Philippine Flood Relief Shifts to Aid Survivors

MANILA — Stella Cabilogan’s house was hit hard by the flash floods over the weekend that killed about 600 people, but she has decided against moving with her two children into a nearby evacuation center.

“The situation in the evacuation center is very difficult,” she said by telephone on Monday from the southern city of Cagayan do Oro. “There is no water or sanitation there. It’s very easy to get sick.”

Ms. Cabilogan, 33, moved her family to her brother’s house on the other side of town, which was less affected. But tens of thousands of people affected by the floods that devastated the southern Philippines had no such option, and by Monday, officials had turned their focus toward the welfare of the living.

“Water has not been restored to many areas, and people are not well sheltered,” Gwendolyn T. Pang, the secretary general of the Philippine Red Cross, said by telephone on Monday. “The risk now is to the health of the survivors.”

According to the Philippine Red Cross, 652 people were killed, and hundreds more were still missing, after flash floods triggered by Tropical Storm Washi ripped through the southern Philippine cities of Cagayan de Oro and Iligan in the dead of night. About 45,000 people are in evacuation centers.

The Philippine government’s national disaster council put the total number of dead at 684 and estimated that fewer than 100 were missing. The discrepancy in figures, according to local officials, was based on the fact that the Red Cross’s missing list includes people whose relatives have been unable to contact them and have requested that they be traced.

Funeral parlors overflowed in the two hardest-hit cities, giving some areas an overwhelming stench of death and triggering health concerns among residents. Officials in Iligan announced plans on Monday for a mass burial, but the health authorities in Manila strongly opposed the proposals, saying that the dead, particularly those in mortuaries, did not pose a health risk to the living.

“There is no rush to bury the dead,” Dr. Eric Tayag, a spokesman with the Department of Health in Manila, told a local television station on Monday afternoon. “They will not spread diseases. We should focus on those who survived.”

Dr. Tayag argued that there was a greater chance of harming the mental health of survivors if the dead were buried in anonymous mass graves.

“It will affect people psychologically if they are not allowed to identify and bury the dead,” he said.

He said that the imminent health threat was in the crowded evacuation centers, which could become breeding grounds for cholera, typhoid, respiratory infections and other communicable illnesses.

Health officials were organizing vaccinations at the centers in an attempt to stem the infections.

Ms. Pang of the Philippine Red Cross said her staff and volunteers on the ground were seeing the psychological effect of the flooding.

“People in the area are still panicked and worried, so we are assisting with psycho-social coping,” she said. “Some people are now afraid of the rain. Every time it rains, they ask to be rescued.”

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Obama to propose "Buffett tax" on millionaires

WASHINGTON (Reuters) - President Barack Obama, in a populist gesture designed to appeal to voters, will propose a "Buffett Tax" on people making more than $1 million a year as part of his deficit recommendations to Congress on Monday.

Such a proposal, among suggestions to a congressional Super Committee expected to seek up to $3 trillion in deficit savings over 10 years, would appeal to his Democratic base ahead of the 2012 election but likely not raise much in revenues.

White House Communications Director Dan Pfeiffer said in a tweet on Saturday the tax would act as "a kind of AMT" (Alternative Minimum Tax) aimed at ensuring millionaires pay at least as much tax as middle-class families.

The "Buffett Tax" refers to billionaire investor Warren Buffett, who wrote earlier this year that rich people like him often pay less in tax than those who work for them due to loopholes in the taxcode, and can afford to pay more.

Obama will lay out his recommendations in White House Rose Garden remarks at 10.30 am on Monday and is expected to urge steps to raise tax revenue as well as cuts in spending.

But Congress is at liberty to ignore his suggestions and

Republicans, who control the House of Representatives, have said that they will not agree to tax hikes.

The super committee of six Democrat and six Republican lawmakers must find at least $1.2 trillion in deficit savings before the end of the year to avoid painful automatic cuts, and is mandated to seek savings of up to $1.5 trillion.

These savings are on top of $917 billion in deficit reduction agreed in an August deal to raise the debt limit and Obama wants it to go further.

He has separately urged it to consider $450 billion in tax increases on top of this goal to pay for a jobs bill that he unveiled earlier this month.

The Buffett Tax could help energize Obama's base by highlighting a feature of the tax code that allows the super rich to pay lower rates of tax less wealthy Americans

because the bulk of their income is capital gains, dividends and the 'carried interest' earnings of hedge fund managers.

