John Boehner Debt Ceiling Plan

WASHINGTON (AP) -- In a blunt challenge to President Barack Obama, House Republicans drafted legislation Monday to avert a potentially devastating Aug. 2 government default – but along lines the White House has already dismissed. U.S. and world financial markets shrugged off the uncertainty.

"This is a city where compromise is becoming a dirty word," Obama lamented as congressional leaders groped for a way out of a looming crisis.

In stinging remarks a short while later on the Senate floor, the Republican leader, Mitch McConnell of Kentucky, urged the president to reconsider his position rather "than veto the country into default."

According to a GOP aide familiar with the emerging House bill, it would provide for an immediate $1 trillion increase in the government's $14.3 trillion debt limit in exchange for $1.2 trillion in cuts in federal spending.

The measure also envisions Congress approving a second round of spending cuts of $1.8 trillion or more in 2012, passage of which would trigger an additional $1.6 trillion in increased borrowing authority.

White House communications director Dan Pfeiffer called the proposal "not a serious attempt to avert default because it has no chance of passing the Senate."

While the bill marked a retreat from legislation that conservatives muscled through the House last week, the two-step approach runs afoul of Obama's insistence that lawmakers solve the current crisis in a way that avoids a politically charged rerun next year in the middle of the 2012 election campaign.