Published July 14, 2011
Tensions are flaring as lawmakers return to the negotiating table Thursday, after President Obama ended the last session by dressing down House Republican Leader Eric Cantor.
"Don't call my bluff. I'm going to the American people on this," the president told Cantor, according to the GOP leader.
Democratic and Republican sources have offered several versions of the final moments of Wednesday's meeting -- by most accounts it ended on a low note, raising questions about whether negotiators can make any progress under increasing pressure to strike a deficit-reduction deal and raise the debt ceiling. A startling warning came Wednesday when credit rating agency Moody's said the U.S. government's impeccable credit rating was under review for a potential downgrade. The agency said the ongoing stalemate increased the risk of a first-ever default on the government's debt.
Leaders from each side cited the announcement from Moody's, calling on the other to give ground for the sake of avoiding fiscal calamity. But the area of agreement between the two sides seems only to have gotten smaller in the past few days.
One Republican aide told Fox News that negotiators are "walking back" the value of proposed spending cuts -- from $2 trillion to $1.5 trillion. Cantor apparently tried to suggest negotiators strike a short-term deal considering the distance between the two sides, but Obama shut that idea down.
According to sources, Obama said "enough is enough," arguing forcefully for revenue increases to achieve the deficit reduction sought by the GOP.
"I've reached my limit. This may bring my presidency down, but I will not yield on this," Obama said, before walking out.
"He became very agitated," Cantor said. He called the president's exit from the talks "abrupt," and added that the two sides are "very far apart right now."
But one House Democrat called Cantor's account "completely overblown," saying the Virginia Republican "rudely interrupted the president three times" while Obama was concluding the meeting.
Cantor disputed that claim.
Meanwhile, one Democratic aide called the meeting "tense but constructive."
As negotiators clash, some are talking about the possibility of an extra round of talks this weekend at Camp David, the presidential retreat in Maryland.
Lawmakers are no doubt concerned about the latest warning from Moody's, which cited "the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal" and, in turn, "a small but rising risk of a short-lived default."
Moody's said such a turn of events would make the United States' AAA rating "no longer" appropriate.
A downgrade means the Treasury likely would have to pay higher interest rates to borrow -- higher rates that could ripple over into interest rates for mortgages, car loans and business loans.
The Treasury Department, which has set Aug. 2 as the deadline for raising the nation's $14.3 trillion debt ceiling to avoid a possible default, said, "Moody's assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit-reduction package."
Despite several weeks of negotiations, the White House and Republicans leaders have not been able to strike a deal to rein in government spending while increasing the nation's borrowing limit.
Democrats have insisted on raising new revenues in any deal that would include deep spending cuts. But Republicans are adamantly opposed to any tax increases, even if it is limited to closing tax loopholes for the wealthiest Americans.
Republicans are now debating whether to get behind Senate Republican Leader Mitch McConnell's backup plan which would make it easier for Obama to obtain a debt ceiling increase -- but also risk the possibility of failing to enact spending cuts.