Obama gives Social Security warning in debt debate

President Obama said he “cannot guarantee” that millions of Social Security beneficiaries would get their checks as scheduled next month unless he and congressional leaders agreed to raise the nation’s debt limit by Aug. 2, a warning that came as both sides ratcheted up the tension over the monthlong standoff.

Amid a volley of charges and countercharges over who would bear responsibility for a crisis, the Senate’s Republican leader proposed a complex plan under which Congress would largely surrender its authority to determine the debt ceiling.

The proposal offered by Sen. Mitch McConnell (R-Ky.) would essentially flip the debt ceiling process on its head. Rather than vote on measures to raise the debt limit, members of Congress would vote on bills that would forbid increases. Obama’s presumably certain veto of the measures would allow the ceiling to rise. Politically, Republicans could claim to be voting to hold the line against a higher limit, safe in the knowledge that there would be no catastrophic default on federal borrowings.

But the plan would essentially abandon the GOP quest to use the debt ceiling as a mechanism to force deep cuts in the federal budget, and was widely criticized by conservatives.

Obama has rejected plans for a short-term agreement, but the White House said McConnell’s proposal was an acknowledgment of the importance of meeting U.S. obligations.

The back-and-forth played out Tuesday in a darkening atmosphere, with the White House saying that federal officials would face a “Sophie’s choice” in deciding what to pay when federal revenue falls short of bills coming due, as is expected in the absence of an increase in borrowing authority from Congress.

Obama wants a resolution within 10 days to avoid unpredictable reactions by financial markets to the growing uncertainty, but Republicans accuse the White House of trying to stampede them to an agreement.

Until now, administration officials have declined to specify which bills they would pay after Aug. 2 with no increase in borrowing authority.

But in an interview with “CBS Evening News,” Obama issued his most explicit warning about government benefits and said for the first time that the elderly might not be the only ones affected.

“This is not just a matter of Social Security checks,” Obama said. “These are veterans’ checks, these are folks on disability and their checks. There are about 70 million checks that go out every month.”

Based on cash flow projections, the government will have enough to cover only slightly more than 55% of its bills in August.

Republicans have said the Treasury Department should prioritize its bills. But besides debt service, the biggest government bills are for Social Security checks, Medicare, weapons for the military, fuel, active-duty military personnel and unemployment benefits.

“That would then entail a kind of ‘Sophie’s choice’ situation where you have to decide what bills you can pay,” said Jay Carney, the president’s spokesman. “So, no, we can’t guarantee, if there were a default, any specific bill will be paid.”

Carney said the administration did not want to confront a decision to pay “the Chinese government, but not pay Social Security recipients or veterans’ benefits recipients.”

Some Republicans said Obama was resorting to scare tactics to win an increase in the debt ceiling. “Telling seniors that they may not receive their Social Security checks is his backdoor way of trying to fulfill his desire to raise the debt limit without any conditions,” said freshman Rep. Tim Huelskamp (R-Kan.).

McConnell, the minority leader, ignited a conservative backlash with his proposal to force Obama to repeatedly return to Congress for debt ceiling increases.

McConnell’s plan, if passed, would create a legislative mechanism in which Obama would be required to request an increase in the debt ceiling in three stages, with the biggest increase scheduled for next summer, in the heat of the presidential campaign. Republicans and Democrats alike could then vote to oppose the request. If that “measure of disapproval” passes Congress, then Obama could veto it and the request would essentially be approved. Only a two-thirds majority in Congress could override the veto.

The plan would force Democrats to take a political hit for raising the debt ceiling and allow the GOP to vote against it without risk of default.

McConnell said his proposal was not his “first choice,” but that he had little alternative but to offer a contingency plan. “As long as this president is in the Oval Office, a real solution is unattainable,” McConnell said.

McConnell’s proposal quickly angered conservatives on and off Capitol Hill, some of whom did not see the logic in walking away from a possible deal that could produce spending cuts in the trillions. Critics called it an abdication of Congress’ responsibility, and Freedom Works, the large “tea party” group, urged its Twitter followers to tell McConnell to “find his spine.”

GOP presidential candidate Newt Gingrich said in a tweet that McConnell’s proposal was “an irresponsible surrender to big government, big deficits and continued overspending.”

The Heritage Foundation, a conservative think tank, called McConnell’s plan “the height of irresponsibility” for allowing an increase in borrowing authority without budget controls.

The proposal was presented at talks at the White House as congressional leaders convened for a third consecutive day of negotiations.

“Sen. McConnell’s proposal today reaffirmed what leaders of both parties have stated clearly, that defaulting on America’s past-due bills is not an option,” Carney said, while reiterating that Obama favors a long-term plan on debt and deficits.

Tuesday’s talks did not appear to resolve an impasse over Medicare cuts and tax increases. Republicans have outlined $350 billion in cuts to the senior healthcare program, including higher costs participants would have to pay.

Seniors would be hit with increased costs for lab services, post-acute care and supplemental policy benefits, among other changes.

Democrats have refused to agree to such reductions in Medicare without increases in federal revenue, which the GOP has rejected.

The impasse over Medicare and taxes represents a key obstacle to reaching the $2.5 trillion in deficit reduction the GOP wants in exchange for its vote to raise the debt limit.

Both Democratic and Republican congressional leaders moved to shore up their caucuses Tuesday at closed-door meetings as lawmakers grew restless over the debate.

Rank-and-file Republicans worry that cuts will be insufficient to satisfy their tea party constituents. McConnell was told at the White House this week that cuts would amount to only $2 billion in fiscal 2012, according to a congressional aide familiar with the closed-door session.

In an appeal to conservative Republicans, House Speaker John A. Boehner (R-Ohio) promised at a private meeting that he would support their call for a balanced-budget amendment. “We’re going to fight for one,” Boehner said, according to a source in the room.

cparsons@latimes.com

lisa.mascaro@latimes.com