Boehner Said to Seek $3 Trillion Cuts, Signal for Markets

(Updates with comment from analyst in fourth paragraph, plans for new meeting in sixth paragraph.)

July 23 (Bloomberg) -- House Speaker John Boehner told Republican lawmakers they need to provide a positive signal on a plan to avert a U.S. default before Asian financial markets open tomorrow, Republican congressional aides said.

Boehner wants at least $3 trillion in cuts in a two-step plan to accompany an increase in the U.S. debt limit, one of the aides said. Concern about Asian markets' reaction to the collapse of talks on a long-term deficit plan between Boehner and President Barack Obama was a subject in a meeting today among the president and congressional leaders, the aides said.

The markets could be tumultuous if a plan isn't negotiated over the weekend, said Christian Cooper, head of U.S. dollar derivatives trading in New York at Jefferies & Co.

"The markets will be under very real pressure at the open because the assumption will be there is really no resolution to this," Cooper said. "The breakdown in negotiations has crossed the line from the political posturing of the last few weeks to potentially a very real crisis.

"The Tea Party is effectively playing Russian roulette with the bond market and they will, with certainty, lose," Cooper said. Jefferies is one of 20 primary dealers that trade with the U.S. Federal Reserve.

Boehner's office said congressional leaders would meet at his office at 5:30 p.m. today.

No Short-Term Deal

Obama remained opposed to any increase in the $14.3 trillion debt limit that doesn't go through the next election in November 2012. He told lawmakers today that a short-term extension would be "irresponsible" and "could cause our country's credit rating to be downgraded, causing harm to our economy," White House Press Secretary Jay Carney said in a statement.

Congressional leaders sought to produce a plan that could pass both chambers.

"Over this weekend Congress will forge a responsible path forward," Boehner, an Ohio Republican, said in a statement after the White House meeting. "House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States."

One Republican congressional aide said that under Boehner's scenario, a first vote next week would provide a down payment on spending reductions, though the amount hasn't been determined. Another vote would be held later.

Lawmakers 'Committed'

Boehner told Republican lawmakers yesterday he would need to introduce legislation by July 27, one lawmaker said, to ensure both chambers could enact it under their regular procedures before Aug. 2, when the Treasury has projected it will exhaust its legal borrowing authority.

Senate Republican leader Mitch McConnell of Kentucky said top lawmakers are "committed" to preventing a U.S. default.

House Democratic leader Nancy Pelosi of California said the leaders must "make every moment count." She said there would "absolutely, positively not" be a short-term deal and that leaders weren't talking about raising the eligibility age for Medicare.

With the debt-limit deadline approaching, Obama said at the White House last night that "at minimum" Congress must act to avoid a default that would roil financial markets and damage the economy. He said he was consulting with Treasury Department officials about the potential consequences of a default.

'Have Some Answers'

"It's very important that the leadership understands that Wall Street will be opening on Monday, and we'd better have some answers during the course of the next several days," Obama said.

Boehner yesterday withdrew from the efforts the two have pursued to revamp the government's finances over the next decade.

via sfgate.com