This is taxed at 15 percent, compared to rates of 10 to 35 percent on straightforward income.

Libyan forces battle to loosen grip on Gaddafi towns

BANI WALID/SIRTE, Libya (Reuters) - Libyan interim government forces charged a desert stronghold controlled by fighters loyal to Muammar Gaddafi and battled on the streets of the ousted leader's hometown as they struggled to quash his last pockets of support.

Nearly a month since they drove Gaddafi's forces out of the capital Tripoli, transitional government fighters have become mired in sieges of his loyalists' remaining redoubts, raising doubt over whether they can quickly unite the vast country.

Forces backed by Libya's National Transitional Council (NTC) made little headway against stiff resistance in Gaddafi's birthplace Sirte on Saturday, but were able to celebrate the capture of the town of Herawa 40 miles to the east.

The fighters also stormed back into the desert town of Bani Walid, a day after diehard loyalists beat them into a retreat.

An NTC spokesman said anti-Gaddafi forces also captured the small town of Birak as they advanced on the major loyalist stronghold of Sabha, deep in the remote southern desert.

Gaddafi's spokesman said the ousted leader was still in Libya and leading resistance. Moussa Ibrahim also accused NATO of killing 354 people in a bombing of Sirte, an accusation Reuters could not independently verify.

NATO said such reports in the past had been false.

A column of NTC pickup trucks mounted with anti-aircraft machine guns and fresh ammunition rushed into Bani Walid as dusk fell across Libya's interior desert.

China charms Europe, but Beijing has own agenda

LISBON, Portugal (AP) — When a nervous horse unseated its cavalry officer at a red-carpet event during Chinese President Hu Jintao's state visit to Portugal last year, the leader of the world's second-largest economy broke with protocol and walked over to the bruised guardsman.

"I hope you get well soon," Hu told him through an interpreter.

The public display of compassion was in keeping with China's European charm offensive in recent years. It has waved its checkbook at a growing number of financially ailing European countries — although the actual impact on Europe's debt-stricken countries has been limited so far, and aimed mainly at winning friends and business contracts.

Europe's frail economies are wobbling under the weight of their debts. Their urgent austerity measures are stunting growth and driving unemployment higher, and their citizens are clamoring for improvements. That has changed the complexion of European dealings with booming China.

Crisis-hit European countries are swooning over China's $3.2 trillion cash pile — the world's biggest foreign exchange reserves — even though many are angry about what they view as unfair Chinese practices.

"China is increasingly trying to diversify its foreign policy relationships ... trying to find the right ways to use its new-found influence, to gain from it," says Nicholas Consonery, an Asia analyst at Eurasia Group in Washington DC.

Join the dots, Beijing-watchers say, and China's strategy becomes clear: It wants to use its economic leverage to make friends who may be more forgiving in disputes over trade and human rights, and ensure doors are open for its goods and corporate investments in the European Union, its main export market.

Most immediately, many European countries are looking for a lifeline to extricate themselves from the continent's severe sovereign debt crisis, which threatens to collapse the continent's financial system.

In the latest example, Rome officials disclosed this week they held talks with China's sovereign wealth fund about buying debt-stressed Italy's bonds.

Before those talks, Beijing had vowed to buy the bonds of Greece and Portugal, which ended up needing international bailouts, and Spain and Hungary.

Though neither China nor EU countries disclose figures on Chinese bond purchases, analysts believe Beijing's repeated expressions of faith in the EU's finances are aimed principally at building goodwill and have not translated into large disbursements.

"Europeans have a tendency to pray for rain from China, but the rain is not necessarily coming," says Francois Godement, a Paris-based senior policy fellow at the European Council on Foreign Relations.

Experts reckon cautious Chinese leaders are hesitant about putting big money into jittery debt markets. Some leading Chinese economists have discouraged the investment as too risky, and analysts note Beijing has to pay attention to the needs of its own poor.

According to EU officials, China has invested in Europe's euro440 billion ($605 billion) bailout fund. But that fund carries a top AAA rating, meaning it is an extremely safe way for Beijing to help Europe without exposing itself much to the dangers of a default. The sums were never disclosed.

Rachel Shoemaker, an Asia expert at Executive Analysis in London, says the bond purchases — however modest — can help win approval for broader Chinese investments down the line, such as in trade and corporate and infrastructure investments.

"We assess that China's rhetoric is likely to exceed its actual support, with China likely to focus on commercial gains and thus to negotiate bilateral deals that essentially result in investment opportunities in return for bond purchases," Shoemaker said in a written reply to AP questions.

