Boehner, Reid work on partisan debt plans

This morning the U.S. is another day closer to a potential default, and there is still no deal on raising the nation's debt ceiling.

On Friday House Speaker John Boehner said he was abandoning talks with the White House to focus on what he thought could be a deal that he could reach with congressional leaders. After a weekend of intense back-and-forth, we are now told that those talks have stalled, too, reports CBS News Congressional correspondent Nancy Cordes.

Senate Majority Leader Harry Reid confirmed the impasse in a written statement Sunday night.

"Talks broke down over Republicans' continued insistence on a short-term raise of the debt ceiling," he said, "which is something that President Obama, Leader Pelosi and I have been clear we would not support."

Now Reid and House Speaker John Boehner are finalizing dueling pieces of legislation.

"I would prefer to have a bipartisan approach to solve this problem," Boehner said on "Fox News Sunday." "If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."

Boehner says his Republican bill would involve raising the debt ceiling in two stages: First, by about $1 trillion, in exchange for a trillion in spending cuts.

That would get the nation through about the next six months, at which point the debt ceiling could be raised again, if Congress identified more cuts.

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But Treasury Secretary Timothy Geithner said a short-term increase would inject too much uncertainty into a weak economy.

"The most important thing is, we can't adopt an approach that leaves the threat of default hanging over the country for another six months or so - that would be deeply irresponsible," Geithner said on ABC' "This Week."

Reid's plan, on the other hand, would hike the debt ceiling through 2012, in exchange for $2.7 trillion in spending cuts.

Which sounds like a lot - but includes money not spent in Iraq and Afghanistan, which Republicans are likely to argue are not true cuts.

So, whose plan will prevail? In a conference call with House Republicans, Boehner told his fellow House Republicans, "I think we can win this for the American people," but added that "it's gonna require some of you to make some sacrifices. If we stand together as a team, our leverage is maximized, and they have to deal with us."

That last comment was probably directed at Republican Members who have said that they will not vote to raise the debt ceiling under any circumstances. Boehner will need their votes if he wants his legislation to win out in what is shaping up as a partisan showdown.

The lack of a deal will begin to have a psychological effect on markets this week, said Bloomberg Businessweek senior writer Roben Farzad, but consumers will be hit after the August 2nd deadline. "You're going to see banks not wanting to make loans. You're going to see car dealerships suddenly getting iffy about extending credit to you, and everybody is going to feel it.

"It's already a credit-starved economy; we know that. That's the chief complaint, that banks are not lending out there. You're just giving banks another reason to not lend there," Farzad said on "The Early Show." "If they can't take for granted the government is good for its obligations, if they don't see past August 2nd, if there's no visibility, everything stops."

Farzad also said it was a legitimate concern for pensioners and others who depend on government-issued check that they may not be paid. ,/P>

"As the Treasury Secretary - ultimately the guy who writes these checks out and cuts these checks - you're going to be at a fork in the road come August 2nd if an agreement isn't reached. Do we pay pensioners, people out there who require our entitlement obligations? Or do we pay our people who are crediting the U.S. government chiefly? You're not going to be able to do both unless there is an extension of the debt ceiling."