President Barack Obama warned on Tuesday that elderly Americans could suffer first from a debt default, raising pressure on lawmakers as prospects for a deal to lift the debt ceiling appeared far from reach.
The president and congressional leaders met at the White House for the third time in as many days, working to break a logjam over taxes and spending cuts before August 2. when the US treasury says it will run out of money to pay all of the country's bills.
Little progress was made and another meeting was expected on Wednesday.
Republicans have balked at raising the debt limit without a deficit-cutting deal, but their leader in the Senate, Mitch McConnell, proposed a backup plan that would allow Obama and his Democrats to do just that, allowing Republicans to duck what would be a painful vote.
McConnell said a "real solution" to the US debt problem was unlikely while Obama was in office. The president, in an interview with television network CBS, chalked up the comments to "partisan politics."
As politicians sparred, US business leaders pressed Washington to act swiftly to raise the USD 14.3 trillion US debt ceiling or risk derailing a sputtering economic recovery and endangering the global financial system.
Obama told CBS that checks to recipients of the Social Security retirement program may not go out in early August if he and congressional leaders do not hammer out an agreement.
"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue," Obama said, according to excerpts of the interview released before its broadcast.
"There may simply not be the money in the coffers to do it," Obama said. He said veterans checks and disability benefits could also be affected without a deal.
Obama's warning that senior citizens - an active voting group - could suffer first if a deal was not reached could give lawmakers a nudge ahead of 2012 elections.
Seniors punished Democrats last year for including Medicare cuts in their healthcare package and then turned on Republicans in a special New York election this year over a Republican plan to overhaul the government-run healthcare program for the elderly.
It also evoked memories of the debt limit crisis of 1996 when Treasury Secretary Robert Rubin warned he would not be able to send out Social Security pension checks the next month if the ceiling were not raised. The Republican-controlled House immediately voted to allow the government to issue more debt to make those payments.
Little Progress
Failure to seal a deal by Aug.ust 2 could spook investors, causing US interest rates to surge and stock prices to plummet, putting the United States at risk of another recession, Treasury officials and economists have warned.
Tuesday's talks lasted nearly two hours.
House Speaker John Boehner questioned whether Social Security checks would be cut off after that point, asserting that the Treasury Department has the ability to prioritize payments.
"I think it's way too early to be making some types of veiled threats like that," Boehner said on Fox News.
He said earlier in the day that the debt limit increase was Obama's problem. Democrats said that Republicans bore a responsibility as well because much of the debt had been racked up during the past decade when they controlled Washington.
The White House said the one thing negotiators on both sides agreed on was the need to raise the debt ceiling.
Boehner said there were several contingency plans in place if the two sides can't reach a deal.
McConnell's proposal would allow only one-third of Congress - presumably Democrats - to raise the debt ceiling. In a complicated legislative maneuver, Congress would reject Obama's debt ceiling request, and Obama would veto that rejection. If Congress failed to muster the two-thirds vote needed to override a veto, the debt ceiling would effectively be lifted by the amount Obama had requested.
The White House and Democratic Senator Harry Reid reacted cautiously to the proposal, which would allow Republicans to essentially duck what is viewed as a painful vote.
One Democratic aide said the proposal "is nothing more than a political ploy to put it all on one party."
Treasury Secretary Timothy Geithner, who has warned of catastrophic consequences if Congress fails to raise the debt ceiling, held firm on Tuesday to vows that the United States would not default. "Failure is not an option," he said.
New York Mayor Michael Bloomberg, mentioned as a possible successor to Geithner, also weighed in on the debate, saying a default would damage the US credibility around the world.
"America's good name and credit are just too important to be held hostage to Washington gridlock, and I hope that in the end cooler heads will prevail and an agreement will be reached quickly," he said in a statement.