She cites Greece as an example. As China promised to acquire that country's bonds, state transport giant China Ocean Shipping Co. snared a $1 billion concession deal in 2009 for the country's largest container-terminal port near Athens. That gives COSCO's growing port management business a foothold in Europe and positions it to prosper as Chinese trade with the Balkans and Central Europe grows. China also pledged to help double the trade volume with Greece to nearly euro6 billion by 2015.

It's a similar story across Europe, with Chinese pledges of bond purchases coming simultaneously with announcements of major investments in the continent's corporations and infrastructures.

Chinese Premier Wen Jiabao and Italian Premier Silvio Berlusconi last year spoke optimistically of doubling bilateral trade to $100 billion within five years. In one of the deals signed in their presence, Internet service provider Tiscali SpA and Zte, a Chinese maker of telecommunications equipment, made a deal for development of ultra-wideband in Italy.

One of the conditions of China's purchase of Spanish bonds in January 2011, analysts say, was the sale to Sinopec of around $7 billion worth of Brazilian oil assets held by Spanish energy company Repsol. That deal gave birth to one of Latin America's largest energy companies.

On his Portugal trip, the Chinese president signed cooperation agreements which sought to double trade between the two countries within five years. Chinese and Portuguese companies signed deals in areas covering energy production, information technology, telecommunications, tourism, banking, port infrastructure, and agriculture.

China's European push came after its expansion into Africa where it has invested billions, mostly in gaining access to raw materials.

United States loses prized AAA credit rating from S&P

Reuters - The United States lost its top-tier AAA credit rating from Standard & Poor's on Friday in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficit and rising debt burden. The action is likely to eventually raise borrowing costs for the American government, companies and consumers.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.

The outlook on the new U.S. credit rating is "negative," S&P said in a statement, indicating another downgrade was possible in the next 12 to 18 months.

The move reflects the deterioration in the global economic standing of the United States, which has had a AAA credit rating from S&P since 1941, and it could have implications for the U.S. dollar's reserve currency status.

"The global system must now adjust to the many implications and uncertainties of the once-unthinkable loss of America's AAA," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co which oversees $1.2 trillion in assets.

The outlook on the new U.S. credit rating is "negative," S&P said in a statement, indicating another downgrade was possible in the next 12 to 18 months.

The decision follows a fierce political battle in Congress over cutting spending and raising taxes to reduce the government's debt burden and allow its statutory borrowing limit to be raised.

On August 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances.

The political gridlock in Washington over addressing the long-term fiscal problems facing the United States came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years.

The S&P 500 stock index fell 10.8 percent in the past 10 trading days on concerns that the U.S. economy may be heading into another recession and because the European debt crisis has worsened.

Treasury bonds, once indisputably seen as the safest security in the world, are now rated lower than bonds issued by countries such as Britain, Germany, France or Canada.

U.S. TREASURY QUESTIONS CALCULATION

Obama was briefed earlier in the day regarding S&P's intentions, but discussions only took place with Treasury officials and did not include the White House, a source familiar with the discussions told Reuters.

Late on Friday, the Treasury said the rating agency's debt calculations were wrong by some $2 trillion.

S&P confirmed it changed its economic assumptions after discussion with the Treasury Department but said it did not affect its decision to downgrade.

"We take our responsibilities very seriously, and if at the end of our analysis the committee concludes that a rating isn't where we believe it should be, it's our duty to make that call," David Beers, head of sovereign ratings at S&P, told Reuters.

The theme running throughout S&P's analysis is the breakdown in the ability of the Democratic and Republican parties to govern effectively.

The agency said that policymaking and political institutions had weakened in the past few months "to a degree more than we envisioned." This has major implications for the nation's budget and debt problems.

For example, S&P now assumes that tax cuts brought in under President George W. Bush in 2001 and 2003 would not, as planned, expire by 2012 because of staunch Republican opposition to any measure that would raise revenues.

The compromise reached by Republicans and Democrats this week calls for creation of a bipartisan congressional committee to find $1.5 trillion of deficit cuts by late November, beyond the $917 billion already identified.

How Washington took the U.S. to the brink

Reuters) - The world's largest economy was headed toward an unprecedented default, and all Washington wanted to talk about was the manner in which the president had left a room.

A White House meeting in mid-July between President Barack Obama and congressional leaders had ended with sharp words as Obama clashed with the brash Republican House majority leader, Eric Cantor.

