-election message than in reducing the size of government.

“Yesterday, President Obama asked for a $1.2 trillion increase in the debt limit, today he is proposing to shrink the federal government,” said Senator John Cornyn, Republican of Texas. “Unfortunately, President Obama does not have much of a record to back up his newfound, election-year enthusiasm for limited government.”

A spokesman for House Speaker John A. Boehner said that Republicans would take a look at the plan.

“We hope the president isn’t simply proposing new packaging for the same burdensome approach,” said the spokesman, Brendan Buck. “However, eliminating duplicative programs and making the federal government more simple, streamlined, and business-friendly is always an idea worth exploring. We look forward to hearing more about his proposal.”

By putting the onus for streamlining government on Congress, however, Mr. Obama was seizing a core issue of Republican presidential candidates like Mitt Romney — the inexorable growth of the federal government — and trying to turn it to his own political advantage.

It was the latest sally by the president, who has gone on the offensive against Congress as he embarks on his re-election bid. He appointed a new head of the Consumer Financial Protection Bureau, Richard Cordray, as well as other appointees to regulatory agencies, during a Congressional recess, to get around the opposition of lawmakers.

Under the terms of the reorganization proposed Friday, six relatively small agencies — the Small Business Administration, the Office of the United States Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the Trade and Development Agency — would be consolidated into a single agency focused on opportunities for the private sector.

The administrator of the Small Business Administration, currently Karen G. Mills, would be elevated to the cabinet.

To illustrate the tangled maze of government services for businesses, the president gestured toward a screen behind him that showed the dozens of Web sites, offices, and customer service centers that a company must contend with, many with overlapping functions.

Mr. Obama championed the goal of streamlining government during his State of the Union address last year. On Friday, he cited an example of duplication from that speech: the Interior Department oversees salmon in fresh water, while the Commerce Department has jurisdiction over them in salt water.

The president said he would use the “consolidating authority” only for bureaucratic reorganizations that cut costs and made the government more efficient. And he challenged Republican lawmakers to support an idea that they themselves have embraced.

“With or without Congress, I’m going to keep at it, but it would be easier if Congress helped,” Mr. Obama said. “This is an area where we should receive bipartisan support because making our government more responsive and strategic and leaner should not be a partisan issue.”

Article source: http://feeds.nytimes.com/click.phdo?i=eced0236a208cbe3ceaf90db991f9bdc

Republican Debates Are a Hot Ticket on TV

This September, Fox’s debate — in Florida, with Mr. Romney, Mr. Paul and new names like Herman Cain and Michele Bachmann — attracted almost twice as many viewers: 6.1 million, the highest so far this year. The very first televised Republican debate this spring attracted almost 3.3 million viewers, while the first debate in the spring of 2007 had 1.8 million.

What explains the fact that debates this year are garnering almost twice as many viewers as any of the early debates, Democratic or Republican, did four years ago? Cable news executives don’t know for sure, but they have theories. Chief among them is that widespread anxiety about the economy and disapproval of the political system is building viewership.

“The ‘pox on all of their houses’ sentiment of the summer debt limit debate is clearly affecting voters,” said Mark Lukasiewicz, the senior vice president for NBC News specials. “It’s driven them to be a lot more interested and more engaged in the process early on.”

“The issues have never quite hit home to this degree,” said Michael Clemente, senior vice president for news editorial at Fox News.

Other theories involve livelier contenders, showier production values for the debates and an increase in online chatter about them — some of the same traits that make reality TV shows successful.

The record-high ratings do not benefit the cable news networks directly through advertising sales, because there are few ads during debates. But the debates do benefit the networks indirectly, by attracting election-season sponsorships and by lending prestige to their brands. “It’s a great tent pole,” Mr. Clemente said. “You get to showcase your best people.”

