WASHINGTON -- House Republicans today modified their two-step bill to raise the nation's debt ceiling, tying the second step to a requirement that Congress ratify a constitutional amendment mandating a balanced budget, in hopes of winning enough tea party backing to allow the bill to pass later today.

Meanwhile, the Senate took up legislation to raise the debt ceiling in one fell swoop, and Senate Majority Leader Harry Reid said the latest House approach will only drive the two houses farther apart only four days before the nation reaches its debt limit -- which could prompt a federal default.

"They've given the right wing even more than they've had before," Reid said of House GOP leaders who modified the bill.

But Republicans said that thanks to the new balanced-budget provision, the House bill is moving in the right direction.

"I think that's the kind of systemic reform that a lot of us want to see to raise the debt ceiling," Rep. Joe Walsh, an Illinois Republican and tea party favorite, said on C-SPAN.

The release of the revised Republican plan came not long after Reid announced plans to move forward with his own legislation and President Obama spoke to the nation for the second time this week to urge a bipartisan solution to the debt crisis.

"The time for putting party first is over," Obama said. "The time for compromise on behalf of the American people is now. And I am confident that we can solve this problem. I'm confident we will solve this problem."

Obama again urged Americans to contact their lawmakers to urge a bipartisan solution. He said he would be working with lawmakers throughout the weekend to come up with workable legislation.

"This is not a situation where the two parties are miles apart," he said, noting similarities between Reid's plan and that offered by House Speaker John A. Boehner. "The power to solve this is in our hands."

Obama spoke as House Republicans met privately to discuss their differences. House sources said several tea party-allied members had agreed to support Boehner's bill, thanks to the addition of the provision requiring a balanced-budget amendment.

The bill must be changed into "something transformative that transcends election cycles and has some degree of permanency to it," said Rep. Trey Gowdy, R-S.C., a tea party figure who met with House leaders for several hours Thursday night.

But Sen. Charles E. Schumer, D-N.Y., said the revised House bill could guarantee a national default in six months, when Congress would be unable to raise the debt ceiling again without a balanced budget amendment -- which the Senate Democratic majority adamantly opposes.

"It wouldn't just make a default likely," Schumer said. "It would guarantee a default. So the Boehner plan says we won't default now but you promise you we will default by January. It is an absurd, absurd proposition."

The addition of the balanced-budget provision came after a series of meetings late Thursday and early Friday when Boehner's leadership team tried to placate and cajole tea party lawmakers into supporting the bill.

What did Boehner and Rep. Jeff Flake discuss?

"I think that's rather obvious ... There's negotiations going on," the Arizona Republican replied.

With the House dithering, Reid said he had no choice but to move forward with his own legislation, calling it possibly the last thing that could stave off default and its dire economic consequences.

Reid's move sets up a possible Senate vote on the measure just after midnight Sunday. That's the earliest the Senate, under its rules, could vote for the measure.

Amid all the controversy in the capital and in the wake of a report that the economy grew by a measly 1.3 percent in the second quarter, stock markets fell early today.

Shortly before 1 p.m., the Standard and Poor's 500-stock index was down 0.41 percent. The Dow Jones Industrial Average stood at 12,173.5, down 0.54 percent.

Republican leaders abruptly pulled their debt-ceiling legislation from the House floor shortly before 6 p.m. Thursday, instead turning the House's attention to a series of bills renaming post offices nationwide.

Earlier Thursday, Boehner, R-Ohio, said he was optimistic his debt ceiling bill would pass.

 "Let's pass this bill and end the crisis," he said. "It raises the debt limit and cuts government spending by a larger amount."

But tea party acolytes said the measure didn't cut government enough. Some refused to consider boosting the debt ceiling under any circumstances, saying the default Obama warns of was nothing but a scare tactic -- and that starvation was the only way to tame the federal beast.

"I don't believe for a moment we will lose the full faith and credit of the United States," Rep. Michele Bachmann, a Minnesota Republican and presidential contender, said at the National Press Club. "I am committed to not raising the debt ceiling."

Other Republicans said they reluctantly concluded the Boehner measure was a good start toward solving the nation's long-term debt crisis while acknowledging that the government has to borrow more in order to pay its August bills.

"It was a tough decision" to back the bill, said Rep. Tom Reed, R-Corning. "I just did some final analysis, looking at the reality of the situation, and the risks of default are real. And when I look at where the Boehner plan was going, it was consistent with going down the path of getting this place in order fiscally."

Under Boehner's plan, Congress would immediately raise the debt ceiling by $900 billion, enough to keep the government going until early 2012, when another vote could leave the government with enough money until 2013. That two-step approach contrasts with a Senate plan, backed by Obama, that would raise the debt limit once, by $2.7 trillion, to last past the 2012 election.

Boehner would cut the deficit by $917 billion, with another vote to be scheduled on up to $1.6 trillion in additional cuts to be recommended by a bipartisan panel. The Senate plan cuts spending over 10 years by $2.2 trillion, again based on recommendations of a bipartisan panel.

Boehner's measure received blistering criticism from House Democrats even before he added the balanced-budget amendment requirement to it.

Because the measure would require a three-fifths majority to raise taxes but only a simple majority to cut spending, Rep. Louise M. Slaughter said that it would inevitably lead to painful budget cuts.

"This cut-first, think-later approach would directly harm the middle class," the Fairport Democrat said. "This amendment stacks the deck in favor of future cuts to Social Security, Medicare and Medicaid, while making it virtually impossible to close tax loopholes for oil companies and millionaires who own private jets."

Rep. Brian Higgins, D-Buffalo, accused Republicans of working to pass legislation that they knew would be doomed and that if enacted, would force the nation to endure another debt-ceiling drama in six months.

"It's facilitating more of the same nonsense," Higgins said. "No wonder people hate Congress."

Rep. Kathleen C. Hochul, D-Amherst, said the GOP bill's two-step increase in the debt ceiling "would just leave the economy and businesses in a state of limbo, which is catastrophically unfair to the American people."

As the two parties continued to bicker over the debt ceiling, American bankers and business people began issuing dire warnings about the consequences of a federal default.

"Failure to increase the statutory debt limit in a timely fashion could have significant and long-lasting negative impact on the U.S. economy," warned 115 business associations, including the Business Council of New York State and the U.S. Chamber of Commerce, in a letter to Congress on Thursday.

The nation's largest banks, including Goldman Sachs and JPMorgan Chase, issued a separate warning.

"A default on our nation's obligations, or a downgrade of America's credit rating, would be a tremendous blow to business and investor confidence -- raising interest rates for everyone who borrows, undermining the value of the dollar and roiling stock and bond markets -- and, therefore, dramatically worsening our nation's already difficult economic circumstances," the Financial Services Forum said in a letter to the president and Congress.

jzremski@buffnews.comnull