Now Cantor was back on Capitol Hill, dishing details to a scrum of reporters -- a shift from the terse, vague statements that usually followed such meetings.

"He said to me, 'Eric, don't call my bluff. I'm going to the American people with this,'" Cantor said in his Southern drawl. "I was somewhat taken aback."

Republican aides filled in the gaps. Obama had "stormed out of the room," one said. At the White House, aides pushed back. One official demonstrated to reporters exactly how Obama had ended the meeting -- lightly pushing his chair back from the table, standing up deliberately, walking away calmly. "He didn't storm out. He just got up and walked into his office," one said.

That evening -- July 13, 2011 -- was one of the lowest points in the struggle to avert fiscal disaster and put the nation's budget on a sustainable path.

Congress needed to extend the country's $14.3 trillion debt ceiling before Tuesday, August 2, the date the Treasury Department would begin running out of cash to cover the country's bills. But Republicans and Democrats were deadlocked.

INSIDERS UNITE

As the deadline drew closer, the two sides abandoned a series of efforts to reach agreement, searching for the right combination of policies and personalities to get a deal done. In the end, it fell to two consummate Washington insiders to prevent the talks from collapsing.

A Reuters examination of the months-long showdown over the debt ceiling found that:

* Vice President Joe Biden and Senate Republican Leader Mitch McConnell emerged as critical players in the final stretch of the talks, as theirs was the only cross-party relationship built on decades of trust.

* Despite a belief among many rank-and-file Republicans that the government could muddle through a default, party leaders never doubted the Treasury Department's warnings that economic catastrophe was a real possibility if they didn't reach a deal by August 2.

* Although House of Representatives Speaker John Boehner, the top U.S. Republican, was eager to strike a bold deal with Obama, it was ultimately necessary for Boehner to distance himself from the White House to convince his House Republicans to back the final deal.

* The business community played an important behind-the-scenes role, with two White House foes -- Wall Street and the Chamber of Commerce -- rallying support for a compromise backed by Obama.

This account of America's journey to the brink of default is based on interviews conducted over the past six weeks with dozens of elected officials, business lobbyists and aides in the House, the Senate and the White House.

A ZEAL FOR CUTS

The U.S. congressional elections in November 2010 set the stage for confrontation over the congressionally mandated cap on the outstanding total of federal government borrowings. Republicans had harnessed voters' anxiety over the economy and soaring deficits to capture the House of Representatives.

Accusing Obama of overreaching with his stimulus package in 2009 and his drive for healthcare reform, Republicans vowed to slash spending and rein in the federal government's size.

A campaign document -- the "Pledge to America" -- promised to cut spending by $100 billion in the first year alone, back to the levels in place in Republican President George W. Bush's last year in office.

The newly elected Republicans, 87 in all, were not interested in compromise. Many felt a greater obligation to the grassroots Tea Party activists who had sent them to Washington than to the party elders who ran the place.

In a budget fight with the Democratic-controlled Senate that took the government to the brink of a shutdown in April, Republicans managed to cut spending by $38 billion, the largest domestic cut in U.S. history.

Still, 59 House Republicans voted against the bill because it did not go far enough.

BOEHNER'S BATTLELINES

That was a mere skirmish. The big battle lay ahead as the government was fast running up against its $14.3 trillion credit limit and would need Congress to raise it further. In early May, Boehner laid out his conditions for a debt-ceiling increase: spending cuts would need to exceed the amount of new borrowing authority.

Instead of billions of dollars, the debate would be measured in the trillions.

It would be a chance for Boehner to show his new troops that he could use the levers of Washington to get results.

An avid golfer and a chain-smoker, the 61-year-old Boehner is from an older generation than many of the Tea Party conservatives whose election to Congress made it possible for him to become House Speaker.

The seasoned legislator and former businessman grew up in Ohio from a family of modest means and worked as a janitor to help put himself through college.

Obama, 49, had a comfort level with fellow Midwesterner Boehner despite their philosophical differences. The speaker reminded the president, a former state senator from Illinois, of Republican legislators he used to play poker with in Illinois and with whom he forged bipartisan deals.

Both men are even-tempered and view themselves as Washington outsiders. Each has ambitions of transforming Washington and making a big mark on policy.

Those aspirations drove their on-again, off-again talks aimed at a far-reaching, bipartisan "grand bargain" that would put the United States on sounder fiscal footing for years to come.

