Republican lawmakers came under mounting pressure from conservatives Thursday to reach a debt deal that would save the United States from an unprecedented default and satisfy demands from Wall Street.
There were some signs of progress as White House and congressional leaders worked furiously to craft a deficit reduction deal that would clear the way for Congress to raise the $14.3 trillion debt limit before the United States runs out of money to pay all its bills Aug. 2.
The White House said there was growing momentum toward a significant deficit reduction plan that would include both spending cuts and tax increases. Congressional aides, however, said the parameters of any potential agreement remained fluid and negotiators were working on many critical details.
Aides and some lawmakers suggested negotiators were coalescing around a short-term extension of the debt ceiling with a $500 billion up-front deficit cut and a commitment to a more substantial, long-term solution to America's fiscal problems.
Both the White House and the top Republican in Congress, House of Representatives Speaker John Boehner, denied a New York Times report that they were close to a deal. But the prospect boosted markets that have become increasingly edgy as as the Aug. 2 deadline looms.
If Congress fails to raise the debt ceiling in time, the United States would default on its obligations, possibly plunging the country back into recession and sparking a crisis in financial markets worldwide.
House Republicans remained the key hurdle to a deal, and drama was unfolding within their ranks over whether they had been given a loophole in their ``no tax'' pledge that could allow them to support a long-term deficit reduction deal.
Boehner said he had warned Republican congressmen that they would have to accept some compromise, and he believed most would do so.
``At the end of the day, we have a responsibility to act,'' Boehner told reporters.
Senate Republicans have already shown themselves more willing to compromise. Mitch McConnell, the Senate's top Republican, offered a backup plan to avoid default, and one of the most conservative senators in the chamber, Tom Coburn, signed onto the long-term deal from a bipartisan group of senators known as the ``Group of Six.''
Quoting congressional officials, The New York Times said the Obama administration had informed Democratic congressional leaders Wednesday night that President Barack Obama and Boehner were starting to close in on a major budget deal that would enact substantial spending cuts and seek future revenues through a tax overhaul.
Outside Congress, some of the most influential and powerful voices tied to the Republican party were urging compromise.
Karl Rove, a leading party strategist and architect of George W. Bush's two presidential victories, told Republicans to ease off the hard-line stances that have crippled talks between the White House and Congress.
The U.S. Chamber of Commerce, a powerful business lobbying group with close Republican ties, also called for a deal before America runs out of money to pay its bills.
``Too much spending and the need for real entitlement reform has led to the debt crisis we're in today,'' said the Chamber's chief lobbyist, Bruce Josten. ``But jeopardizing our country's credit rating and fiscal security by refusing to compromise isn't the answer.''
Officials from one of the three big credit rating agencies, S&P, were due to meet first-term Republican lawmakers at 3 p.m.
Credit rating agencies have threatened to downgrade the United States if Congress fails to raise the debt limit. Even if Congress boosts the borrowing limit, that likely would not be enough for the credit agencies, which want the United States to tackle its long-term fiscal problems.
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Republicans won control of the House last November with the backing of the fiscally conservative Tea Party movement, which opposes tax hikes and increasing the government's debt burden.
Republicans have insisted on deep spending cuts as part of any agreement to raise the limit on borrowing, but talks hit an impasse as the party's negotiators refused to discuss tax increases that Democrats insist be part of the package.
The White House had called for agreement by Friday to allow Congress the time needed to move legislation through its chambers. There have been glimmers of hope this week for a possible compromise.
The Gang of Six plan, proposed by a group of Republican and Democratic senators, calls for $3.75 trillion in savings over 10 years including $1.2 trillion in new revenue.
Obama also made a concession this week, agreeing to a small increase in the debt limit if a long-term deficit reduction deal were possible within a few days of the Aug. 2 deadline.
On Thursday, Grover Norquist, founder of Americans for Tax Reform and author of a ``no tax'' pledge most Republican lawmakers have signed, gave conservatives a potential out on that promise.
In comments to the Washington Post editorial board, Norquist said allowing the Bush-era tax cuts on personal income to expire would not constitute a violation of the pledge. He later told MSNBC he would oppose any change to those taxes but that there were ways to technically not violate the pledge.
``There are certain things you can do technically and not violate the pledge but that the general public would clearly understand as a tax increase,'' Norquist told MSNBC television.
Democrats called the concession significant and a Republican aide said it could give Boehner greater latitude to cut a deal.
But Boehner said he remains opposed to tax increases and that allowing the Bush-era cuts to expire would amount to a hike.