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Republican offers new U.S. debt proposal

A top Republican Tuesday offered a new proposal to unlock the negotiating impasse over raising the U.S. government's borrowing limits.

But fix would be tied to future spending cuts

U.S. President Barack Obama on Monday said he won't sign any short-term debt limit increases. (Pablo Martinez Monsivais/Associated Press)

A top Republican Tuesday offered a new proposal to unlock the negotiating impasse over raising the U.S. government's borrowing limits, but it came with a catch.

Senate minority leader Mitch McConnell suggested giving President Barack Obama sweeping new power to, in effect, unilaterally increase the nation's debt limit to avoid a first-ever default on U.S. obligations.

McConnell's offer would allow the president to demand up to $2.4-trillion in new borrowing authority by the summer of next year in three separate submissions. However, Obama would also be required to simultaneously propose spending cuts of greater size.

Those increases in the so-called debt limit would automatically take effect unless both the Republican-controlled House and the Democratic Senate enact legislation specifically disapproving it and even then Obama could exercise his authority to veto such legislation. Significantly, the president's spending cuts would be debated under normal procedures, with no guarantee they ever come to a final vote.

In essence, McConnell's proposal would greatly enhance Obama's authority to avoid a default, while also virtually absolving Republicans of responsibility if one occurred.

At the same time, it would allow Republican lawmakers to avoid having to support an increase in the debt limit, something many of them find odious.

"Republicans will choose a path that actually reflects the will of the people, which is to do the responsible thing and ensure the government doesn't default on its obligations," McConnell said in a speech on the Senate floor.

White House has no response

There was no immediate response to the proposal from the White House, where Obama hosted his third meeting in as many days with congressional leaders struggling to avert a financial crisis.

A session lasting 90 minutes on Monday produced no progress.

The proposal came hours after the Republican House of Representatives Speaker John Boehner said the burden for raising the government's debt limit rests on President Barack Obama's shoulders.

"This debt limit increase is his problem, and I think it's time for him to lead by putting his plan on the table — something that the Congress can pass," Boehner said in a morning news conference. Boehner's comments were a sharp shift from a recent conciliatory tone.

Raising the debt ceiling ultimately requires congressional authorization.

The two sides remained hundreds of billions of dollars apart as they tried to find an agreement on more than $2 trillion in spending cuts.

Republicans remain vehemently opposed to a deal that would include any tax increases, while the White House insists increased revenues must be a part of the final package.

U.S. senate minority leader Mitch McConnell, shown at a news conference on June 28, proposed Tuesday a three-step solution which would allow the U.S. government to raise its debt ceiling. ((J. Scott Applewhite/Associated Press))

At the same time, the top Senate Republican, Mitch McConnell, accused Obama and the Democrats of "deliberate deception" of the public during the negotiations to cut government spending and increase the nation's debt limit.

In a harshly worded speech on the Senate floor Tuesday, McConnell said the president presented Republicans during the Monday meetings with three choices: smoke and mirrors, tax increases, or default.

McConnell said Republicans refused to play along.

Despite their strong language, both McConnell and Boehner have said they believe the U.S. will not default on its obligations. The Treasury Department has said the debt ceiling must be raised by Aug. 2 to avoid that potentially calamitous situation.

"I do not see a path to a deal if they don't budge, period," Obama said Monday.

He increased the stakes by announcing he won't sign any short-term debt limit increases.

"We are going to get this done," Obama insisted during a news conference.

The declaration seemed aimed at pressuring lawmakers to make a deal providing for the largest deficit reduction plan possible, despite the fact that talks on a plan for a complete overhaul of the tax code along with cuts to benefits programs like Medicare and Social Security fizzled over the weekend.

That sparked the interest of speaker Boehner until he learned the extent of White House demands for tax increases. "The American people will not accept — and the House cannot pass — a bill that raises taxes on job creators," Boehner said Monday before heading to the White House.

Representative Paul Ryan of Wisconsin, Republican chairman of the House budget committee, said Tuesday that "we are already taxing our job creators and our businesses more than our foreign competitors are taxing theirs."

Ryan told CBS's The Early Show he believes there must be more than a dollar in spending cuts for every dollar in granted to Washington in new borrowing authority.

Ryan said the United States must get spending under control because the mounting federal debt "is a recurrent threat to our economy." He said he believes an international debt crisis looms and "we want to get ahead of it."

The U.S. Treasury Department has said lawmakers have until Aug. 2 to extend the nation's debt limit to prevent a catastrophic government default on its bills. The goal of the White House talks is to produce spending cuts of at least $2.4 trillion over the coming decade.

That wouldn't be enough to address deficits, but would represent a down payment on further reductions that would be imposed after next year's elections.

The $2.4 trillion figure would meet the House Republicans' own standard of a debt-cutting package: one that would exceed the size of the increase in the debt limit, and provide enough borrowing room to get the country through 2012.

With files from The Associated Press