On a golf outing in mid-June, the two agreed to work together on a broad deficit-reduction deal. "Let's give it a try," Obama told the speaker.

The following week, at a secret White House meeting, they agreed to have their staff draw up options. The aim was to craft a plan that would cut deficits by roughly $4 trillion over 10 years.

A 'GRAND BARGAIN?'

The challenges were steep. Democrats would have to agree to rein in cherished social programs like the Medicare health plan for retirees and the disabled. Republicans would have to accept a tax-code overhaul that would increase revenues through the elimination of tax breaks and deductions.

Boehner's enthusiasm for the "grand bargain" was not shared by his colleague, Senate Republican leader Mitch McConnell.

McConnell had confided to Vice President Joe Biden that he thought it was unrealistic to try to accomplish such a sweeping deal in the weeks before August 2 deadline.

The Senate Republican leader worried it would lead to a dead end when pressure was building to resolve the debt-limit standoff. Rating agencies were warning they might downgrade the country's top-notch credit score and, while there was no sign of panic yet in financial markets, investors were growing nervous.

McConnell, 69, had served in the Senate since 1985 and witnessed firsthand the divided-government battles of the 1990s, when Republican House Speaker Newt Gingrich and an earlier generation of firebrand conservatives went toe-to-toe with Democratic President Bill Clinton.

MEMORIES OF 1996

That confrontation led to a shutdown of the federal government and provoked a public backlash against Gingrich and his party. With the Republican brand tarnished, Clinton sailed to re-election in 1996.

McConnell, whose party is a minority in the closely divided Senate, viewed the 2012 elections as a chance to gain dominance in the chamber.

He feared the debt-limit fight would put that in jeopardy while also bolstering Obama's re-election prospects.

If Treasury Secretary Timothy Geithner's warnings were right -- and both McConnell and Boehner believed they were despite skepticism among their rank-and-file -- the fallout from a debt default would be calamitous, causing stocks and the dollar to sink and interest rates to surge.

Mortgage rates and business borrowing costs would spike, potentially sending the economy into another recession. That would mean Republicans -- whom Democrats had accused of intransigence over the debt limit -- would share in the blame for the economy's woes and suffer voter wrath as a result.

Many in the White House viewed McConnell as more of a tactician than a visionary and someone more focused on party politics than on setting policy. In the quest for a grand bargain, Boehner would make a better partner, they thought.

But in the end, after Boehner twice broke off talks with the White House, administration officials relied heavily on McConnell as an emissary to the speaker, and came to view him as a crucial player.

A BOND BETWEEN RIVALS

The administration's chief link to McConnell was Biden, 68, a 36-year veteran of the Senate with rock-solid Democratic credentials who nonetheless had a strong rapport with the Republican leader.

The two seemed to speak the same language from their years in the Senate together. Their bond grew closer when they worked together on a tax-cutting deal just before Christmas late last year, according to people who know both men.

"C'mon Mitch, you know what I'm dealing with here," Biden would sometimes tell McConnell -- Senate-speak to describe the pushback he would face from Democratic Party activists if he gave too much ground.

According to a former Biden aide, McConnell seemed to appreciate that Biden understood the GOP leader faced similar constraints within the Republican Party.

In April, Obama tapped Biden to lead a panel of lawmakers that would lay the groundwork for a deal. In an ornate corner room just off the Senate floor, the group pored through stacks of government and private-sector reports to identify more than $1 trillion in mutually acceptable spending cuts.

As the talks stretched into June, Biden gradually built up a rapport with Cantor, the House majority leader, who was leading the Republican side.

REPUBLICAN RIFT

In less than 10 years in Washington, Cantor had quickly climbed to the top rungs of Republican leadership. But his sharp elbows had earned him enemies -- some from within his own party.

He and Boehner had a cool relationship, say people who know both lawmakers. The rift extended into the lobbying community, where Republicans identified themselves as "Boehner people" or "Cantor people."

At the end of June, Cantor abruptly walked out of the Biden talks, saying the two sides could not agree on taxes. The "principals" -- Obama and Boehner -- would have to take it from there.

Even before the Biden talks began, members of Boehner's office dismissed them as political theater.

"This thing will ultimately get decided by Boehner and Obama," a Boehner aide said.

After weeks of back-channel negotiations with Obama, Boehner decided on July 22 that he could not work with the White House and would have to forge a deal with Democrats on Capitol Hill.

