US Senate in intense debt debate

30 July 2011 Last updated at 16:56 ET

The Democrat-led US Senate is holding an intense debate on its plan to raise the nation’s $14.3tn (£8.7tn) debt limit, which could determine whether a deal to avoid default is possible.

Senate leaders say the bill is the country’s best hope of a deal but Republicans say only direct talks with President Obama can resolve the crisis.

The House of Representatives rejected the bill on Saturday afternoon.

The US risks default without a deal by 2 August.

The moves come a day after the Senate rejected a rival Republican bill passed in the House of Representatives.

The president backs Senate Majority Leader Harry Reid’s proposal, which would cut $2.2tn from deficits and raise the debt ceiling by $2.7tn.

The Senate plan envisages raising the debt ceiling until after the 2012 elections. Republicans have sought a plan which raises the ceiling for just a few months.

Senate Democrats had hoped to pass the bill by Sunday morning so that it could go to the House by Monday, but the House has already voted 246-173 to reject it.

The BBC’s Marcus George in Washington says there will now be an increasing focus on backroom talks between congressional leaders.

Democrat leaders in Congress have been meeting President Obama to discuss their next move, while Republicans said they were confident a deal could be reached.

Referring to the Senate bill, Senate Republican leader Mitch McConnell called on Democrats to “end this charade” so that negotiations could be pursued with the president.

“We are now fully engaged with the one person in America out of 370 million people who can sign this bill into law,” he said.

‘Heading for disaster’

The BBC’s Paul Adams in Washington says the Treasury is already drawing up emergency plans in case a deal is not reached.

It is a measure of how the anxiety is spreading that troops in southern Afghanistan saw fit to ask Adm Mike Mullen, the chairman of the Joint Chiefs of Staff, whether they would be paid this month, he adds.

Democrat leaders in the Senate are said to be seeking agreement with Republicans to avoid procedural obstacles which could delay the Senate vote until Monday.

Mr Reid accused the Republicans of seeking to filibuster, or delay, proceedings.

“Unless there is a compromise, or they accept my bill, we’re heading for economic disaster,” he said.

In a weekly radio address, Mr Obama reiterated that any solution on a default had to be bipartisan.

“There are multiple ways to resolve this problem,” he said.

“Congress must find common ground on a plan that can get support from both parties in the House and in the Senate. And it has to be a plan that I can sign by Tuesday.”

The House of Representatives passed its own plan on Friday evening by 218-210, with 22 Republicans and every Democrat voting against.

The plan, drawn up Speaker John Boehner, includes some $900bn of spending cuts and would raise the debt ceiling by a similar amount.

However it would require another vote during mid-2012 and includes language in support of a so-called “balanced budget amendment” to the US constitution – both rejected by the White House and the Senate leadership.

Shortly after the House passed its bill, the Democratic-led Senate voted to reject the Boehner plan.

The US government will start running out of money to pay all its bills unless a $14.3tn (£8.79tn) borrowing limit is increased by Tuesday.

Democrats say the Republican bill as passed would cause immeasurable damage to the economy because it would force Congress to vote on another extension of the debt ceiling early in 2012, a time when presidential election campaigns will be in full swing.

Analysts predict a last-minute scramble for a compromise and razor-edge votes in both chambers, with the high-stakes game of legislative brinkmanship expected to continue all weekend.

The Boehner and Reid plans overlap in key ways, such as trimming spending over 10 years and shunning President Obama’s call for tax increases on the wealthy and corporations.

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