Hopes fade as debt talks break down

Hopes for a sweeping budget deal to increase the federal debt limit unraveled when House Speaker John A. Boehner abruptly withdrew from talks, provoking a furious response from President Obama, who summoned political leaders for an emergency meeting.

“We have now run out of time,” Obama said, demanding that the Democratic and Republican leaders of Congress convene for a White House meeting at 11 a.m. Saturday to explain what they will do to avoid default.

Boehner, who has been under enormous pressure from the conservatives in the House Republican majority, blamed the breakdown on Obama’s insistence that any deal include new revenues as well as spending cuts. Boehner said the two had “different visions for our country.”

The end of the Boehner-Obama talks means that the effort to prevent a default will enter a new phase. Instead of using the crisis of a debt ceiling deadline to force both sides to devise a large-scale deficit reduction package, the emphasis now will be on simply ending the crisis before Aug. 2, which both the White House and the Republican leadership have said is essential.

But even with that general agreement, the goal of lifting the ceiling is fraught with partisan traps. Obama is insisting that the debt ceiling extension be large enough to ensure that the issue does not arise again until after the 2012 election, while Republicans would like to see the president be forced to seek extensions repeatedly.

Negotiators planned to work through the weekend to devise a backup proposal to be presented to the House and Senate by Monday.

Obama held an unscheduled news conference in which he scolded Republicans, complaining that leaders are unwilling to take on the party’s most conservative voices to reach a deficit reduction deal that voters favor.

“It’s hard to understand why Speaker Boehner would walk away from this kind of deal,” Obama said.

“This was an extraordinarily fair deal,” he continued. “A lot of Republicans are puzzled as to why it could not get done. In fact, there are a lot of Republican voters who are puzzled.

“Can they say ‘yes’ to anything?” the president asked.

After weeks of holding closed talks and trying to keep their positions secret, Boehner and Obama disgorged considerable details Friday in an effort to seize the narrative that is almost certain to frame the 2012 election.

Obama said his first inkling that the talks were in trouble came Friday when he couldn’t get Boehner to return his phone call.

“I’ve been left at the altar now a couple of times,” Obama said.

Boehner, holding his own unscheduled news conference, repeated his critique of the president and his aides, equating their bargaining approach to “a bowl of Jell-O.”

After days of denying that a deal was at hand, Boehner said it was the president who reneged on an emerging agreement.

“There was an agreement with the White House for $800 billion in revenue. It’s the president who walked away from his agreement and demanded more money at the last minute,” Boehner said.

Boehner said he would begin working with the Senate on a new path.

“I’m confident that Congress can act next week and not jeopardize the full faith and credit of the United States government,” he said.

Boehner’s announcement capped a tumultuous week in Washington as proposals ricocheted across the capital. But Congress and the White House were never able to break the impasse.

Republicans have demanded substantial budget cuts in exchange for their vote to raise the debt ceiling, but polls show Americans increasingly prefer the “balanced approach” Obama has sought: reducing deficits with a combination of spending cuts and new taxes on corporations and the wealthy.

Boehner met with his rank-and-file Friday morning, but said nothing of his pending announcement. He circulated a letter late Friday to the entire House GOP membership, explaining his decision to walk away from the talks.

“I have decided to end discussions with the White House,” Boehner said in the letter.

“The president is emphatic that taxes have to be raised,” he said. “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.”

GOP officials said a week of renewed discussions broke down as the White House insisted on revenues from new taxes. Republicans were interested in proposals for overhauling the tax system advanced by the White House, but insisted on making the spending cuts first. That stance caused a revolt among Democrats once it was floated by the White House midweek. The Democratic-led Senate particularly resisted.

Senate Majority Leader Harry Reid (D-Nev.) has worked with Minority Leader Mitch McConnell (R-Ky.) on a backup plan that would allow Obama to raise the debt ceiling on his own, in increments.

House Republicans oppose that plan, saying it would have them shirk their responsibility for managing federal budgets. Under the scenario, the House GOP would get to add as much as $1 trillion in spending cuts to the proposal — a sweetener, but still not as much as the GOP wants.

Friday’s announcement came after the financial markets had closed for the week. Markets have fluctuated all week as Congress and the White House struggled to find agreement. Financial ratings agencies have warned of adverse consequences for the government’s credit rating if Treasury officials default on federal obligations, which is expected if the debt ceiling is not raised by Aug. 2 and which could send shock waves across the economy.

Around the Capitol, Republicans said they would move to the next stage of the crisis. “It’s disappointing that the talks with the White House did not reach a favorable conclusion,” said McConnell. “It’s time now for the debate to move out of a room in the White House and onto the House and Senate floors, where we can debate the best approach to reducing the nation’s unsustainable debt.”

Democrats harshly criticized Boehner’s withdrawal.

“Speaker Boehner’s adult moment is long overdue,” said Rep. Nancy Pelosi (D-San Francisco). “Our economy, our children’s education, our seniors’ security and our nation’s fiscal soundness require that we act without further delay.”

lisa.mascaro@latimes.com

Peter Nicholas and Kathleen Hennessey in the Washington bureau contributed to this report.