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The White House and congressional leaders will work through the weekend on a deficit-reduction deal that would keep the federal government from defaulting on its debts.

President Obama and congressional leaders met at the White House today to discuss the size and specifics of a long-term deficit-reduction package. Republicans insist they won’t vote for raising the nation’s $14.3 trillion debt limit unless it’s accompanied by sizable spending cuts.

The Treasury Department has warned that the government will begin defaulting on its obligations if the debt limit isn’t raised by August 2. The White House contends a deal to do this must be reached by July 22 in order to get the legislation through Congress by August 2.

Obama said today’s meeting was “very constructive.”

“People were frank,” he said. “We discussed the various options available to us. Everybody reconfirmed the importance of completing our work and raising the debt limit ceiling so that the full faith and credit of the United States of America is not impaired.”

Congressional leaders will return to the White House Sunday for another round of talks.

By then, Obama said he expects “the parties will at least know where each other’s bottom lines are and will hopefully be in a position to then start engaging in the hard bargaining that’s necessary to get a deal done.”

While there has been lots of speculation about what a final deal might include, the president said “nothing is agreed to until everything is agreed to. And the parties are still far apart on a wide range of issues.”

“Everybody acknowledged that there’s going to be pain involved politically on all sides, but our biggest obligation is to make sure that we’re doing the right thing by the American people, creating an environment in which we can grow the economy and make sure that more and more people are being put back to work,” Obama said.

Even if Obama and congressional leaders reach a deal, they’ll still face a tough time selling it to Congress. Republicans say they won’t accept any tax increases, and Democrats are upset about reports that Obama is considering changes in Social Security to save money.

Businesses are anxiously awaiting a resolution of the debt limit crisis. Most economists expect a government default would roil financial markets and lead to increased interest rates for businesses and consumers, as well as the government. A two-month failure to raise the debt limit could lead to the biggest quarterly decline in the economy since 1947, according to the Center for American Progress. The possibility of a default may already be leading businesses to hold back on hiring or making new investments, according to the center.

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Read more: http://www.portfolio.com/views/blogs/capital/2011/07/07/small-business-lending-fund-finally-flows#ixzz1RS0bby3Z

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