* New stance reflects urgency to avoid default
* Lawmakers seek to combine McConnell-Gang of Six plans
* Obama meets separately with Republicans, Democrats
* Fed making contingency plans in case of default
(Updates with Democratic officials, quotes)
By Jeff Mason and Andy Sullivan
WASHINGTON, July 20 The White House signaled on
Wednesday it could support a short-term increase in the U.S.
borrowing limit for "a few days" if lawmakers agreed to a broad
deficit reduction deal but needed more time to pass it.
The move, a shift from President Barack Obama's previous
position, reflects the growing political reality that time is
short for Congress to pass a massive deficit-cutting deal
before the United States runs out of money on Aug. 2.
A new proposal for long-term deficit reduction from a
bipartisan group of senators known as the Gang of Six has
revived hope that a broad agreement on spending cuts can be
reached to avoid a looming default and alleviate pressure on
America's triple-A credit rating.
Republicans do not want to support increasing the debt
limit without deep spending cuts. Democrats want tax increases
for the wealthiest Americans to be part of a deficit cutting
package, an option most Republicans rule out.
Obama had vehemently opposed a short-term extension of the
$14.3 trillion debt limit as a solution to the dilemma, and the
White House reiterated that stance on Wednesday -- but with a
Obama's spokesman Jay Carney said in a written statement
that the president would consider supporting a short-term fix
if a deal had been reached "and we needed a very short-term
extension (like a few days) to allow a bit of extra time for a
bill to work its way through the legislative process."
Full coverage of U.S. budget and debt [ID:nUSBUDGET]
Possible outcomes for U.S. debt talks [ID:nN1E76I10Y]
Anything possible if U.S. downgraded [ID:nN1E76I1M8]
White House officials had previously said July 22 was the
last day a deal could be reached in time to get legislation
through Congress, but meeting that deadline looks increasingly
unlikely. Negotiators may meet through the end of the month.
The United States will run out of money to pay its bills if
Congress does not increase the debt limit by Aug. 2. Failure to
act could plunge the United States back into recession and send
shockwaves through global financial markets.
BACKUP PLANS, MORE MEETINGS
The Federal Reserve has been actively preparing for the
possibility of default, ironing out what to do if the world's
biggest economy runs out of cash in two weeks, Philadelphia
Federal Reserve Bank President Charles Plosser told Reuters.
Plosser said his "gut feeling" was that Obama and Congress
would come to an agreement and avert a default.
Obama and congressional leaders have tried to reassure
markets that the debt ceiling will be raised and a default
Obama met with Democratic congressional leaders at the
White House on Wednesday afternoon and then held a separate
meeting with John Boehner and Eric Cantor, the No. 1 and No. 2
Republicans in the House of Representatives, for roughly 1-1/2
hours later in the day.
Aides declined to give details about the meetings, but two
Democratic officials said Obama had reiterated his opposition
to a short-term deal in both settings.
The leaders were expected to have discussed an ambitious
deficit reduction plan proposed on Tuesday by the Gang of Six.
Obama has latched onto that plan as a way to help end the
deadlock, which has threatened the United States' top-notch
credit rating. [ID:nN1E76I1TF]
The $3.75 trillion Gang of Six plan calls for an immediate
$500 billion in deficit savings and gives Congress six months
to come up with more far-reaching reforms.
One of its authors, Democratic Senator Kent Conrad, said
the initial portion could be used to raise the debt ceiling.
That downpayment could presumably be raised to win the support
of House Republicans who have given the plan mixed reviews.
Lawmakers have been scrambling to find a solution, and
there is no single plan.
One leading option had been put forward by Senate
Republican leader Mitch McConnell and billed as a backup plan,
which passes responsibility, authority and potentially blame
for raising the debt ceiling to Obama.
McConnell's plan would allow Obama to raise U.S. borrowing
authority in three separate chunks over the next year. He has
been negotiating with Senate Democratic leader Harry Reid to
make it palatable to Democrats.
The stalemate on debt talks has shaken global markets, and
credit rating agencies said even if lawmakers raise the debt
limit in time, the top-notch triple-A credit rating will still
be under pressure without a broad deficit-reduction plan.
Brett Rose, head of U.S. rates strategy for Citigroup, said
markets and rating agencies understand that ironing out all the
legislative details could take time.
"They probably would have to do a short-term thing for a
couple of weeks or a month while they get that passed, and that
deal would satisfy the ratings agencies," Rose said. "I don't
think this is a tactic that the ratings agencies would
Investors welcomed the Group of Six plan on Tuesday,
driving up the price of 30-year Treasury bonds sharply and
pushing global stocks higher. But on Wednesday, bond prices
eased as Wall Street realized the road ahead remains long.
An analyst from Fitch said it was encouraging that progress
appeared to be being made on a substantial deficit-reduction
deal and said the credibility of the bipartisan plan was as
important as the overall savings amount.
(Additional reporting by Richard Cowan, Thomas Ferraro, Matt
Spetalnick and Alister Bull in Washington, Kristina Cooke and
Tim Ahmann in Philadelphia, and Emily Flitter in New York;
Writing by Deborah Charles and Jeff Mason; Editing by Eric