While that has been true for decades, it may matter more now that cable news channels are effectively politics channels around the clock, making them more eager than ever to have screen time with the candidates. Exceptionally early interest in the election has revealed itself not just in the debate ratings but “in clicks online for political stories and in ratings for candidate interviews,” said Sam Feist, the Washington bureau chief for CNN, which will host the next debate on Tuesday in Las Vegas.

Television producers have added a little more sizzle to the debates this year — the introduction to September’s CNN-Tea Party debate reminded many of a “WrestleMania” match — and they say they have, in some cases, spent a little more than in previous years on the productions.

CNN intentionally held its debates this summer in large arenas. “I’m not sure that there’s a direct correlation between production values and ratings, but just anecdotally, the bigger the event feels on TV, the bigger the audience” that tunes in, Mr. Feist said.

(The introductory theme for Tuesday’s debate sounds a lot like an Olympics opening ceremony theme.)

Over all, though, Mr. Feist and his counterparts say they have made no major changes to the marketing, publicity or format of debates. For the most part, they credit the people on stage and the dramatic situations that those characters, for lack of a better word, create. Mr. Clemente said, “If I said, ‘There’s going to be a show on where you can find out how you might get a better job or retirement income,’ you’d go, ‘Geez, all right, let me listen to that.’ ”

In the early days of the presidential primary race, in May and June, the audience was more than three million each for the first debate on Fox and the second debate on CNN. The audience rose to five million on Fox in August and to 5.4 million on MSNBC in early September. A week later, the CNN-Tea Party debate drew 3.6 million; that decline was attributed to competition from “Monday Night Football” and tennis matches on other channels. Then came the current cycle’s record-setter, 6.1 million on Fox.

Article source: http://feeds.nytimes.com/click.phdo?i=85d9fd01f687457ca7c6af737accaa87

Economix Blog: It’s the Aggregate Demand, Stupid

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Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.

Today’s Economist

Perspectives from expert contributors.

With the debt limit debate temporarily set aside, the Obama administration is talking about finding some way to create jobs and stimulate growth. But the truth is that there really isn’t much it can do and it knows it. There may be some small-bore things it can do without Congressional action that may help a little, but the operative word is “little.” The only policy that will really help is an increase in aggregate demand.

Aggregate demand simply means spending — spending by households, businesses and governments for consumption goods and services or investments in structures, machinery and equipment. At the moment, businesses don’t need to invest because their biggest problem is a lack of consumer demand, as a July 21 study by the Federal Reserve Bank of New York documented.

The federal government could increase aggregate spending by directly employing workers or undertaking public works projects. But there is no possibility of that given the political gridlock in Congress and President’s Obama’s desire to appear moderate and fiscally responsible going into next year’s election.

That really leaves just consumers as a potential avenue for increasing spending. But that will be difficult as long as unemployment remains high, thus reducing aggregate income, and households are still saving heavily to rebuild wealth, which was decimated by the collapse in housing prices. Saving is, in a sense, negative spending.

Changes in wealth affect spending because people will spend a percentage of their increased wealth. And they are more likely to raise their spending when the wealth increase is perceived to be permanent rather than transitory.

Historically, people have viewed increases in home equity as more permanent than increases in stock market wealth because they know the latter is more volatile. A recent Federal Reserve Board working paper estimated that the long-run increase in spending from an increase in housing wealth may be as high as 9.1 percent per year.

As home prices increased, many people came to believe they had no real reason to save since they could always tap their home equity — which banks were more than happy to help them do — in the event that they needed funds. Thus the personal saving rate fell from 3.5 percent in the early 2000s to just 1.4 percent in 2005 at the peak of the housing bubble.

Home prices roughly doubled between 2000 and 2006, according to the Case-Shiller index, and many homeowners talked themselves into believing they would continue rising indefinitely. Thus they increased their spending and reduced their saving based not only on actual price increases, but also on expectations of future increases.