The two sides had come tantalizingly close to a deal, but stumbled again over the tax question.

Boehner felt the White House had shifted the goalposts at the last minute.

White House officials believed Boehner's departure stemmed from an unwillingness -- or an inability -- to take on the conservative rebels in his party. If Boehner had been willing to shake hands publicly with Obama on a "grand bargain," they said, there would have been a way to woo enough mainstream Republicans and Democrats to pass the bill.

They also disagreed with any suggestions that they had shifted the goalposts.

'A BOWL OF JELL-O'

"Dealing with the White House is like dealing with a bowl of Jell-O," Boehner said angrily at a press conference that night.

Obama called him back to the White House the following day and told him he should not be left out of the process.

"Mr. President, as I read the Constitution, the Congress writes the laws. You get to decide if you want to sign them," Boehner responded, according to his aides.

The action moved back to Congress. Like the deal that Boehner and the White House had abandoned, the latest plan would separate the relatively easy decisions -- curbs on annual discretionary spending -- from the difficult reforms to benefits and the tax code.

It wasn't the "grand bargain" Obama and Boehner had sought, but it would deliver trillions in savings and cover the nation's borrowing needs past the November 2012 elections.

There was one catch. The plan would require another debt-ceiling vote in a few months to ensure Congress would sign off on the second set of savings, and Obama had already ruled that out.

Around 10 p.m., on Saturday, July 23, Obama called Boehner to tell him he would veto the bill if it reached his desk. But he suggested that they could find another way to ensure Congress would actually follow through with the tax and benefit changes envisioned by the plan.

GOING SEPARATE WAYS

Congressional staff continued work on the plan the next day. Boehner told Fox News he would press ahead with his own legislation if the two sides could not agree. With no progress made on the enforcement mechanism, known as a "trigger" in Washington-speak, that appeared to be the case.

Boehner told Republicans he would unveil his version of the plan on Monday, July 25, while the Democratic leader of the Senate, Harry Reid, decided to advance a rival plan. Another effort had failed.

The final week would put Boehner's leadership to the test.

Boehner unveiled his plan to Republicans that Monday in a meeting room in the bowels of the Capitol. It wouldn't tie a debt-limit increase to the balanced-budget constitutional amendment, as many of them wanted, but it would deliver more than $2 trillion in savings. A vote was set for Wednesday, July 27.

Boehner launched a two-front lobbying blitz, alternating between in-person meetings with wavering lawmakers and phone calls to conservative media figures like talk radio host Rush Limbaugh and columnist Charles Krauthammer.

On Monday night, he touted the plan directly to a national audience, as television networks granted him air time to respond to a prime-time speech by Obama.

'READY TO DRIVE THE CAR'

Boehner's rally continued on Tuesday morning at the Capitol Hill Club, a social club for Republicans. Boehner's lieutenants took the lead. Cantor bluntly acknowledged that "the debt limit sucks." Kevin McCarthy, the House Republican whip, or lead vote counter, showed a clip from "The Town," a 2010 movie about bank robbers.

"I need your help," said a character played by Ben Affleck. "You can never ask me about it later and we're gonna hurt some people."

"Whose car are we going to take?" asks another character.

The message: it was time to get the job done, no matter how messy. The film clip appeared to win over at least one convert.

Representative Allen West, an outspoken Tea Party-aligned freshman, stood up and shouted: "I'm ready to drive the car!"

OBAMA'S UNLIKELY ALLIES

But momentum shifted as the day wore on. Outside conservative groups like the Club for Growth and the Heritage Foundation urged a vote against the bill.

At the White House, aides were batting away suggestions that Obama had been sidelined.

"He's working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all opportunities for compromise," said senior White House adviser Valerie Jarrett.

Obama worked the phones, talking strategy with Democratic leaders and developing options for the final endgame.

Jarrett, one of the administration's envoys to the business community, said her phone was ringing off the hook with calls from retailers and other business owners worried about the prospect of another debt-limit fight in December if Obama was forced to accept Boehner's two-step plan.

The White House was also actively reaching out to the business community to spell out the dire consequences of a default.

The administration found an ally in the Chamber of Commerce, a group traditionally aligned with Republicans, who now urged the party to back the bill.

The financial services industry was also on the same page as the administration on this issue, despite its many skirmishes with the White House during the debate over Wall Street reform in 2010.

JAMMED CIRCUITS

In his public address on Monday night, Obama had implored Americans to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers.

