Mr. Geithner, in a letter to Congressional leaders of both parties, stood by an earlier projection that even with the Treasury’s accounting maneuvers, on Aug. 2 “the borrowing authority of the United States will be exhausted,” ultimately threatening a government default.
With the House in recess all week, few members of Congress were even in town, and budget talks between Vice President Joseph R. Biden Jr. and Congressional leaders were suspended. But a bipartisan “Gang of Six” continued negotiating toward a long-term debt-reduction compromise in what could be their make-or-break week.
The focus of budget attention was in Mr. Obama’s hometown, Chicago, where Representative Paul D. Ryan of Wisconsin defended the House Republican budget he wrote, and its Medicare proposals in particular, in a speech to the Chicago Economic Club.
As dozens of protesters marched and chanted outside, Mr. Ryan told his business audience, “Our budget proposal makes no changes for those in or near retirement, and offers future generations a strengthened Medicare program they can count on, with guaranteed coverage options, less help for the wealthy and more help for the poor and the sick.”
The speech by Mr. Ryan, the chairman of the House Budget Committee, was part of a Republican effort to counter intensifying criticism from Democrats, who hope to exploit the Medicare controversy to take back seats in 2012. That would be payback, as Democrats see it, since they lost their House majority in midterm elections last November after Republicans campaigned against Medicare reductions in Mr. Obama’s health care law.
The message on one of the protest signs — “Hands Off Medicare” — was also seen last year at conservatives’ protests against Democrats. Yet despite that sentiment, which is also reflected in national polls, Republican and Democratic leaders agree that Medicare and Medicaid must be squeezed for savings because rising health care prices and an aging population make those programs the main drivers of the projected and unsustainable growth of the nation’s debt. But their approaches are far apart.
The House Democratic leader, Representative Nancy Pelosi, was in New York on Monday, along with the two Democratic leadership lieutenants she named to the Biden budget talks, to meet with financial industry and news outlets about the debt. She told Bloomberg Television that “we are open to many” suggestions for Medicare savings, adding, “We cannot take that off the table.”
“But one suggestion we are not open to is the abolishment of Medicare,” she said. “That is what the Republicans have put forth in their budget.”
While Medicare savings under the Democrats’ health care law and pending proposals would come mainly from reduced federal payments to doctors, hospitals and insurance companies, the budget put forth by House Republicans would cut spending by turning Medicare into a system of vouchers for future beneficiaries to buy private insurance, but in amounts that would not keep pace with the projected inflation of health costs.
The Congressional Budget Office has said the Ryan plan would drive up health care costs for older Americans in the future and limit their coverage. But Mr. Ryan framed his proposal as a way to slow the growth in Medicare spending while giving older Americans more control over their care choices.
His plan would “give seniors the power to deny business to inefficient providers” while Democrats would “give government the power to deny care to seniors,” Mr. Ryan said.
Republicans have acknowledged that the two parties will not be able to agree on Medicare and other entitlement programs — a “big, grand, global bargain” on debt reduction, as Mr. Ryan put it — before the August deadline for increasing the debt limit.
Given that, the goal in the budget talks is twofold: to find up to $2 trillion in specific multiyear savings from other programs, including farm subsidies, and to agree on mechanisms in the budget process to force the two parties to find more savings in the future, including in Medicare and other entitlement programs.
“For every dollar the president wants to raise the debt ceiling, we can show him plenty of ways to cut far more than a dollar of spending,” Mr. Ryan said, echoing the position of Speaker John A. Boehner of Ohio.
Democrats demand that higher revenues also must be part of the equation, particularly from the wealthiest Americans. Ms. Pelosi signaled one concession: while she repeated Democrats’ demand to end the Bush-era tax cuts after 2012 for the richest households, she said she would support making repeal apply to those with taxable income above $1 million instead of $250,000.
Mr. Ryan opposed any tax increases and accused Democrats of “class warfare” for pitting Americans of different incomes against one another. “Class warfare may be clever politics, but it is terrible economics,” Mr. Ryan said.
He said he would decide this week whether to seek the Senate seat in Wisconsin that Herb Kohl, a Democrat, is giving up. Mr. Ryan said he wanted to retain an influential role in the fiscal debate, which would seem to weigh in favor of his staying in the House.
Jackie Calmes reported from Washington, and Carl Hulse from Chicago.