Hope remains for debt deal despite disputes, veto threat

WASHINGTON -- Crisis concerns rising, House Republican leaders shrugged off a White House veto threat and an outbreak of tensions within their own party Wednesday as they built support for legislation to stave off the government default threatened for next week.

With some politicians talking of economic Armageddon, Americans coast to coast were suddenly focusing on debt and deficit matters that most would have dismissed as arcane until recently. Some lawmakers' offices were inundated with phone calls and emails, many urging some kind of deal to avert the possibility of calamity.

Washington pushed ahead, and there was even some hopeful talk.

"We're getting there," said House Speaker John Boehner of Ohio, one day ahead of a scheduled vote on his GOP bill to cut trillions in federal spending in exchange for increasing the debt limit the government will collide with next Tuesday.

The White House disparaged the bill Republicans were working so hard to pass, and Senate Majority Leader Harry Reid of Nevada was even more emphatic. "A big wet kiss for the right wing," he called it.

The White House has threatened a veto, saying the bill does not meet President Barack Obama's demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.

Instead, Obama supports an alternative drafted by Reid that also cuts spending yet provides enough additional borrowing authority to tide the government over through 2012.

For all the bluster, there were hints that a compromise might be near.

"Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid told reporters.

Without legislation in place by Aug. 2, administration officials say the Treasury will not be able to pay all the nation's bills, possibly triggering a default that could prove catastrophic for an economy still recovering from the worst recession in decades.

The U.S. financial markets posted big losses for the day as the nation's political leaders maneuvered.

The Dow Jones industrial average fell nearly 200 points and appeared headed for its worst week in nearly a year.

"Confidence in our political system is beginning to fade," said Channing Smith, managing director of Capital Advisors Inc.