Obama, Boehner vie for edge on debt

President Obama and Speaker John Boehner (R-Ohio) both sought to get the upper hand Monday in the fight over reining in the federal deficit.

While Obama invited Senate Democrats and Republicans to the White House for meetings later this week, Boehner told a New York audience that the $14.3 trillion debt ceiling should be raised only if spending is cut by an amount greater than the increase to the borrowing limit.

{mosads}The White House has asked for a $2 trillion hike in the ceiling, which would mean at least that much in spending cuts would be needed.

Boehner and Obama are both fighting to win over voters worried about excessive Washington spending but unconvinced by proposals to reign in entitlement reforms.

Republicans want to win immediate spending cuts, while Democrats favor requiring either spending cuts or tax increases down the road to lower the deficit.

The battle is also being waged for credibility with Wall Street, where some worry that political brinkmanship over the debt ceiling could upend capital markets and raise interest rates. 

“It’s true that allowing America to default would be irresponsible,” Boehner told the Economic Club of New York, according to excerpts provided by his office, “but it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

Cuts “should be greater than the accompanying increase in debt authority the president is given,” Boehner said. “We should be talking about cuts of trillions, not just billions. They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future.”

Republicans will continue their efforts to win over Wall Street on Tuesday, when House Majority Leader Eric Cantor (R-Va.) meets business leaders and rings the New York Stock Exchange’s opening bell. 

Meanwhile, Obama will invite House Republicans and Democrats to the White House in the coming weeks.

Democrats warn that the GOP’s hard line on debt threatens to send the economy into another tailspin.

In a press call intended to pre-empt Boehner, Sen. Charles Schumer (D-N.Y.) said that in his speech, the Speaker should explicitly rule out a default. He said the House should move to raise the debt ceiling well before the Aug. 2 deadline set by the Treasury Department, and warned that if no action is taken by around July 15, markets could react badly.

Boehner, who previously had described the debt-ceiling vote as being the first “adult moment” for the new House majority, should assure credit markets the GOP will not force default on federal debts, Schumer said. 

“Mr. Boehner needs to have that adult moment right here and now,” Schumer told reporters. He said Boehner’s speech “will be a ‘litmus test’ on whether House Republicans plan to finally approach the debt ceiling as adults. So far, many of them have not been responsible about this issue at all.” 

The trips by the top two House Republicans were not coordinated, said John Murray, Cantor’s deputy chief of staff. The majority leader’s visit is part of his own broader effort “to articulate the Republican pro-growth message beyond the Beltway,” Murray said.

Cantor will join a private roundtable of executives at the stock exchange Tuesday, and will meet separately with Duncan Niederauer, the CEO of NYSE Euronext, and Larry Leibowitz, its chief operating officer. 

House Republicans argue that while they have approved a 2012 budget resolution that would reduce deficits by $4 trillion over the next decade, Democrats have yet to produce a plan.

Obama in April outlined a framework for reducing deficits by about $3 trillion over 10 years, but the White House has not produced a full-scale budget proposal fleshing that out. The April speech essentially renounced Obama’s official February budget proposal, which would have frozen federal spending.

Senate Democrats have so far failed to back a budget alternative drafted by Budget Committee Chairman Kent Conrad (D-N.D.).

A vote to raise the debt ceiling without reducing spending would be difficult for members of both parties, and Schumer said he is open to a suggestion by Senate Majority Leader Harry Reid (D-Nev.) to enact debt triggers that could force spending cuts or tax increases to rein in deficits.

But the two parties are far apart on whether tax increases could be considered. Schumer said a GOP proposal for a spending cap is “impossible” to enact since it ignores revenue. 

Sen. Jon Kyl (R-Ariz.), who is set to take part in a second round of talks being led by Vice President Biden on Tuesday, denounced Obama’s position as “shortsighted” since, he argued, tax hikes would cut growth and ultimately reduce revenue.

As Republicans and the White House fought for better ground, administration officials met for regular talks with China, the U.S.’s largest creditor.

Treasury Secretary Timothy Geithner assured officials from China, which holds $1.15 trillion in U.S. treasuries, that the U.S. is enacting ”reforms that will force us to once again live within our means as a nation” while working to maintain crucial investments in education, innovation and infrastructure.

Chinese officials have made clear in recent weeks they are closely monitoring U.S. efforts to shore up its finances and prevent a future debt crisis that could hurt China’s investment.

“We hope that the United States in its fiscal cleanup will be able to adopt effective measures based on President Obama’s proposal,” Chinese Vice Finance Minister Zhu Guangyao told reporters in Beijing on Friday, according to published accounts.

Brookings Institution scholar Eswar Prasad predicted Friday that during this week’s meetings, the Chinese will put “tough questions” to the U.S. about the possibility of a default on the debt, if Congress refuses to raise the nation’s debt ceiling in the coming months. 

— Jordan Fabian and Russell Berman contributed to this report.