Republicans to vote on US debt plan

Republicans in the House of Representatives will hold a largely symbolic vote today, demanding a balanced budget constitutional amendment as their price for raising the US debt ceiling and avoiding a catastrophic US default.

While the Republican-dominated lower chamber was expected to pass the plan, which also calls for dramatic spending cuts and a cap on government outlays at 2008 levels, it was virtually certain to face defeat in the Democratic-controlled Senate.

President Barack Obama has promised to veto the measure in the unlikely event it should ever reach his desk.

The Bill before the House would ban increasing the debt ceiling until there is a separate vote on a constitutional amendment mandating a balanced federal budget. The measure being voted on does not include such an amendment.

The token vote allows dozens of House members - elected last year with support from the "tea party" movement - to tell constituents that they were true to their pledge to block any tax increases and attempt to force deep cuts in government spending.

Several Republicans said privately the decision to vote on the veto-threatened legislation was paradoxically designed to clear the way for a compromise being discussed by Senate leaders that could resolve the debt-ceiling stalemate.

Congress faces an August 2 deadline for raising the debt limit above the current $14.3 trillion (€10.1tn) level. Failure to do that would make it difficult for the United States to make payments to holders of treasury bonds and meet domestic obligations such as payments to recipients of social security, the government pension plan for retired Americans.

That could create turmoil in world and domestic financial markets and cripple global economies still struggling to recover from the financial crisis that began in 2008.

If the United States were to allow an unprecedented default on its debt, Democratic senator Kent Conrad said yesterday that "interest rates would spike, markets would crash and the economy would flounder".

Mr Conrad, a moderate who is chairman of the Senate budget committee, said Republicans in the House were living "in a dream world".

The White House issued a stinging rejection of the House Republican plan in a statement from the Office of Management and Budget.

It declared that the plan, known as Cut, Cap and Balance, "could result in significant cuts to education, research and development, and other programmes critical to growing our economy ... and put at risk the retirement security for tens of millions of Americans".

Today's House vote will give tea party-aligned House members cover once they face a vote in the coming days on a plan now being constructed by Senate majority leader Harry Reid and his Republican counterpart Senator Mitch McConnell.

That legislation would allow Mr Obama to raise the debt limit three times before the 2012 presidential election without prior congressional approval, while exacting smaller spending cuts and not dealing with the issue of higher taxes.

House Republicans could say they did their best to uphold their pledge on extreme fiscal belt-tightening but had no choice, after defeat of their plan, but to accept the Senate deal to prevent default.

Mr Obama says he still hopes the House will agree to his plan for huge spending cuts over the next decade coupled with higher taxes for the wealthiest Americans and a revocation of tax loopholes benefiting large corporations such as oil companies. House Republicans, however, steadfastly refuse higher taxes in any deal.

The president met House speaker John Boehner and majority leader Eric Cantor quietly in the Oval Office on Sunday morning. A Boehner spokesman, Brendan Buck, said "there is nothing to report in terms of an agreement or progress".

But after an appearance in the White House Rose Garden yesterday, Mr Obama responded to a shouted question by saying: "We're making progress."

Neither Mr Obama nor spokesman Jay Carney disclosed what progress might have been achieved.