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Obama, lawmakers to meet again as debt clock ticks

WASHINGTON (AP) — With pressure continuing to build but no breakthroughs in sight, budget bargaining between President Barack Obama and top lawmakers resumes Monday at the White House, with both sides hoping to slash the deficit as the price for permitting the government to borrow more than $2 trillion to pay its bills.

 

In a rare Sunday meeting in the White House Cabinet Room, Obama continued to push for a "grand bargain" in the range of $4 trillion worth of deficit cuts over the coming decade, but momentum is clearly on the side of a smaller measure of perhaps half that size. Obama continues to press for revenue increases as part of any agreement but Republicans remain stoutly opposed — despite some private hints to the contrary last week by House Speaker John Boehner, R-Ohio.

Obama holds a news conference Monday morning. The third White House meeting since Thursday is slated for the afternoon.

An Aug. 2 deadline looms to stave off a potentially disastrous first-ever default on U.S. obligations, but the two sides seem no closer than they were when Republicans withdrew from talks led by Vice President Joe Biden more than two weeks ago, citing an impasse on taxes.

Last week, Boehner and Obama had private talks that led Democrats to believe the House speaker was willing to entertain revenue increases as part of a full overhaul of the tax code later this year in exchange for Democrats agreeing to stiff curbs on the growth of Medicare and lower increases in Social Security cost-of-living adjustments. But Boehner recoiled and abandoned the idea Saturday night in a move that rattled the talks.

Sunday's sometimes testy session was shorter than some had anticipated and it's clear neither side is willing to budge on taxes. Democrats say tax increases are a prerequisite for big spending cuts; Republicans rule out the idea unless taxes are lowered elsewhere.

"The sides are at loggerheads," Rep. Chris Van Hollen of Maryland, the top-ranking Democrat on the House Budget Committee, said in a nationally broadcast interview Monday morning.

Monday's meeting will feature a discussion of tentative agreements reached in the discussions led by Biden. They include cuts to farm subsidies, student aid, federal workers' pensions and domestic agency budgets, among others.

Van Hollen blamed Republicans, saying "they refuse to eliminate any of these tax breaks for corporate special interests — corporate jets, oil and gas companies and folks at the very high end of the income scale."

South Carolina's Sen. Jim DeMint, a Republican, argued that Obama "still has not given us a proposal we can accept or reject."

"We're not going to default. We've got the money. We don't need to panic," DeMint said.

Republicans say the Biden group identified more than $2 trillion in cuts, but Democrats put the true figure significantly lower — in large part because many of their concessions on spending cuts relied on the assumption Republicans would accept some new tax revenues. But the Biden group was bitterly divided over taxes, as Republicans like House Majority Leader Eric Cantor of Virginia repulsed Democratic demands to shut down tax breaks for oil and gas companies and deductions enjoyed by the wealthy. And Republicans resisted Democratic attempts for a mechanism to guarantee the Pentagon would contribute to cuts.

"The Speaker told the group that he believes a package based on the work of the Biden group is the most viable option at this time for moving forward," said a Boehner spokesman.

Sunday's meeting featured some tense exchanges, officials briefed on the talks said, as Democrats accused Republicans of being inflexible. And officials briefed on the talks said Obama sharply rebuked Republicans for saying there's no time for a "grand bargain" blending new revenues with big spending cuts — including curbs to Social Security and Medicare.

"If not now, when?" Obama asked, according to a Democratic official requiring anonymity because the session was private.

Senate GOP Leader Mitch McConnell, R-Ky., said a big $4 trillion bargain is off the table.

"Everything they told me and (Boehner) is that to get a big package would require a big tax increases in the middle of an economic situation that's extraordinarily difficult, with 9.2 percent unemployment," McConnell said on "Fox News Sunday." ''We think it's a terrible idea. It's a job-killer."

The lower $2 trillion-plus figure is noteworthy because it's what's needed under GOP-imposed ground rules to solve the issue until after next year's elections and avoid another politically toxic vote before then. Boehner is insisting that any increase in the so-called debt limit be matched by larger cuts in spending, though the spending cuts would accumulate over the coming decade while the debt increase would last perhaps 1½ years.

Democrats continue to press for a larger agreement, arguing that it may be just as easy to achieve as a medium-sized deal.

Treasury Secretary Timothy Geithner cautioned Sunday on NBC's "Meet the Press" that a package about half the size of the one Obama prefers would be equally tough to negotiate because it, too, could require hundreds of billions in new tax revenue — anathema to Republicans.