Telephone circuits on Capitol Hill seized up, email messages bounced back and Web sites crashed under the load.

The anxiety at the White House was building.

"It's fair to say that nobody here had any doubt that this was going to go right up to the line, even as we urged Congress not to take it right up to the line," one administration official said. "That's just the way Congress works."

Still, the path toward a deal was far from clear.

Over at Treasury, Geithner was trying to figure out what to do if Congress failed to reach a deal in time.

Should the government make debt service a top priority to prevent a meltdown on Wall Street? That could delay paychecks to soldiers, benefit checks to retirees, and payments to government contracts, sending ripples through the economy.

Back at the Capitol, Boehner's troubles mounted.

Representative Jim Jordan, a leader of the Republican Party's right wing, predicted Boehner wouldn't get the votes he needed from his own party. Democrats united against his bill.

The Congressional Budget Office, the official scorekeeper, said it would only deliver $850 billion in savings, rather than the $1.2 trillion it claimed. Late that evening, Boehner decided to rewrite the bill to make sure it complied with the party's vow to extract spending cuts greater than the size of the debt limit increase. That put off a vote until at least Thursday.

'FIRE HIM!'

The acrimony spilled into the open Wednesday morning, July 27, in the party's basement meeting room.

Representative Greg Walden, a Boehner ally, read aloud an email from a Jordan staffer that urged outside conservative groups to convince undecided members to vote against the bill. Many lawmakers in the room viewed the message as a betrayal of the Speaker. As the Jordan staffer stood uncomfortably against a wall, lawmakers chanted, "Fire him! Fire him!"

The usually jovial Boehner turned the screws. "Get your ass in line," he said. There was laughter, but the message was unmistakable.

As the meeting adjourned, lawmakers predicted the bill would pass. But a large number remained on the fence. Boehner spent the day listening to their concerns -- the cuts weren't big enough, the special committee might raise taxes, the balanced-budget amendment has been watered down.

Thursday morning, July 28: another meeting, another chance to rally the troops over fruit and doughnuts and signs that read "Play like a champion." Representative Mike Kelly, an alumnus of Notre Dame University, drew upon his school's storied legacy as he urged members to "put on your helmet, buckle your chin straps, run out onto the field and beat the shit out of your opponent!"

Doubters like Jordan stayed silent. As the meeting adjourned, they told reporters that their opposition had not changed.

With the rewritten bill ready to go, Republican leaders scheduled a vote for late Thursday afternoon. As debate started on the House floor, Boehner, Majority Leader Cantor and Whip McCarthy continued to meet with doubters, making the case that the party needed to stick together if it wanted an acceptable final product.

At 5:25 p.m., the Republican troika abruptly yanked the bill from the House floor with only one minute left of debate. They didn't have the votes.

'BLOODY AND BEATEN'

As floor action turned to naming post offices, Boehner summoned the holdouts to his office just off the Capitol rotunda. Whatever he was doing wasn't changing any minds.

"I'm a bloodied and beaten 'no,'" said Representative Louie Gohmert of Texas, one of several conservatives who had downplayed the consequences of a technical default, as he left the office.

At the beginning of the year, Republicans had enacted a ban on earmarks, the pet spending projects that had come to symbolize waste and corruption in the public imagination. That meant that Boehner had fewer carrots to offer reluctant members -- no highway overpasses.

"It is the most refreshing thing in the world to see what is going on here. These kinds of negotiations a couple of years ago would have cost $20 billion," said Representative Jeff Flake of Arizona, whose anti-spending stance had made him an outcast in the party in the past decade.

The five Republicans who represent South Carolina headed from Boehner's opulent suite to the Capitol's small, private chapel to pray.

As they knelt beneath a stained glass window depicting George Washington, they weren't praying for guidance, just strength to maintain their stand.

"I think divine inspiration has already happened. I was a 'lean-no,' now I'm a 'no,'" said Representative Tim Scott.

19 BOXES OF PIZZA

The action moved downstairs to McCarthy's office. The jovial 46-year-old Republican whip, from California's dusty interior, was a novice vote counter. He had presided over a few embarrassing setbacks earlier in the year. Now he was facing a true disaster.

As the night wore on, 19 boxes of pizza from Al's Pizzeria disappeared into McCarthy's office.

The holdouts weren't looking for pork-barrel spending or other favors -- though they didn't refuse the pizza. Instead, they wanted to strengthen the balanced-budget clause. That would certainly doom the bill in the Senate, but at that point Boehner just wanted to get it out of the House.

