U.S. debt plan heads to Senate

Washington (CNN) -- Top administration and congressional officials are expected to continue talks Friday on a potential deal tying roughly $3 trillion in new savings over the next decade to an increase in the debt ceiling.

The negotiations -- necessary to stave off an unprecedented national default that could prove economically devastating -- are testing the ability of leaders on both sides of the aisle to legislate effectively in an era of increasingly shrill and unyielding partisanship.

Republicans, feeling the pressure of tea party populism, remain staunchly opposed to any tax increases. Democrats are desperately trying to protect one of their party's primary legacies -- entitlements such as Social Security and Medicare, programs forged at the height of the New Deal and Great Society.

What, if anything, either side is prepared to yield remains an open question.

"Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem," President Barack Obama wrote in an op-ed appearing in Friday's USA Today. "That's what the American people expect of us."

Some congressional Democrats appeared to be on the verge of open revolt against their own president Thursday night after hearing some of the details in the $3 trillion plan -- a package many of them contend does not do nearly enough to ensure wealthier Americans share in the burden of stemming the tide of Washington's red ink.

The talks have now become a race against the clock. If Congress fails to raise the $14.3 trillion limit by August 2, Americans could face rising interest rates, a declining dollar and increasingly jittery financial markets, among other problems.

The Democratic-controlled Senate is expected to cast aside the House GOP's so-called "cut, cap, and balance" plan Friday -- a plan that would tie a debt ceiling increase to sweeping reductions in federal spending, caps on future expenditures, and a balanced budget amendment to the Constitution.

Voting on the measure allows Republicans to demonstrate their preference for steps favored by many in the tea party movement even as GOP leaders try to find a middle ground with Democrats.

Senate Majority Leader Harry Reid, D-Nevada, dismissed the vote Friday morning as a waste of time.

"There is simply no more time to waste debating and voting on measures that have no hopes of becoming law," Reid said. There is "no more time to waste playing partisan games."

Reid's remarks triggered any angry response from Sen. Dan Coats, R-Indiana, who accused the Democratic leader of obstructing a resolution.

"The well gets poisoned last evening by the majority leader and gets poisoned again this morning," Coats said. "Those of us who have worked our tails off to try to get something done are told that this is a piece of crap."

House Speaker John Boehner, R-Ohio, is set to meet behind closed doors Friday with House Republicans. Boehner told reporters Thursday that while some members of his caucus wouldn't compromise, he didn't believe they "would be anywhere close the majority."

Obama and Vice President Joe Biden huddled with top congressional Democrats on Thursday night. The president is scheduled to take his call for compromise on the road Friday, holding a town hall meeting at the University of Maryland.

Spokesmen for Obama and Boehner have denied that any deal is imminent.

Regardless, attention continue to swirl around the prospects of the $3 trillion compromise. The possible deal remains in limbo over a disagreement on whether to extend Bush-era tax cuts for families earning more than $250,000 a year, according to congressional aides who spoke on condition of not being identified.

Nothing has been agreed to yet, they noted.

The possible deal would include spending cuts expected to total $1 trillion or more agreed to in earlier negotiations led by Biden, the sources said. It would reform entitlement programs by changing the eligibility age for Medicare over time, and using a more restrictive inflation index for Social Security benefits, according to the sources.

On taxes, it would permanently extend the Bush tax cuts for families earning less than $250,000 while allowing the cuts to expire at the end of 2012 for those with income above that, the aides said. At the same time, the deal would include a commitment to reform the tax code next year, which is expected to lower all tax rates and eliminate loopholes and subsidies, the sources said.

Boehner, however, wants the deal to make all of the Bush tax cuts permanent while keeping the commitment to tax reform, the sources said. Republicans oppose any tax increases, and their resistance has been a major obstacle to any deal in the negotiations so far.

Some sources said the deal would work in two stages, with spending cuts and a debt ceiling increase occurring right away while entitlement reforms and tax reforms would occur later.

It is unclear -- even if a deal is reached -- that any sweeping package can be approved by the August 2 deadline.

White House Press Secretary Jay Carney signaled to reporters earlier in the week that the president may now be willing to sign a short-term debt limit extension if Democratic and Republican leaders are close to agreement on a broad plan that includes both tax hikes and spending reforms.

Obama previously indicated he would veto any short-term extension.

Meanwhile, lawmakers are also continuing discussions focused on the $3.7 trillion debt reduction blueprint put forward by the "Gang of Six," a group of three Democratic and three Republican senators.

Under the group's proposal, $500 billion in budget savings would be immediately imposed, with marginal income tax rates reduced and the controversial alternative minimum tax ultimately abolished.

The plan would create three tax brackets with rates from 8% to 12%, 14% to 22%, and 23% to 29% -- part of a new structure designed to generate an additional $1 trillion in revenue. It would require cost changes to Medicare's growth rate formula as well as $80 billion in Pentagon cuts.