A prescient 2007 Congressional Budget Office study explained how this would affect spending and growth in the economy. It said that if people were expecting a 10 percent rise in home prices and instead they fell 10 percent, the impact on spending would be equivalent to a 20 percent fall in prices. The budget office estimated that this might reduce growth of gross domestic product by 2.2 percent per year. Since actual home prices have fallen by about a third, this suggests that G.D.P. may be $500 billion less this year than it would be if home prices had simply remained flat since 2006.

One way that the rise and fall of spending can be visualized is by looking at the velocity of money. This is the speed at which money turns over in the economy. When velocity rises, more G.D.P. is produced per dollar of the money supply. When velocity falls, the economic impact is exactly the same as if the money supply shrank by the same percentage.

The chart below comes from the Federal Reserve Bank of St. Louis and shows velocity as the ratio of the money supply (M2) to nominal G.D.P. It rose from 1.85 in 2003 to 1.96 in 2006. It has since fallen to a current level of 1.66. Thus one can say that each $1 increase in the money supply produced almost $2 of G.D.P. in 2006 and only $1.66 today.

Velocity of M2 money supply, expressed as the ratio of quarterly nominal G.D.P. to the quarterly average of M2 money stock. (Shaded areas indicate United States recessions.)Source: Federal Reserve Bank of St. LouisVelocity of M2 money supply, expressed as the ratio of quarterly nominal G.D.P. to the quarterly average of M2 money stock. (Shaded areas indicate United States recessions.)

This suggests that the Federal Reserve could have offset the decline in spending and velocity resulting from the fall in home prices with a sufficient increase in the money supply. And it tried. Since 2006, money supply has increased by about $2 trillion. But velocity fell faster than the money supply increased as households reduced spending and increased saving — the saving rate is now over 5 percent — and banks and businesses hoarded cash.

Nonfinancial businesses are now sitting on close to $2 trillion in liquid assets that could be invested immediately if there was an increase in sales, and banks have $1.5 trillion of excess reserves that could be lent as well.

Fiscal policy could raise velocity and growth by getting money moving throughout the economy. But since that is not feasible, the Fed is the only game in town. Joseph Gagnon, a former Fed economist, says that it should immediately increase the money supply by $2 trillion and promise to keep increasing it until the economy has turned around.

But the Fed is already under pressure to tighten monetary policy from its regional bank presidents, three of whom dissented from last week’s Fed decision to keep policy steady. They fear that inflation is right around the corner. But as the Harvard economist Kenneth Rogoff has argued, a short burst of inflation would do more to fix the economy’s problems than any other thing. One reason is that inflation raises spending by encouraging consumers and businesses to buy things they need immediately because prices will be higher in the future.

The right policy can be debated, but the important thing is for policy makers to stop obsessing about debt and focus instead on raising aggregate demand. As Bill Gross of the investment firm Pimco put it recently: “While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease — it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease.”

Article source: http://feeds.nytimes.com/click.phdo?i=8ce4e978e5f4b1bbd8dd791816e5dc76

Economix: The Debt Ceiling, in Pop Culture

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Enlisting readers in a hunt for answers.

During the financial crisis, the bank-run scene from “It’s A Wonderful Life” proved a useful pop-culture reference for helping people understand what was happening to the economy.

This whole debt ceiling debacle and its potential consequences are similarly confusing, especially if you’re just tuning in now. It would be nice if there were a similar popular allusion to help people make sense of the debate. Yesterday I asked the Twitterverse for suggestions, and so far I’ve heard “Thelma and Louise,”  the end of “Planet of the Apes” and “Jackass: The Movie.“ Those aren’t exactly the kind of analogies I was looking for, but hey, they’re amusing all the same.

So readers, what do you think? Is there a film or other cultural touchstone that can help people understand the debt limit discussions and their potential consequences?