Even with that change, Boehner still appeared to be short of the 217 votes he needed. At 10:30 on Thursday night, the House adjourned without a vote.

House Republicans met in their basement clubhouse again on Friday morning, July 29. The holdouts came under more pressure -- this time from other rank-and-file members who said they were undermining the party's negotiating position. But a final count showed that the votes appeared to be there.

"I love you guys," Boehner said in a moment of levity.

The bill passed Friday evening on a vote of 218 to 210 -- just one vote more than needed. The Senate defeated it two hours later, and the House retaliated on Saturday by defeating a proposal put forth by Harry Reid, leader of the Democratic majority in the Senate.

Another week had elapsed, and Congress was no closer to consensus.

While the legislative chess game played out, Biden called McConnell on Wednesday and Friday.

MCCONNELL'S BOTTOM LINE

Out of loyalty to Boehner, the Senate Republican leader had refrained from talks with the White House for most of the week.

On Friday morning, McConnell told Biden there was "no daylight" between the two Republicans, but told the vice president to try later in the day.

"Call me back after these votes and I will tell you what it will take to get my support," McConnell said, according to a Republican aide.

Biden and McConnell spoke again Friday evening and in the early afternoon on Saturday. Negotiations began in earnest around 3 p.m., after the House defeated Reid's bill.

Tuesday, August 2, was three days away.

White House chief of staff Bill Daley's office became Grand Central Station for a rolling series of meetings among White House staff. The meetings moved on Sunday to the vice president's office and later to the Oval Office.

On Saturday, Obama asked Biden's chief of staff, Bruce Reed, whether his wife was angry that he was spending his wedding anniversary at the office.

"Previously, I was on negative watch but I've now been officially downgraded," Reed deadpanned.

CLIMACTIC PHONE CALLS

After months of high-profile meetings, nearly all of the negotiations on the final weekend took place by phone.

In the big gatherings, participants tended to emphasize "talking points" because of the expectation that the conversations would spill out into the public. Smaller meetings allowed participants to cut to the chase, according to an administration official, and details could remain private.

On Saturday night, a media report surfaced that there was a tentative framework for a deal.

White House reporters seeking an update chased a top communications aide toward the Oval Office, only to be told later that the two sides had not arrived at a deal yet.

Indeed, the negotiations ended up going down to the wire.

At 5 p.m. on Sunday night, White House officials discussed whether Treasury Secretary Geithner should make a statement to the financial markets that evening or perhaps the following morning.

GEITHNER'S GAME

Geithner, in his former role as head of the Federal Reserve Bank of New York, was one of the chief financial firefighters during the global markets meltdown triggered by the collapse of Lehman Brothers in September 2008.

Asian markets were about to open. The crisis had already roiled U.S. debt markets and taken a toll on the dollar and Wall Street stocks.

Administration officials feared worse bloodletting if investors returned to their desks at the start of the week without clarity on whether there would be a deal.

Geithner and a small team of aides had been quietly working on contingency plans in case Congress missed the August 2 deadline to raise the debt ceiling. Treasury had planned to brief markets on those plans no later than Monday.

Private-sector analysts believed that in a worst-case scenario, Geithner would be prepared to tell markets he would put a priority on paying the government's debt in order to avoid default -- even if that meant taking the politically explosive step of delaying payments to Social Security recipients and others.

PULLING THE TRIGGER

But the Treasury secretary never had to show his hand.

The final sticking point in the talks centered on the terms of the deficit-cutting "trigger." Democrats wanted automatic cuts in military spending if Congress balked at the second round of deficit reduction.

Biden and McConnell spoke four times on Saturday, five times on Sunday, circling around the two stumbling blocks that remained -- the nature of the "trigger" and the size of the defense cuts that Democrats wanted. McConnell kept in contact with Boehner.

On Sunday, July 31, there were less than two full days before Default Day. As Obama's budget director, Jack Lew, crunched numbers on the Republican defense cut proposals, the White House feared it might not get a deal. Biden spoke with Boehner around 4 p.m. and said, "We just can't get there."

McConnell floated a compromise to widen the trigger to all security-related programs -- the State Department, veterans' care, nuclear security -- and not just the Pentagon.

At 8:15 p.m. Sunday, Obama made a final call to Boehner as White House aides listened nearby.

"Do we have a deal?" Obama asked.

There was a moment of suspense, then: "Congratulations to you, too, John."