WASHINGTON (CBSNewYork/AP) - President Barack Obama says he'll keep calling meetings on deficit reduction and the government borrowing limit until there's a deal, even though he and Republican lawmakers remain far apart.
New York City Mayor Bloomberg chimed in on the debate, saying Tuesday it was time for both sides to get real and make a deal.
"They're all going to have to, in the end, stop what I would argue is posturing," said Bloomberg. He said a federal government default would have serious consequences.
"It would have a catastrophic effect on our financial system and on our credibility around the world," Bloomberg said.
1010 WINS' Stan Brooks Reports From City Hall
Bloomberg said talk about deficit reduction and the debt ceiling need to be separated. He says that would increase the likelihood of a deal and reduce the odds of financial damage to the economy.
With compromise talks at a vituperative standstill, Senate Republicans unexpectedly offered to hand Obama new powers to avert a first-ever government default threatened for Aug. 2.
WCBS 880's Peter Haskell With Mayor Bloomberg
Under a proposal outlined by Sen. Mitch McConnell of Kentucky, Obama could request -- and likely secure -- increases of up to $2.5 trillion in the government's borrowing authority in three separate installments over the next year, as long as he simultaneously proposed spending cuts of greater size.
The debt limit increases would take effect unless blocked by Congress under special rules that would require speedy action -- and even then Obama could exercise his authority to veto such legislation. Significantly, the president's spending cuts would be debated under normal procedures, with no guarantee they ever come to a final vote.
McConnell made his proposal public a few hours before Obama presided over his third meeting in as many days with congressional leaders searching for a way to avoid a default and possible financial crisis.
Democratic officials who participated in the session said Obama did not reject the Senate Republican leader's suggestion, but stressed it was not his preferred approach. A statement issued later in press secretary Jay Carney's name said the president "continues to believe that our focus must remain on seizing this unique opportunity to come to agreement on significant, balanced deficit reduction."
WCBS 880's Pat Farnack With Jackie Calmes Of The New York Times
Other officials said participants at the meeting spent part of the time reviewing proposed spending cuts that were made by both sides during several weeks of negotiations led by Vice President Joe Biden, suggesting that negotiators had not given up on a deal to cut deficits.
There was little or no dispute among senior officials about the importance of avoiding default.
In an interview on CBS taped before the meeting, Obama said that without a deal to raise the debt limit, he could not guarantee that Social Security checks will be issued on Aug. 3 "because there may simply not be the money in the coffers to do it."
House Speaker John Boehner, R-Ohio, interviewed on Fox News, pointed to turmoil rippling across Europe as evidence of what might happen if the United States defaults on its obligations.
In essence, McConnell's proposal would greatly enhance Obama's authority to avoid a default, while also virtually absolving Republicans of responsibility if one occurred.
At the same time, it would allow Republican lawmakers to avoid having to support an increase in the debt limit, something many of them find odious.
"Republicans will choose a path that actually reflects the will of the people, which is to do the responsible thing and ensure the government doesn't default on its obligations," McConnell said in a speech on the Senate floor. He also excoriated the administration for seeking tax increases along with spending cuts as part of an agreement to raise the debt limit, adding that as long as Obama is president "a real solution is unattainable."
Boehner praised McConnell for doing "good work" with his recommendation but did not endorse it.
Other conservatives were less polite. Presidential hopeful Newt Gingrich tweeted his criticism almost as soon as the proposal was released. Rep. Louie Gohmert, R-Texas, said Republicans would be "agreeing to give up the best leverage that we could possibly have to get the country on track financially in return for an agreement that is completely unenforceable."
At the same time, Boehner said he believed Obama was trying to reach a compromise on deficit cuts, "but their insistence on raising taxes is preventing us from getting there."
The talks have revolved around attempts to meet Republican demands for deficit cuts at least as large as any increase in the debt limit. Negotiators have grown testy in recent days as Obama and Democrats pushed for higher tax revenue as part of the deal, a line Republicans say they will not cross.
Given the reaction from other Republicans, it seemed unlikely that McConnell's proposal could show the White House and congressional leaders of both parties a way out of a deadlock that Obama and others said threatened calamitous results for an economy still struggling to recover from the worst recession in decades.
Yet it would obligate Obama to outline deep spending cuts, something Republicans have been trying to force him to do for months without much success.
Reductions as large as $2.5 trillion would almost certainly affect domestic programs seen as important by Democratic constituencies and by rank-and-file lawmakers, possibly including Medicare and Medicaid. Even if the cuts never took effect, Republicans would be able to call for votes, while identifying them as sponsored by the White House.
Any such proposals could also be used by Republicans in the 2012 campaigns, if only to blunt attacks made by Democrats.
The White House talks have been aimed at producing a compromise to cut projected deficits by trillions of dollars over the next decade while renewing the Treasury's authority to resume borrowing.
The government reached its current $14.3 trillion borrowing limit several weeks ago, and Treasury officials have been relying on accounting maneuvers to continue to pay the nation's bills without additional borrowing.
While Obama and Republicans maneuvered for political position, New York Mayor Michael Bloomberg said during the day that the two parties' debate over deficit reduction "should not be tied to the debt ceiling."
"America's good name and credit are just too important to be held hostage to Washington gridlock," he said in a speech a few miles away from the nation's financial center of Wall Street.
Bloomberg's concern echoed similar expressions by Obama and Treasury Secretary Timothy Geithner, and neither McConnell nor Boehner has disputed the assertion that a default could bring disaster to the economy that is growing so slowly that unemployment stands at 9.2 percent nationally.
Still, in remarks made before McConnell unveiled his proposal, Boehner said bluntly of the president, "This debt limit increase is his problem and I think it's time for him to lead by putting his plan on the table -- something that the Congress can pass."
McConnell's Senate speech was particularly pointed when he spoke of Obama, whose defeat in 2012 he has called his top political priority.
"Rather than find a way to bring government back to the people, the administration has committed itself to protecting the size and scope of government at the cost of job creation, economy growth and America's status in the global economy," he said.
Under his proposal, the debt limit would rise by $100 billion as soon as Obama requested the first of the three increases envisioned.
Officials have said that the government normally borrows about $125 billion a month to finance operations, meaning Obama could avoid a default for a brief period of time simply by asking for it.
Earlier Tuesday, Wisconsin's Rep. Paul Ryan told CBS's "The Early Show'' that "we are already taxing our job creators and our businesses more than our foreign competitors are taxing theirs.''
Ryan said there should be over a dollar in spending cuts for every dollar in new borrowing authority.
(TM and Copyright 2011 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2011 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
for more features.