Article source: http://feeds.nytimes.com/click.phdo?i=9442f02f00b2d900fdd92de70da39ecc

That Aug. 2 Deadline? It May Be Impossible, Veteran Lawmakers Say

The seemingly unbridgeable impasse between the two parties as the deadline for raising the nation’s debt limit approaches has Tom Daschle losing sleep, as he never did when he was a Senate Democratic leader in the mid-1990s and Congressional Republicans forced government shutdowns rather than compromise on spending cuts.

“That was nothing compared to this. That was a shutdown of the government; this could be, really, a shutdown of the entire economy,” Mr. Daschle said. “You can’t be too hyperbolic about the ramifications of all this.”

Democrats and Republicans with legislative experience agree that even if both sides decided Saturday to raise the $14.3 trillion borrowing ceiling and to reduce future annual deficits, it would be extremely difficult for the compromise measure to wend its way through Congress before Tuesday’s deadline, given Congressional legislative procedures.

But such a bipartisan deal seemed virtually impossible on Friday, as House Republicans approved their bill and dug in deeper against compromise with President Obama.

Any possibility of avoiding an economy-shaking default seemed to rest on hopes of a so-far nonexistent compromise in the Senate — between the majority leader, Harry Reid, Democrat of Nevada, and the Republican minority leader, Senator Mitch McConnell of Kentucky — that could pass by Tuesday and then be sent to the House.

That would force Speaker John A. Boehner to decide at the 11th hour whether to hold a House vote on a bill that would not get many Republican votes, forcing him to rely on Democrats and perhaps further weaken his leadership, or to risk blame for an economic crisis.

“He’s going to have to pass it with Democratic votes. That’s going to be a tough decision, but he doesn’t have any choice at that point, particularly if the markets are reacting,” said Tom Davis, a former House Republican leader from Virginia. “That’s the position they’ve got themselves in.”

But, he added: “The stakes are much higher here. If interest rates start spiking up, it’s going to cost us a lot more than anything you could save. They’re playing brinkmanship with our credit rating. That’s not very smart.”

Mr. Davis recalled his vote in late September 2008 for the $700 billion Troubled Asset Relief Program that President George W. Bush sought to rescue a financial system near collapse. “I hated TARP, but no one had a better alternative,” he said.

But most of his Republican colleagues opposed the rescue measure and helped defeat it, sending the stock markets tumbling even as the vote was taking place. That reaction forced the Republicans to retreat, and days later a bailout bill carried on a second try.

Mr. Davis predicted that the current standoff over the debt limit could end similarly. “When the markets react” — as early as Monday if there is no compromise in sight — “I think the politicians will act,” he said.

Yet many of the Congressional Republicans who won office last November with the help of the antigovernment Tea Party movement, giving their party control of the House, campaigned on promises to resist any government bailouts and to oppose an increase in the debt limit. Some lawmakers have been quoted describing the debt-limit vote as a way to make up for Republicans’ support of the bank rescue three years ago.

Against that backdrop, major business groups issued statements on Friday reiterating their calls for a deal, but with a heightened note of alarm.

The Business Roundtable, an association of executives of some of the country’s largest corporations, sent a letter to the White House and Congress warning that “inaction poses an unacceptable financial risk to the nation’s economic growth and job creation” — this on a day when the latest economic data confirmed that growth slowed in the second quarter with the fallout of Japan’s tsunami, Europe’s debt crisis and upheaval in the Middle East.

“Failure to Raise Debt Ceiling Could Turn the Economy Back Into a Recession” was the headline on a statement from the U.S. Chamber of Commerce.

“I’ve never seen people genuinely worried like this,” said Vin Weber, a former representative from Minnesota, now a Republican strategist who has been meeting with other Republicans, including lawmakers, this week. “This time you have people who genuinely don’t know what the outcome is going to be, and they’re worried that the wrong outcome could genuinely be disastrous.”

