Debt negotiations underway at White House

Senate Majority Leader Harry Reid says negotiations aimed at resolving the debt-limit standoff are under way at the White House.

As a result, the Democrat postponed a test vote on a Democratic debt limit proposal that had been scheduled for shortly after midnight. He says he's delaying that vote until 1 p.m. Sunday to give negotiators time to work out an agreement.

In a brief statement on the Senate floor, Reid said that many parts of the potential pact remain to be worked out.

Obama huddles with Democrats in hunt for debt deal

US President Barack Obama held an urgent White House summit with key Democratic allies Saturday as his Republican foes said fever-pitch efforts to avert a disastrous debt default would soon pay off.

"That's not true," Democratic Senate Majority Leader Harry Reid said, pouring cold water on the upbeat Republican message after he and Democratic House Minority Leader Nancy Pelosi met with Obama and Vice President Joe Biden.

With three days before a midnight Tuesday deadline, Obama stayed largely out of sight but warned in his weekly address that "very little time" remained to reach a deal to raise the ê14.3 trillion dollar US debt ceiling.

The US economy hit that limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally -- but can only do so through August 2.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 percent in the wake of the 2008 global meltdown.

Absent a deal, the US government will have to cut an estimated 40 cents out of every dollar it spends, forcing grim choices between defaulting on its debt or cutting back on programs like those that help the poor, disabled and elderly.

Republican Senate Minority Leader Mitch McConnell said he had spoken with Obama and Biden by telephone and declared himself "confident and optimistic that we're going to get an agreement in the very near future."

"Senator McConnell and I are both confident that we're going to be able to come to some agreement with the White House and end this impasse," Republican House Speaker John Boehner said as they held a joint press conference.

But a grim-faced Reid scolded McConnell, declaring that "merely saying you have an agreement in front of television cameras doesn't make it so" and stressing that "the process has not been moved forward during this day."

McConnell shot back that he "actually cut short a conversation with the vice president to come out here" and added: "I would like to get back to work so we can hopefully solve this problem."

The Senate was on course for a 1:00 am (0500 GMT) Sunday procedural vote on Reid's proposal to end the angry stalemate -- but US Senate Republicans were expected to kill the measure.

The plan would raise the debt ceiling by about ê2.2 trillion with equivalent cuts over ten years, and includes elements of a "fall-back" plan by McConnell that would let Obama raise the limit with just Democratic votes.

Behind closed doors, officials tussled over the contours of a compromise expected to call for spending cuts, no tax hikes and the creation of a special committee of lawmakers tasked with finding more savings in the future.

Key sticking points included the size of spending cuts to be tied to Obama's request for a ê2.4 trillion debt limit increase, an effort to put off another political battle on the issue to after the November 2012 elections.

They also included a fight over a enforcement mechanism to ensure that lawmakers agree to future spending cuts, notably to cherished social safety net programs, according to a senior Republican Senate aide.

Obama warned that a stalemate could lead ratings agencies to downgrade the sterling Triple-A US debt rating, causing a spike in interest rates that would throw a wrench into the gears of the already sputtering US economy.

The acrimonious talks came after the Republican-led House of Representatives voted to kill Reid's proposal for raising the debt limit, a day after the Democratic-held Senate did the same to Boehner's plan.

The House move, which amounted to a preemptive strike on a bill that had yet to get a Senate vote, came after an often angry and partisan debate punctuated by boos and cheers and spiced up with unusually personal broadsides.

When Republican Representative David Dreier said defeating the measure would help leaders of both parties negotiate a path forward, Democratic Representative Sandy Levin denounced the claim as "pernicious nonsense."

Republican Representative and presidential candidate Michele Bachmann accused Obama of snubbing the negotiations while overseeing "insane, never-before-seen-in-the-history-of-this-country levels of spending."

And Pelosi, recalling how Boehner had toughened his own bill to win over conservatives, said the speaker "chose to go to the Dark Side" -- a reference to Star Wars movie franchise villain Darth Vader.

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