Obama has praised the plan, calling it "broadly consistent" with his approach to debt reduction because it mixes tax changes, entitlement reforms and spending reductions.

The proposal, however, has been hit with a barrage of criticism from both the right and the left. Conservatives have complained about some of the plan's tax changes, while liberals have warned it would cut entitlement benefits too deeply.

If all else fails, party leaders could still turn to a fallback plan initially put forward by Senate Minority Leader Mitch McConnell, R-Kentucky. The measure would give Obama the power to raise the borrowing limit by a total of $2.5 trillion, but also require three congressional votes on the issue before the 2012 general election.

Specifically, Obama would be required to submit three requests for debt ceiling hikes -- a $700 billion increase and two $900 billion increases. Along with each request, the president would have to submit a list of recommended spending cuts exceeding the debt ceiling increase. The cuts would not need to be enacted in order for the ceiling to rise.

Congress would vote on -- and presumably pass -- "resolutions of disapproval" for each request. Obama would likely veto each resolution. Unless Congress manages to override the president's vetoes -- considered highly unlikely -- the debt ceiling would increase.

The unusual scheme would allow most Republicans and some more conservative Democrats to vote against any debt ceiling hike while still allowing it to clear.

McConnell and Reid are also working on two critical additions to the plan, according to congressional aides in both parties. One would add up to roughly $1.5 trillion in spending cuts agreed to in earlier talks led by Vice President Joe Biden; the other would create a commission meant to find more major spending cuts, tax increases and entitlement reforms.

Changes agreed to by the commission -- composed of an equal number of House and Senate Democrats and Republicans -- would be subject to a strict up-or-down vote by Congress. No amendments would be allowed.

Sources say the panel would be modeled after the Base Closing and Realignment Commission, which managed to close hundreds of military bases that Congress could not otherwise bring itself to shut down.

CNN's Ted Barrett, Kevin Bohn, Kate Bolduan, Tom Cohen, Lisa Desjardins, Deirdre Walsh and Jessica Yellin contributed to this report

CNN

Quieter royal tour heads for mixed Quebec reception (Reuters)

OTTAWA (Reuters) – A visit to Canada by Britain's Prince William and Kate took on a quieter note on Saturday as the newlyweds prepared to head for Quebec and a politically sensitive phase of their royal tour.

The Duke and Duchess of Cambridge attended a tree-planting ceremony with invited guests in Ottawa and helped unveil a newly purchased mural at the Canadian War Memorial where they also greeted military veterans and war brides.

They are later heading to Montreal where they planned to visit a hospital neo-natal ward, then attend a cooking class before boarding a Canadian Navy frigate for an overnight trip down the St Lawrence River to Quebec City.

Saturday's schedule contrasted with the first two days of the nine-day Canadian tour that included events with thousands of people watching and often chanting "Will and Kate" at the potential future king and queen of Britain and Canada.

Anti-monarchist groups in Quebec have vowed to protest the visit by Duke and Duchess of Cambridge to the French-speaking province and security was expected to be even tighter than at events in Ottawa, Canada's capital.

Some recent tours by members of the Royal family have avoided Quebec, where many still see Britain's defeat of France in 1759 giving it sovereignty over Canada as a raw wound.

Supporters of the monarchy in Canada see the couple's first overseas tour since becoming married in April as an opportunity to reinvigorate public interest in the royal family.

William and Kate are touring seven cities in four provinces and one territory on their Canadian tour. They head to California on July 8.

A poll this week found almost half of Canadians believe that the nation should sever ties with the monarchy when Queen Elizabeth dies, although that was down 10 percentage points from a year ago.

(Writing by Allan Dowd in Vancouver, Editing by Eric Walsh)

Yahoo! News

IMF head's arraignment pushed to Monday

The IMF chief is undergoing a physical and forensic exam, his attorney saysLaw enforcement official says victim has Strauss-Kahn in a police line-upStrauss-Kahn's attorney vows to vigorously defend his client, saying he is innocentPolice say Strauss-Kahn was naked when he tried to force himself on a N.Y. hotel employee

New York (CNN) -- The head of the International Monetary Fund was set to answer charges Monday that he chased a housekeeping employee down the hall of his swanky New York hotel suite and tried to sexually assault her.

Dominique Strauss-Kahn's arraignment was delayed a day after he agreed to forensic testing requested by police, said his attorney, William Taylor. The IMF chief's other attorney, Benjamin Brafman, vowed Sunday to vigorously defend him in court, insisting his client is innocent.

Strauss-Kahn's accuser picked the IMF chief out of a line-up Sunday at a New York police station, singling him out as the man who had sexually assaulted her, according to a law enforcement source who has direct knowledge of the investigation.

The official, who spoke on condition of anonymity, was not authorized to release details to the media.

Strauss-Kahn, who has been charged with attempted rape and unlawful imprisonment, willingly consented to a physical and forensic examination that had been requested by police, Taylor said. Those tests were conducted Sunday night.