Article source: http://feeds.nytimes.com/click.phdo?i=116ec8ffec072a59543b2b8ee7d2eabf

Boehner Says G.O.P. Is Ready to Act Alone on Debt Deal

Leaders of both parties continued to negotiate over the telephone, hoping to settle the matter before the opening of the Asian markets later on Sunday. That opening is widely feared to be the first real test of the tangible financial market fallout from the debt limit impasse. It was far from clear that such a deal would or could be reached in time.

As the Aug. 2 deadline for lifting the debt ceiling nears, warnings are growing that the nation’s economy may be damaged because of the protracted political stalemate. A downgrade of the nation’s credit rating, which could raise the cost of borrowing, seemed more likely, deal or no deal.

The impasse has further set the tone for the 2012 presidential race, with the debate growing rancorous and the two parties’ visions for the country at odds. The enormous deficit challenges have been clearly articulated to voters, as the parties seek unified control of Congress, where the Republicans are the majority in the House and the Democrats in the Senate.

“My last offer is still out there. I’ve never taken my last offer off the table,” Mr. Boehner said on “Fox News Sunday.” He said that plan included about $800 billion in new tax revenue as well as significant spending cuts.

“The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that’s possible,” Mr. Boehner added. “If that’s not possible, I and my Republican colleagues in the House are prepared to move on our own.”

The contours of such a plan were far from clear at midday Sunday. But it seemed likely to take the form of a two-step process, with a short-term increase in the debt limit along with about $1 trillion in cuts, an amount the Republicans said was sufficient to clear the way for a debt limit increase through year’s end. That would be followed by future cuts guided by a new legislative commission that would consider a broader range of trims, program overhauls and revenue increases.

Both sides would also be given another chance to vote on a balanced budget amendment that would set stringent guidelines for future debt ceiling increases.

While the White House remains adamantly opposed to a two-step deal that does not extend the debt ceiling beyond next year’s elections, administration officials expect that the Senate would modify Mr. Boehner’s proposal.

At the moment, the White House is a spectator to the 11th-hour game plan, after Mr. Boehner’s abrupt abandonment of negotiations on Friday night.

While a modified plan might fail to gain the support of the more right-leaning and Tea Party-influenced House members, it could win enough Democratic votes to pass if it is blessed by the Senate majority leader, Harry Reid. However, if Mr. Boehner were to reject Senate modifications and go with a deal that would pass muster with his Republican conference, the Senate would have to offer a rebuttal, as the clock ticks.

Such a plan has been rejected out of hand by the White House and Senate Democrats as unacceptable; they prefer one that would clear the way for roughly $2.5 trillion in extra borrowing needed to get through 2012, just beyond the presidential election.

Indeed, the so-called grand bargain between Mr. Boehner and Mr. Obama has not been left for dead — as have plans crafted by Mr. Boehner; the Republican minority leader, Mitch McConnell; and others — because, at the end of the day, the $800 billion in tax revenues and trillions of dollars in cuts amount to perhaps the best deal either party can get, even if it is unacceptable to the base of each.

Mr. Obama has said he will veto any debt legislation unless it extends the ability of the nation to borrow into 2013, the White House chief of staff, William M. Daley, said on Sunday.

Mr. Daley, appearing on the NBC News program “Meet the Press,” said that world markets and the American economy could not continue with the doubts brought on by periodic fights over the debt ceiling. “The president believes that we must get this uncertainty out of the system,” Mr. Daley said.

Minutes after Mr. Daley promised a veto, Senator Tom Coburn, Republican of Oklahoma, said on the same program that Mr. Daley’s remarks were “a ridiculous position, because that’s what he’s going to get presented with.”

Meanwhile, Treasury Secretary Timothy F. Geithner suggested there was still hope for a grand bargain. “They are talking again,” Mr. Geithner said in an appearance on “This Week” on ABC. “They’ve been in touch throughout this time.”

Both Mr. Geithner and Mr. Daley said they believed Congress would figure out a way to avoid default. “The leaders of Congress have said unequivocally that we will meet our obligations,” Mr. Geithner said.

