President urges GOP to avoid 'Armageddon'

Tensions rise over budget battle

House, Senate working on fallback plans

Jan Bees, a member of the Progressive Change Campaign Committee upset over potential cuts to Medicare, Medicaid, and Social Securit,y walks to President Obama's campaign headquarters to deliver 200,000 signatures from people who are refusing to donate or volunteer for his re-election campaign if Mr. Obama cuts entitlement programs, Friday.

WASHINGTON -- President Obama challenged Congress Friday to compromise and "do something big" to reduce long-term deficits, insisting he was willing to make his own tough choices including trimming benefits for wealthy Medicare recipients.

Facing a critical Aug. 2 deadline to raise the nation's debt limit, Mr. Obama said the public was on his side but "we're running out of time."

Lawmakers embarked instead on competing fallback plans.

One is a House Republican version given little chance of success, even by some supporters, while the other is a bipartisan Senate approach holding out more promise to avert what Mr. Obama called financial "Armageddon."

"If we can't do the biggest deal possible, then let's still be ambitious. Let's still try to at least get a down payment on deficit reduction," Mr. Obama said. "If Washington operates as usual and can't get anything done, let's at least avert Armageddon."

House Republicans scheduled a vote for Tuesday on a measure that would cut deeply into the federal budget, cap government spending for the years ahead, and approve a constitutional amendment requiring a balanced budget.

The Democratic-controlled Senate tentatively planned a vote for Wednesday on a balanced budget amendment.

While neither measure will make it into law given opposition from Mr. Obama, Republicans are eager to reassure their conservative base that they are not backing down and that they will continue to press their case for shrinking the government through the 2012 elections.

Mr. Obama signaled that he would support the fallback plan, based on a proposal from Senate Minority Leader Mitch McConnell (R., Ky.) that would defer the bigger budget fight but allow for the debt limit to be raised.

As part of the Senate proposal, a panel of lawmakers would recommend cuts in benefits programs by the end of the year, with the House and Senate required to vote yes or no on the package without possibility of changes.

"If they show me a serious plan I'm ready to move," Mr. Obama said.

He indicated that he wanted a far more sweeping deal that might have raised the age of Medicare eligibility from 65 to 67 if Republicans would increase selected taxes.

"We are obviously running out of time," he said.

Mr. McConnell said, "Now the debate will move from a room in the White House to the House and Senate floors," an indication that the daily closed-door negotiations on Mr. Obama's home ground were a thing of the past.

The House Republican rank and file were advised in a GOP meeting that, barring action by Congress, the government would be able to pay only about half its bills after Aug. 2, and separately that a default could cost the government trillions of dollars in the form of higher interest rates on the debt.

"No matter what 50 percent you choose to pay, there are things in that 50 percent you don't pay that would have really severe consequences," Rep. John Campbell (R., Calif.) said afterward.

"There are people out there who keep saying we don't need to increase the debt limit at all. I think this was a way of saying, the people who are saying that need to look at the practical consequences of what they are saying."

Rep. Paul Ryan (R., Wis.) chairman of the House Budget Committee, said after the meeting he had discussed the additional costs generated by a default -- an event that would likely raise interest rates.

At his news conference, Mr. Obama said that would mean "effectively a tax increase on everybody" by affecting car purchasers, students, and businesses.

The second White House news conference in a week was a testament to the overriding political and economic significance of the issue that has convulsed Congress as well as the administration.

Urging lawmakers to cut trillions from deficits at the same time they raise the debt limit, the President said he favored a balanced approach that included spending cuts, changes to huge government benefit programs, and higher taxes on wealthy individuals and certain industries.

It was an offer Republicans could -- and did -- refuse.

"There are going to be no tax hikes because tax hikes destroy jobs," House Speaker John Boehner said.

While Mr. Boehner had earlier shown some flexibility on closing tax loopholes as part of an unprecedented deal with Mr. Obama, many Republican lawmakers are adamant that deficit reductions be limited to spending cuts.

Top presidential advisers -- William Daley, the White House chief of staff, and Timothy Geithner, the Treasury secretary -- were on Capitol Hill to meet with Mr. Boehner, given the House speaker's continued interest in some deficit-reduction compromise despite resistance from many House Republicans.

Publicly, Mr. Boehner gave no hint of accord.

"We're in the fourth quarter here," he said at a news conference. "We asked the President to lead. We asked him to put forward a plan -- not a speech, a real plan -- and he hasn't. We will."

Meanwhile, at Mr. Obama's national campaign headquarters in Chicago, a liberal group upset over potential cuts to Medicare, Medicaid, and Social Security threatened to pull its support from the President's re-election campaign.

About a dozen people representing the Progressive Change Campaign Committee delivered what they said were 200,000 pledges from people who will refuse to donate or volunteer for Mr. Obama's campaign if he cuts the entitlement programs.