Senate rejects House budget-cutting plan

The Senate on Friday firmly rejected a House Republican bill to slash spending and require a balanced-budget amendment, leaving unresolved with just days to go the urgent issue of increasing the nation's borrowing powers and averting a potentially devastating US government default.
The 51-46 Senate vote against the House measure which had been expected in the Democratic-run chamber came shortly after the leader of the House of Representatives, Speaker John Boehner, told reporters he and President Barack Obama had failed to reach a separate agreement to resolve the debt crisis.
"There was no agreement, publicly, privately, never an agreement, and frankly not close to an agreement," Boehner said. "So I suggest it's going to be a hot weekend here in Washington, D.C." The Obama administration says the government is in danger of defaulting for the first time in its history after August 2 unless Congress raises the federal debt ceiling from its present $14.3 trillion level so it can keep borrowing enough to pay its bills.
But Democrats and Republicans have been deadlocked over terms of a deficit-reduction package linked to the debt-limit increase, with Democrats demanding some tax increases and Republicans insisting on doing it just with spending cuts.
Speaking at a town hall Friday at the University of Maryland, Obama insisted that any deal to reduce the deficit must include tax increases on wealthier Americans and corporations, not just spending cuts. Obama sought to push back on the argument from House Republicans that taxes should not go up as part of the deal.
Obama said if the debt is reduced only by cutting spending, "then a lot of ordinary people would be hurt, and the country as a whole would be hurt. And that doesn't make any sense."
If progress is to be made over the weekend in the nation's steamy capital, it will have to be made behind closed doors and not in the open.
Senate Majority Leader Harry Reid cancelled planned weekend Senate sessions, increasing the pressure on Obama, Boehner and other top-level negotiators to strike a deal.
Reid said that talks ongoing between Obama and Boehner are focused on producing legislation involving taxes and that the House would have to act before the Senate, because tax measures must originate in the House.
Boehner underscored his willingness to keep negotiations going, telling reporters, "As a responsible leader, I think it is my job to keep lines of communications open." He said House Republicans were prepared to compromise and prodded Obama: "The ball continues to be in the president's court."
The focus now is on efforts by Obama and Boehner to come up with an ambitious $4 trillion "grand bargain" that would secure the support of rank-and-file lawmakers. But wide differences still remain.
The continuing Obama-Boehner talks kept alive the possibility of substantial deficit reduction that would combine cuts in spending on major benefit programmes like Medicare and Medicaid the government-funded programmes that provide health care coverage for the elderly and poor and revenue increases through a broad overhaul of the tax code. "We have the opportunity to do something big and meaningful," Obama declared in a newspaper opinion piece published Thursday.
Still, insiders stressed that no compromise appeared imminent. And new hope of one ran instantly into old resistance: from Republicans opposed to higher taxes and Democrats loath to cut benefit programmes.
Boehner is under pressure from dozens of new House Republicans, elected last November with the support of the anti-tax, small government tea party movement, who oppose any deal that includes measures to increase government revenues. Obama faces discontent from Democratic lawmakers who don't want to see spending slashed for the major social safety net programmes Medicare, Medicaid and Social Security retirement benefits.
Talk of an Obama-Boehner deal prompted a spasm of distress among Senate Democrats worried that the president would agree to immediate spending cuts but put off steps to increase tax revenues that the president has said are key to any agreement. The White House immediately sought to tamp down talk of an impending deal.