Mr. Daley acknowledged, however, that both sides were still at the brink. “We are now getting to a point where markets around the world will question whether the political system can come together and compromise for the good of the country,” Mr. Daley said.

On Saturday, Congressional leaders clashed as they tried to reach a new deficit reduction agreement that Mr. Boehner told colleagues could cut $3 trillion to $4 trillion in spending over 10 years.

“We are working, and I’m confident there will be resolution,” Mr. Boehner told his fellow House Republicans in an afternoon conference call, according to participants. “There has to be.”

Maria Newman contributed reporting from New York.

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Debt Ceiling Uncertainty Puts States at Risk

Maryland is postponing a bond sale that had been scheduled for Friday, after the state was warned that its credit rating would probably be lowered in the event of a federal downgrade. California, which typically issues short-term bonds at this time of year, is working to arrange bank loans instead, citing the market uncertainty. And state officials across the nation are trying to figure out what will happen to the federal payments they rely on for everything from Medicaid to unemployment to highway construction if a deal is not reached to raise the debt ceiling by the Aug. 2 deadline.

States whose economies rely on the federal government — including Maryland and Virginia, home to many federal employees and contractors — are at the greatest risk if there is no agreement and Washington has to decide which payments to make and which to skip. They were among the states warned by Moody’s Investors Service this week that their credit ratings were being jeopardized by Washington — which would make it more expensive for them to borrow for costs like construction, through no fault of their own.

“For nearly 75 years we have worked hard to earn the highest credit ratings from all three rating agencies,” Gov. Bob McDonnell of Virginia, a Republican, wrote this week to President Obama and members of Congress, urging them to raise the debt limit. “Now your failure to get the job done is hurting the businesses and citizens of our commonwealth.”

Many state and local officials are still hoping that a deal will be reached, averting a situation in which federal payments to the states could start to be cut in August. But a number of states have begun preparing for the worst.

Ric Brown, Virginia’s secretary of finance, said that it was a difficult task, made much more difficult by the lack of concrete information coming from Washington. “What you’ve got at the federal level, let’s face it, is outright chaos,” he said in an interview. “It’s hard to make sense out of that.”

In Maryland, the uncertainty over what will happen in Washington is complicating the state’s plans to sell bonds for school construction and to refinance some existing debt. The sale was pushed back to Monday after the state was warned that the debt ceiling debate could harm its credit rating.

Of course, if the debt limit is not raised and the federal government cannot meet all its costs, states and localities will face a new set of more serious problems. The National Conference of State Legislatures told members this week that there was little experience to guide their many “what if” questions, citing instead “a potpourri of ‘coulds,’ ” including the possibility that the federal government could pay its debts in the order in which they were received, or could prioritize which payments to make.

If the federal government were to stop paying some employees or contractors next month, or were to hold back Social Security checks, it could have a “profound effect on state and local tax revenues,” according to a report issued this week by the Pew Center on the States. On top of that, a delay in the payments that states and local governments rely on would pose cash-flow problems for many states. The Pew report noted that the federal government owed $10.4 billion in tuition assistance next month, when the academic year begins.

August is also the peak of the road construction season. In June, the states got $4 billion worth of reimbursements for transportation projects from the federal government, said Jack Basso, the director of program finance and management for the American Association of State Highway and Transportation Officials. Now the association is trying to figure out whether money in the highway trust fund — which comes mostly from the federal gas tax — would be protected if the debt limit were not raised.

An interruption in payments would put states in a bind, Mr. Basso said, since they use the money to pay private contractors. “They would have to face ‘How are we going to pay our bills?’ ” Mr. Basso said.

California had been preparing to issue $5 billion worth of short-term bonds next month, but now its treasurer, Bill Lockyer, is seeking to put together a bridge loan with banks instead.

