Republican debt plan faces close vote in Congress

A bill to cut the deficit faced a nail-bitingly close vote in Congress today as the top Republican lawmaker sought to quell an internal revolt and push his plan to avoid a ruinous default.

Approval of a plan by House of Representatives Speaker John Boehner would break the inertia in Washington over a debt crisis that has spooked markets and raised the prospect that the government of the world's largest economy will run out of money to pay its bills in less than a week.

President Barack Obama has threatened to veto the bill and a majority of the Democratic-controlled Senate has vowed to vote against it. But a successful vote in the House would give the bill legitimacy and make it a crucial element of the legislative chess game that is likely to play out up to August 2.

That's when the Obama administration says it will run out of funds to pay the country's bills unless a $14.3 trillion borrowing limit is increased. A defeat of the bill could deepen the crisis, swinging the momentum toward a rival Democratic plan in the Senate but leaving no clear way to overcome entrenched opposition from fiscally conservative Tea Party Republicans in the House.

As the brinkmanship over the ideologically charged dispute looks like it will go on through the weekend, investors and ordinary Americans are increasingly nervous that a previously unthinkable US default could spark a new financial crisis.

Asian stocks slid more than 1 percent in thin volume today as investors nervously watched the clock tick down toward the debt ceiling deadline. European shares followed suit, sliding half a percent. The Treasury says it will run out of spending money next Tuesday unless Congress agrees to raise the debt ceiling. Even if an 11th-hour compromise emerges, the United States could lose its top-notch credit status if ratings agencies are not convinced it has done enough to address its bulging debt burden.

The White House has warned of "catastrophic" consequences if a deal is not reached by August 2, rejecting the idea that Obama could invoke an obscure constitutional clause to raise the debt limit.mSeveral House Democrats planned to hold a news conference today to urge Obama to take that option if necessary.

"The only option here is for Congress to do its job," said senior White House adviser David Plouffe on the PBS television show "NewsHour."

"We've run out of excuses and we're running out of time."

After weeks of bickering and setbacks, some common ground has emerged between rival Republican and Democrat plans to cut the deficit and raise the debt limit. A bill being pushed by top Senate Democrat Harry Reid and backed by the White House would cut $2.2 trillion from the deficit over 10 years without raising taxes.