Meanwhile, the International Monetary Fund's new chief, Christine Lagarde, said that if the U.S. fails to raise its debt limit, she foresees "interest hikes, stock markets taking a huge hit and real nasty consequences" for the American and global economies.

"I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also the rest of the world," she said.

Japan idled reactors could restart after stress test

TOKYO (Reuters) - Japan's idled nuclear reactors could restart work if they pass the first stage of two-step post-Fukushima safety checks, the government said on Monday.

Still, without a timeframe for the tests, concerns remain about summer power shortages that could hurt the economy.

Last week's surprise announcement that the government would conduct stress tests alarmed corporate Japan and outraged some local authorities, who had been prepared to approve reactor restarts after receiving safety assurances from the government.

The first stage of the stress tests will target reactors which have already completed routine checks and are ready for restart. The checks will assess resistance to severe earthquakes and other events more extreme than those for which they were designed.

A second stage of tests will make a comprehensive safety assessment of all 54 of Japan's reactors, the government added in its statement.

Four months after the Fukushima Daiichi plant was smashed by a tsunami and began leaking radiation, only 19 of the country's reactors are running and if some do not resume operation, Japan could be without nuclear power by next April.

The disaster has also sparked a broader public debate about the role of nuclear energy in earthquake-prone, resource-poor Japan, which relied on atomic power for almost 30 percent of its electricity before the crisis.

"Safety and a sense of security are the top priority," Chief Cabinet Secretary Yukio Edano told a news conference.

"On the other hand, the government must fulfill its responsibility for a stable supply of electricity and is coordinating on this with relevant ministries ... and will make every effort to secure (supply) in the medium and long term," he added.

Edano gave no precise timeframe for completing either of the two stages, but said they should be carried out speedily.

UNCLEAR TIMEFRAME

The new assessment scheme, which also lacks detailed procedures, did little to elucidate atomic safety policy for reactor-hosting municipalities, whose approval is by custom required to restart reactors.

"I'm afraid we are still in the dark as to what the government wants to do," said Shigenobu Oniki, vice mayor of the southern Japanese town of Genkai, home of Kyushu Electric Power Co's Genkai nuclear power plant. The government had seen two idled reactors at Genkai as prime candidates for the first restarts since the Fukushima crisis.

"We don't know what each stage will be like and what kind of checks will be involved. I think the government owes us an explanation," Oniki said.

Amid the drawn-out radiation crisis at Tokyo Electric Power Co's Fukushima plant, credit ratings agency Standard & Poor's said, Japan's energy policy will likely remain unpredictable for some time, posing risks for the utility sector.

"Because the nation's energy policy forms the backbone of the Japanese electric utility sector's creditworthiness, we believe prolonged uncertainty could hurt the sector's credit quality," it said.

Shares in Tokyo Electric have tumbled 80 percent since the March 11 disasters, while Kansai Electric Power Co and Chubu Electric Power Co, the next two largest power companies, have both lost 31 percent.

In a sudden policy shift last week, Prime Minister Naoto Kan -- under fire for his handling of the nuclear crisis -- said Japan would administer stress tests modeled on those conducted by the European Union after the meltdowns at Fukushima.

The move was welcomed by critics who say Japan's safety regulations have been too lax, but it also raised the risk of power shortages that could stretch into 2012, and hurt industrial production.

To avoid a power crunch, the government had been pushing for early restarts of facilities that have completed regular checks, but some local authorities said they could not give their OK until the government clarified its position.

Anti-nuclear activists maintained their opposition to reactor restarts. About 100 demonstrators marched on Monday into the government building of Saga Prefecture, where Genkai is located, and made their way near the governor's office, Jiji news agency said.

Kan has ordered a full review of Japan's energy policy, which before the March 11 disasters had aimed to boost nuclear energy's share of electricity supply to more than half by 2030.

He also wants to raise the contribution of renewable energy sources to more than 20 percent by the 2020s, and has made passage of a bill to promote such energy sources a condition for keeping a promise to resign.

The unpopular leader, already Japan's fifth premier in five years, survived a no-confidence vote last month by pledging to hand over the reins to his Democratic Party's younger generation, but has refused to specify when he will step down.

(Additional reporting by Chikako Mogi and Stanley White; Writing by Linda Sieg; Editing by Edmund Klamann and Daniel Magnowski)