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Obama, Senate GOP Discuss Debt Ceiling


President Obama sat down with Senate Republicans today to talk about steps they can take together to reduce the nation's long-term debt. Whatever they do, the debt is likely to keep growing in the short run and Congress is under pressure to raise its self-imposed debt ceiling to avoid a government default.

NPR's Scott Horsley reports on today's meeting and what's at stake.

SCOTT HORSLEY: The White House and Senate Republicans were diplomatic in describing today's closed door meeting. Both sides called the budget talks constructive. The two parties have staked out very different strategies for getting control of the government's red ink. But Senate Republican Leader Mitch McConnell said he was pleasantly surprised by the tone of today's conversation.

Senator MITCH MCCONNELL (Republican, Kentucky): Candidly, I was a little skeptical as to whether this meeting was worth having. But I actually think it was a very good meeting. It gave the president an opportunity to have Republican senators tell him directly how they see this. And everyone did it very respectfully. We didn't have a big food fight in there over the things that we typically, you know, fight over in an election. I thought it was really helpful.

HORSLEY: The budget talks are still at an early stage, but there is a clock ticking in the background. The government will soon begin bumping up against a self-imposed limit on the federal debt. White House spokesman Jay Carney says the Senate Republicans acknowledged that.

Mr. JAY CARNEY (Spokesman, White House): Everyone in the room, at least who spoke to that issue, agreed that we absolutely have to raise the debt ceiling, which was a good thing.

HORSLEY: Still, Republicans in Congress are demanding something in return for their debt ceiling votes. House Speaker John Boehner said this week any increase in the limit should be accompanied by big cuts in government spending.

Representative JOHN BOEHNER (Republican, Ohio): The American people have overwhelmingly rejected the idea of giving the president a blank check to increase the debt limit and Republicans are listening to the American people.

HORSLEY: Meanwhile, American business people have begun urging Congress to raise the debt ceiling without delay. Dozens of business associations wrote to lawmakers this week warning that failure to raise the debt limit could trigger a massive spike in borrowing costs and do lasting damage to the U.S. economy.

The letter was signed by a wide range of business interests, including candy makers, industry firms and the Independent Bakers Association.

Mr. NICK PYLE (President, Independent Bakers Association): We're about 250 small to medium-size wholesale bakeries, most of your family owned regional independents. Bread is the staff of life.

HORSLEY: Association president Nick Pyle is usually more concerned with wheat and flour prices than the yield on 10-year Treasury debt. But he says the threat of a government default and the higher borrowing cost that would follow is a concern for every business on Main Street.

Sen. MCCONNELL: It affects every American and unfortunately there are a lot of very strong-willed individuals that are new to Congress that feel very strongly about using the debt limit as a hammer to drive their political means of getting control over federal spending.

HORSLEY: McConnell is no newcomer to Congress, but the Senate Republican leader said he'll only vote for a debt limit increase if it's accompanied by short-term cuts in discretionary spending and longer term savings in entitlement programs. McConnell rejected Democrats' calls to balance any spending cuts with tax increases.

Sen. MCCONNELL: We are talking here about spending reductions. There will be no tax increases in connection with raising the debt ceiling. We're talking about spending reductions.

HORSLEY: White House spokesman Carney says President Obama spent much of today's meeting listening to Republicans. Carney says GOP lawmakers have been clear about what they want from the negotiations, but ultimately, he says, both sides will have to give.

Mr. CARNEY: This is not the kind of thing you can do by ramming through one side's proposal. It's just it won't happen.

HORSLEY: McConnell sounded an optimistic note, wanting to past bipartisan compromises to salvage Social Security and balance the budget. He argues it's better to tackle big challenges when the government is divided between Republicans and Democrats, 'cause that way neither party can score political advantage.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.