Obama draws debt line

WASHINGTON — President Barack Obama warned Republicans on Wednesday not to use the debt ceiling as leverage on spending and tax decisions, saying he refused to engage again in the sort of brinkmanship that took the country close to default last year and damaged its credit rating.

Obama said in a speech to the Business Roundtable: “That is a bad strategy for America, it’s a bad strategy for your businesses and it is not a game that I will play. Everybody here is concerned about uncertainty. There’s no uncertainty like the prospect that the United States of America, the largest economy, that holds the world’s reserve currency, potentially defaults on its debts.”

While saying he would not “play that game,” a phrase he repeated, Obama did not say what he would do in response, but some Democrats have urged him in the past to simply raise the borrowing limit using his own executive authority and let the courts determine if he overstepped his constitutional bounds.

He seemed to embrace a suggestion by John Engler, the Business Roundtable president, to raise the debt ceiling enough to last five years.

“John is exactly right when he says that the only thing that the debt ceiling is good for as a weapon is just to destroy your credit rating,” Obama said.

Obama was reacting to reports that Republican leadership officials were looking for a fallback in the current debate to avert an end-ofthe-year fiscal crisis. Some Republicans foresee accept- ing Obama’s call to extend George W. Bush-era tax cuts for the middle class while allowing them to expire for the wealthiest Americans, and then taking up the fight again when the nation’s debt rises to the point that the statutory borrowing limit needs to be raised again, which could be in late January or February.

Republicans view any vote to raise the debt ceiling as a chance to enforce more fiscal discipline on Obama. House Speaker John Boehner has said any increase in borrowing capacity should be offset by spending cuts that exceed the increased debt. Obama has responded by proposing to take away the congressional power to approve increases in the debt ceiling, but Boehner said last weekend that “Congress is never going to give up this power.”

Appearing before reporters Wednesday, Boehner and other House Republican leaders implored Obama to sit down with them and begin negotiating in earnest to head off the looming fiscal crisis.

Boehner and his leadership team did not give an inch in their opposition to raising tax rates on top earners or their insistence that any deficit-reduction plan emphasize spending cuts. But the speaker insisted that he had moved toward the president’s position by agreeing to $800 billion in higher tax revenue over 10 years.

“The revenues we’re putting on the table will come from guess who? The rich,” he said. “There are ways to limit deductions, close loopholes and have the same people pay more of their money to the federal government without raising tax rates.”

The dueling public appearances underscored how far apart the two sides are, at least as a matter of principle. Obama’s plan calls for $1.6 trillion in new taxes over 10 years, mainly through allowing rates to rise on incomes of more than $200,000 a year for individuals or $250,000 for families.

He has also revived a yearold plan to trim health-care and other mandatory spending by $600 billion over 10 years, but he also wants to spend $50 billion in the short term to help the economy.

Boehner has countered with a plan, more focused on spending cuts, that limits new tax revenue to $800 billion over 10 years, raised through closing provisions, ending tax breaks and restricting deductions, but keeping the Bushera rates across the board. His plan envisions spending cuts of $1.4 trillion over 10 years, including curbing increases in entitlement programs such as Medicare and Social Security.

Obama argued that if Republicans accepted his plan to raise tax rates, the rest of a deal could come together quickly.

“We can probably solve this in about a week,” Obama said. “It’s not that tough. But we need that conceptual breakthrough that says we need to do a balanced plan.”

For the first time in days, Obama and Boehner spoke by phone Wednesday.

Officials provided no details of the conversation. They said after the talk that there was no immediate plan for a resumption of negotiations to avert the “fiscal cliff,” a combination of automatic spending cuts and tax increases that are to go into effect in January unless Congress acts before then.

At the same time, they said that for the first time in a few days, at least one top presidential aide had been in touch with Republicans by e-mail on the subject.