Police allege Strauss-Kahn sexually assaulted the 32-year-old woman Saturday at the Sofitel hotel in Manhattan, then quickly headed off to a New York airport to board a Paris-bound flight.

Will IMF sex scandal impact EU bailout?

The world got its first look Sunday at Strauss-Kahn since his arrest as the handcuffed IMF chief was taken by New York Police detectives from a police station to the Manhattan Criminal Court building to await his arraignment.

The arrest of the 62-year-old, widely considered a leading potential candidate for the French presidency, has triggered intense political chatter across the Atlantic.

A former French finance minister, national legislator and economics professor in Paris, Strauss-Kahn became the IMF's 10th managing director in November 2007. He is also chairman of the IMF executive board.

"Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities," said Caroline Atkinson, IMF's director of external relations. "The IMF remains fully functioning and operational."

IMF bylaws state that its officials "shall be immune from legal process with respect to acts performed by them in their official capacity except when the fund waives this immunity." Strauss-Kahn's attorneys did not answer questions from CNN about whether he may claim that diplomatic immunity covers such an allegation.

Deputy New York Police Commissioner Paul Browne said Strauss-Kahn does not have diplomatic immunity in this case nor, to the commissioner's knowledge, has he claimed it. CNN senior legal analyst Jeffrey Toobin said it was unlikely to apply to Strauss-Kahn, regardless, because violent crimes like this one typically aren't covered under diplomatic immunity.

Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case
--Caroline Atkinson, IMF's director of external relations

IMF spokesman William Murray said that as far as he knows, Strauss-Kahn was not in New York City for IMF business.

The fund on Sunday postponed an informal session where members were to be "briefed on developments" related to Strauss-Kahn, the IMF said. The executive board meeting was "postponed pending further developments in New York," Murray said in an e-mail to CNN.

At about 1 p.m. Saturday, Strauss-Kahn was in his hotel room when the housekeeping employee came in to clean it, Browne said.

She thought she was alone in the luxury $3,000-a-night suite, but Strauss-Kahn then emerged from a room naked, Browne said.

Strauss-Kahn ran after her down the hallway of the suite, Browne said. The suite has its own foyer, hallway, living room, bathroom, conference room and bedroom.

The woman said Strauss-Kahn pulled her into a bedroom and started attacking her, police said.

She fought him off, she told investigators, but Strauss-Kahn then dragged her into the bathroom and forced himself on her. Police said Strauss-Kahn tried to remove her underwear, but the woman got away.

The employee ran to the front desk, Browne said. Hotel staff alerted the New York Police Department.

By the time officers arrived, Strauss-Kahn had left, leaving his cell phone behind at the hotel, according to Browne.

"The alleged victim was taken to Roosevelt Hospital (in Manhattan) and was treated for minor injuries," Browne said.

Authorities learned the IMF head was on an outbound flight at JFK airport destined for Paris. New York police asked their counterparts at the Port Authority to hold the plane.

Two plainclothes Port Authority police detectives boarded the aircraft "just before the door closed" on the flight, and found Strauss-Kahn seated in first class, said a law enforcement official who had been briefed on the investigation.

He "offered no resistance" when he was led off the plane, after which he was turned over to New York police, the official said.

Strauss-Kahn's arrest has set French political circles abuzz.

While Strauss-Kahn hadn't officially entered the race, recent French opinion polls showed him leading prospective Socialist Party presidential candidates.

The surveys also suggested he posed a stiff challenge to incumbent French President Nicolas Sarkozy in the 2012 election.

"If the accusations are true, Strauss-Kahn will not be able to run for president," said Jacques Attali, a former top aide to Socialist former President Francois Mitterrand. Attali now serves as political analyst.

Strauss-Kahn became embroiled in controversy soon after joining the IMF, amid reports -- which he later acknowledged -- that he'd had an improper relationship with a female employee. The physical relationship was consensual, an independent inquiry found.

The world body's executive board concluded in October 2008 that "there was no harassment, favoritism or any other abuse of authority by the managing director."

"Nevertheless, the executive board noted that the incident was regrettable and reflected a serious error of judgment on the part of the managing director, as he has acknowledged and for which he has apologized," the IMF said in a statement at the time.

Strauss-Kahn also issued a statement following the closing of the investigation, noting that he had "apologized for it to the (board of directors), to the staff of the IMF and to my family," as well as "the staff member."

Strauss-Kahn is married to French journalist Anne Sinclair. They live in Washington, where the IMF is based.

Deputy head John Lipsky serves as acting managing director while Strauss-Kahn is not in Washington, the IMF said, making him the agency's de facto leader at least as long as Strauss-Kahn is detained in New York. The IMF is a major player in economic inequalities and crises worldwide.

Strauss-Kahn was scheduled to be the keynote speaker at the Brussels Economic Forum Wednesday. Organizers said Sunday his appearance had not been canceled officially, but that they were no longer expecting him to attend.

CNN's Susan Candiotti, Miguel Susana, Rick Martin and Ross Levitt contributed to this report.

CNN

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