* House puts off vote on Republican measure
* Boehner plan faces opposition from party rebels
* Tuesday deadline looms to avert risk of U.S. default
* Obama administration: Americans want compromise
* House Republicans to meet on Friday morning
(Adds Chinese comments)
By Andy Sullivan and Richard Cowan
WASHINGTON, July 28 Urgent efforts to avoid an
unprecedented U.S. debt default suffered a new blow on Thursday
when some fiscally hardline Republicans blocked a budget
deficit plan proposed by their own congressional leaders.
After hours of trying to get enough votes, the Republicans
who control the House of Representatives put off action for the
night and scheduled an emergency meeting for Friday morning.
The Republican infighting further delays any compromise
with Democrats to stop the countdown toward Tuesday when the
government says it will run out of money to pay all its bills.
Lawmakers must lift the government's $14.3 trillion
borrowing limit by Aug. 2 or risk a devastating default and
downgrade of the top-notch credit rating that helps make U.S.
debt a pillar of the global financial system.
There was speculation House Speaker John Boehner, the top
Republican in Congress, may revise his plan to attract more
votes from rebels who want bigger cuts in spending than the
roughly $900 billion over 10 years he has proposed.
"Republicans have taken us to the brink of economic chaos,"
House Democratic Leader Nancy Pelosi said. "The delay must end
now so we can focus on the American people's top priority:
creating jobs and growing the economy."
Even if it passes, the Boehner bill is certain to be killed
in the Democratic-controlled Senate but could still feature in
any possible compromise. Boehner's difficulties in securing
votes weakens his bargaining position, Democrats said.
Investors, unnerved by the risk of a U.S. default or
downgrade, are watching anxiously.
The dollar sank to a fresh four-month low against the yen
and Asian stocks struggled after the announcement that the
House would not vote on Thursday evening. [MKTS/GLOB]
In U.S. trading earlier on Thursday, the stock market's
broad S&P 500 index fell for a fourth day and interest rates
soared on some Treasury bills that mature in August.
In a strongly worded commentary, China's state-run news
agency Xinhua criticised U.S. lawmakers for flirting with a
disastrous default, saying the world's largest economy has been
"kidnapped" by "dangerously irresponsible" politics.
No policymakers in China, the largest foreign creditor to
the United States, have commented on the crisis but Xinhua said
"the ugliest part of the saga is that the well-being of many
other countries is also in the impact zone." [ID:nL3E7IT0JC]
International Monetary Fund chief Christine Lagarde warned
of the risks if Congress fails to act.
"One of the consequences could be a decline of the dollar
as a reserve currency and a dent in people's confidence in the
dollar," Lagarde told PBS NewsHour in an interview.
U.S. financial executives added their voices to calls from
the business community for Congress to strike a deal.
Full coverage of U.S. budget and debt [ID:nUSBUDGET]
SCENARIOS-Obama options if no debt deal [ID:nN1E76O0QG]
ANALYSIS-Debt crisis big test for Boehner[ID:nN1E76Q1PW]
BREAKINGVIEWS-Investors too complacent [ID:nN1E76Q0EQ]
Graphics package r.reuters.com/nud82s
Boehner has been grappling with lawmakers such as Mick
Mulvaney, a supporter of the Tea Party movement that represents
a new force on the Republican right flank.
"I'm still a no," Mulvaney said as he left Boehner's office
to pray at the congressional chapel before the vote was
canceled for the night.
Republicans changed procedural rules to allow them to bring
up the bill for a vote quickly on Friday.
Many Americans are outraged that Washington cannot reach a
deal after many weeks of polarized and acrimonious debate.
There were increasing calls by some Democrats for President
Barack Obama to raise the debt ceiling on his own by invoking
the 14th Amendment of the Constitution -- a clause dating from
the Civil War era of the 1860s that the U.S. public debt "shall
not be questioned."
The White House has resisted taking such a step.
Some wavering Republican House members were insisting on
tying a debt limit increase to passage of a balanced budget
amendment to the Constitution, according to a Republican aide.
The Senate rejected such an approach last week.
Even if a deal is reached to lift the debt ceiling, a
downgrade of the U.S. credit rating is likely unless a big dent
is made in the deficit. A downgrade would raise borrowing
costs, hurt an already weak economy and rattle global markets.
Once the House acts one way or the other, action will move
to the Democratic-controlled Senate. Boehner's plan is doomed
in the Senate, where Democratic Leader Harry Reid is pushing
his own deficit reduction plan.
But after both chambers have their say, frantic talks are
expected this weekend to seek a compromise to permit a vote on
raising the debt ceiling and staving off a default on Tuesday.
"I think there will be a whole new stage of the Senate and
House having to come together to avoid August 2nd as being a
day that has never happened in the U.S.," White House chief of
staff William Daley told CNN.
Republican leaders were engaged in arm-twisting as they
tried to secure the 217 votes needed to pass the Boehner bill
in the House and avoid a humiliating defeat.
A stream of lawmakers who had decided to vote against the
plan came and went from Boehner's office. Whatever was said did
not seem to be changing many minds.
Republican Representatives Louie Gohmert and Joe Walsh said
they would still vote against the bill. Trent Franks and Jeff
Flake would not say where they stood.
Boehner's plan for about $900 billion in cuts is twinned
with a short-term debt ceiling increase. Lawmakers would have
to come up with further spending cuts to raise the debt ceiling
again in several months -- just as the campaign heats up for
congressional and presidential elections in November 2012.
Reid's plan, backed by Obama, would cut $2.2 trillion from
the deficit over 10 years without raising taxes and extend the
debt ceiling through next year.
At the White House, Obama and his team also worked late
into the evening to avert a default that would scar his
presidency, no matter who was at fault, as he prepares to ask
Americans for a new four-year term in 2012.
Despite the gridlock, Congress could kick into higher gear
as pressure to reach a deal mounts before Tuesday.
"The markets are going to be on tenterhooks until we get an
understanding of what the quality of the package is," said
Kevin Caron, market strategist at Stifel, Nicolaus & Co.
White House senior adviser Valerie Jarrett told Reuters
Insider the Treasury secretary would face very difficult
decisions if the deadline is not met.
"Do we say to our servicemen and women serving abroad that
we're not going to pay them and support their families? Do we
say to the 70 million, 80 million people who receive Social
Security that we're not going to pay them?" she said. "Or small
businesses who are vendors of the United States government?"
(Additional reporting by Dave Clarke, JoAnne Allen, Rachelle
Younglai, Deborah Charles, Alister Bull, Caren Bohan, Laura
MacInnis, Tabassum Zakaria and Lily Kuo in Washington, Ashley
Lau in New York and Anirban Nag in London; Writing by Steve
Holland and Stuart Grudgings; Editing by John O'Callaghan)