Obama backs ‘Gang of Six’ deficit plan

US President Barack Obama has announced his support for a bipartisan deficit-reduction proposal aimed at averting a debt default, saying time was running out for an agreement to raise the US borrowing limit.

Obama said the ambitious budget plan brought forward on Tuesday by the “Gang of Six” group of senators could provide new ideas for breaking the impasse in Congress over raising the federal government’s credit limit by August 2.

He said the proposal was broadly consistent with his approach on reducing debt and deficits. Obama urged congressional leaders of both parties to start discussing it.

“My hope … is that they tomorrow are prepared to start talking turkey and actually getting down to the hard business of crafting a plan that can move this forward in time for the August 2 deadline,” Obama said at a press conference.

Top Republican supports plan

Senate budget committee chairman Kent Conrad, a Democratic member of the “Gang of Six” who have been working since December on a deficit-reduction plan, said the proposed $3.75 trillion in savings over 10 years contains $1.2 trillion in new revenues.

Senator Lamar Alexander, a member of the Republican leadership, also embraced the plan.

“This is a serious, bipartisan proposal that will help stop Washington from spending money we don’t have, and I support it,” Alexander said of the measure.

Obama is working with lawmakers to reach an agreement on deficit reduction so Congress can increase the debt ceiling by August 2, when the government is expected to run out of money to pay its bills.

The stalemate on debt talks has shaken global financial markets, and the situation could worsen unless a deal is struck soon.

News of plan lifts markets

But news of the plan and its proposed $3.75 trillion in deficit cuts sent 30-year bond prices sharply higher and stocks to the day’s highs.

In addition to avoiding default, investors grew optimistic on evidence that Congress was acting quickly with a long-term solution to the nation’s debt problems.

Talks on a comprehensive deficit reduction deal have stalled over tax increases, but Obama said he hoped the new proposal, which calls for both parties to give up some of their entrenched positions, could help form the basis of an agreement.

Most Republicans, especially Tea Party members in the House of Representatives, have vowed to block any revenue increases.

Obama’s announcement came as White House and congressional negotiators worked on a backup plan to keep the United States from a catastrophic default but one that is unlikely to save America’s top-notch AAA credit rating.

Two weeks before their final deadline, Obama and top politicians face more pressure for a debt deal amid a growing sense that the last-ditch plan taking shape in Congress may be the only workable solution politically.