Obama seeks to salvage U.S. debt ceiling deal
U.S. President Barack Obama summoned top lawmakers to a Saturday meeting to try to salvage a deal on the...
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U.S. President Barack Obama summoned top lawmakers to a Saturday meeting to
try to salvage a deal on the government's borrowing limit from the wreckage of
deficit talks whose collapse pushed the world's largest economy closer to a
With the Treasury set to run out of money to
pay all of its bills on August 2, Obama said the window may have closed for a
"grand bargain" of spending cuts and tax increases in exchange for
Congress raising the $14.3 trillion (8.76 trillion pounds) debt ceiling.
Credit rating agencies also want spending
restraints for the United
States to keep its prized AAA rating that
makes U.S. Treasuries the solid foundation for global investors and lowers
borrowing costs for state governments, businesses, homeowners and consumers.
"We have now run out of time,"
Obama said on Friday after John Boehner, the top Republican in Congress, broke
off talks on a deficit reduction package worth more than $3 trillion over 10
Financial markets are growing more edgy and U.S. banks and
businesses are making contingency plans for the possibility of a debt default
that would drive up interest rates, sink the dollar and ripple through
economies around the world.
Obama, a Democrat, called Boehner and other
congressional leaders to a meeting at 11 a.m. EDT (4 p.m. British time) at the
White House on how the debt ceiling can be raised by August 2.
"They are going to have to explain to me
how it is that we are going to avoid default," Obama said.
Boehner, the speaker of the House of
Representatives, said he would attend. Senate Republican leader Mitch
McConnell, Senate Democratic leader Harry Reid and Nancy Pelosi, the top
Democrat in the House, were also summoned.
Boehner said he was confident the debt
ceiling would be raised next week. But he will have to overcome resistance from
Tea Party conservatives in his own party and could run into problems for having
signalled a willingness to give ground on revenue increases in closed-door
talks at the White House.
Both Republicans and Democrats chafed at the
compromises a far-reaching deal would require before the presidential and
congressional elections in November 2012, with each side accusing the other of
not doing enough and demanding too much.
Boehner said talks collapsed because the
White House insisted on raising taxes while refusing to get serious about
cutting spending and overhauling retirement and healthcare programs. Democrats
say tax loopholes and Bush-era tax cuts for the wealthy must end as part of a U.S. fiscal
A major barrier was how much revenue would
be raised via tax reform -- with Obama wanting $1.2 trillion over 10 years and
Boehner putting $800 billion on the table.
"If not reversed within the next few
days through crisis negotiations, this breakdown will be highly detrimental to
the already fragile health of both the U.S. and global economies," Mohamed
El-Erian, co-chief investment officer at Pimco, the world's top bond fund
manager, told Reuters.