“Given the situation in Washington, the treasurer decided it would be prudent to develop a contingency plan, a Plan B,” said Tom Dresslar, a spokesman.

Mayors are also watching the debate in Washington nervously. Several said in interviews that they were not worried in the short term. But some, including Mayor Ralph Becker of Salt Lake City, said they were worried about the general economic harm that a federal default would cause. “We all fear and see the specter, the dark clouds that would hide our beautiful blue skies and mountains,” he said. “It’s hanging over us.”

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Debt Ceiling Talks Collapse as Boehner Walks Out

The latest turn in the summer’s epic clash between the White House and Congressional Republicans came little more than a week before the government hits its borrowing ceiling, and set off accusations from both sides about who was to blame.

A visibly angry President Obama, in a hastily scheduled White House news conference, demanded that Congressional leaders come to the White House on Saturday morning. “I want them here at 11 a.m. tomorrow,” he said. “They are going to have to explain to me how it is that we are going to avoid default.”

Mr. Obama said Mr. Boehner had stopped returning his calls when it became clear that rank-and-file House Republicans would not agree to raise revenues on wealthy Americans as part of a debt-reduction deal, despite Mr. Obama’s concessions on reducing future spending for Medicare, Medicaid and Social Security. Both sides have sought a deficit-reduction agreement as part of the essential vote to raise the government’s $14.3 trillion debt limit, which will be reached Aug. 2.

In a letter to his Republican colleagues on Friday night, Mr. Boehner said, “A deal was never reached, and was never really close.” He added: “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.”

The speaker said Mr. Obama wanted to raise taxes too high and would not make “fundamental changes” to entitlement benefit programs like Medicare.

But according to a White House official, Mr. Obama had agreed over the coming decade to cut $250 billion from Medicare spending and $310 billion from other domestic entitlement programs, like farm subsidies and education programs. And Mr. Obama was willing to change the formula for Social Security cost-of living adjustments, which many economists say would more accurately reflect inflation, for savings of about $125 billion more.

All of Mr. Obama’s concessions on the benefit programs were contingent, however, on Mr. Boehner and Republicans agreeing to higher taxes for wealthy individuals and corporations.

At the news conference, Mr. Obama said Republicans were forfeiting an “extraordinarily fair deal” to trim the deficit and raise the debt ceiling. “I have gone out of my way to make compromises,” the president added.

“Essentially what we had offered Speaker Boehner was over a trillion dollars in cuts to discretionary spending, both domestic and defense,” Mr. Obama said. “We then offered an additional $650 billion in cuts to entitlement programs Medicare, Medicaid, Social Security. We believed that it was possible to shape those in a way that preserved the integrity of the system, made them available for the next generation and did not affect current beneficiaries in an adverse way.”

Republicans, though, said that the White House pushed for more revenue midway through the talks. “The White House moved the goal posts,” Mr. Boehner said in a news conference.

The breakdown was the second time this month that Mr. Boehner had walked away from the table with Mr. Obama after word of their private talks was leaked to the news media, provoking protests from Republican lawmakers and antitax conservative groups.

“I’ve been left at the altar now a couple of times,” Mr. Obama said. “And I think that one of the questions that the Republican Party is going to have to ask itself is, Can they say yes to anything?” 

This time, however, Mr. Obama had also faced a firestorm from within his party, because of the spending cuts he was considering with Mr. Boehner.

Hours before the tempest, the three top stewards of the nation’s financial system — Treasury Secretary Timothy F. Geithner; Ben S. Bernanke, chairman of the Federal Reserve, and William C. Dudley, president of the Federal Reserve Bank of New York — had met to discuss how to react to shield the economy from the blow if Congress failed to raise the debt limit. But in a joint statement, they said they remained confident Congress would act.

Mr. Obama, too, said he thought that default could be avoided. “I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits,” he said at his news conference.

Mr. Boehner said he would work now with Senate leaders on a plan to raise the debt limit.

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