Treasury Secretary Timothy Geithner said Wednesday that the Obama administration is “absolutely” ready for the economy to go over the fiscal cliff rather than accept a budget deal that doesn’t include higher tax rates for top earners.

Geithner said the administration thinks budget deficits are so large that they can’t be closed without increasing tax rates on the highest-earning 2 percent of Americans.

“There’s no prospect in an agreement that doesn’t involve those rates going up on the top 2 percent of the wealthiest Americans,” Geithner said in an interview on CNBC.

Geithner’s comments immediately drew fire from a top Republican senator.

“This is one of the most stunning and irresponsible statements I’ve heard in some time,” said Sen. Orrin Hatch, R-Utah. “Going over the fiscal cliff will put our economy, jobs, people’s paychecks and retirement at risk, but that is what the White House wants, according to Secretary Geithner, if they don’t get their way.”

In the interview, Geithner also said the administration would reject a budget plan that didn’t include an increase in the federal borrowing limit.

Among Republicans, Sen. Tom Coburn of Oklahoma became the latest to break ranks and say he could support Obama’s demand for an increase in tax rates at upper incomes as part of a comprehensive plan to cut federal deficits.

“I don’t really care which way we do it,” Coburn said in an interview on MSNBC. “Actually, I would rather see the rates go up than do it the other way because it gives us greater chance to reform the tax code and broaden the base in the future.”

Additionally, a few dozen Republicans have joined a bipartisan call to break the impasse between Obama and Boehner over taxes for the highest-earning Americans.

The Republicans signed a letter calling for exploration of “all options” on taxes and entitlement programs, a signal that some rank-and-file members are ready to bargain.

One of the petition leaders, Rep. Mike Simpson of Idaho, says he could accept higher rates for married couples earning more than $500,000 a year, in exchange for an overhaul of spending on entitlements such as Medicare.

Separately, Rep. Kay Granger of Texas is endorsing Oklahoma Republican Tom Cole’s call to extend all tax cuts for middle-class earners as “just the right thing to do.”

The letter’s approximately 80 signers are half Republican, half Democratic, according to Simpson spokesman Nikki Watts.

“It’s pretty obvious Obama won the election, and he promised he was going to raise taxes on the wealthiest,” Simpson said in an interview. “What Republicans said is, ‘We’ve got to have entitlement reform.’”

While it may be an unpalatable trade for both sides, he said, “There’s enough sane people left to get it done.”

Aides to Boehner and House Majority Whip Eric Cantor of Virginia are playing down the number of Republicans willing to negotiate on tax rates. Publicly, the speaker has given no indication that he’ll change his position.

Last week, Cole was the first high-profile Republican to say his party should lock in the Bush-era income tax cuts for 98 percent of Americans by the end of the year and allow them to expire for the top 2 percent of earners.

“I would gladly accept some rate increase if some spending reduction was locked in, but the White House is not addressing any of that,” said California’s Rep. Brian Bilbray, who is retiring.

Republicans including Peter King of New York and Scott Rigell of Virginia have said they would break a pledge against raising taxes.

“There are probably dozens of other Tom Coles in the House who just don’t feel free to speak their mind,” New York’s Sen. Charles Schumer, a Democrat, told reporters Wednesday.

In the House, Cantor said Wednesday that the chamber will not formally adjourn for the year “until a credible solution to the fiscal cliff has been found.”

The House was originally scheduled to adjourn and formally end the 112th Congress on Dec. 14. But Cantor’s announcement means House lawmakers likely will meet the next week and possibly right up to and beyond Christmas Day.

Information for this article was contributed by Peter Baker and Jonathan Weisman of The New York Times; by David Espo, Jim Kuhnhenn, Andrew Taylor and Martin Crutsinger of The Associated Press; by Heidi Przybyla, Roxana Tiron, Kathleen Hunter, Richard Rubin, James Rowley and Roger Runningen of Bloomberg News; and by Ed O’Keefe and Rosalind S. Helderman of The Washington Post.