Obama, lawmakers meet for 75 minutes on debt impasse
President Barack Obama and Republican leaders failed on Sunday to mend rifts over tax increases and social spending cuts in talks aimed at cutting the US budget deficit and averting a debt default.
July 11, 2011 / 11:21 IST
President Barack Obama and Republican leaders failed on Sunday to mend rifts over tax increases and social spending cuts in talks aimed at cutting the US budget deficit and averting a debt default.
In a 75-minute meeting at the White House, Obama and Democratic congressional leaders sought to revive an effort to craft a USD 4 trillion package of spending cuts and tax increases over a decade, while Republicans insisted a USD 2 trillion plan was the best option for reaching an agreement.More talks are scheduled for Monday and the White House said Obama would hold a news conference at 11 am EDT (1500 GMT) before reconvening with congressional leaders.Obama made clear at the start of Sunday's session that they were racing the clock. Asked whether a deficit-reduction deal could be reached within the next 10 days, he told reporters: "We need to."The US Treasury has said it will exhaust its borrowing capacity by August 2, meaning it will run out of money to pay all its debts. Republicans have balked at raising the congressional-set USD 14.3 trillion debt ceiling without steep spending cuts while Democrats want to increase revenue by eliminating tax breaks for the wealthy and some industrial sectors.Failure to seal a deal by August 2 could put the United States at risk of another recession, Treasury officials and private economists have warned.The unexpected brevity of Sunday's meeting, which the White House late last week had described as vital, underscored the difficult phase the negotiations had entered.Last week, Obama and House of Representatives Speaker John Boehner, the top US Republican, were united in their aim of pursuing a far-reaching deficit-reduction package.But on Saturday, Boehner, facing the prospect of a conservative revolt over tax increases that Democrats had insisted be included in the plan, abandoned the quest for a larger deal and urged a focus on a USD 2 trillion measure made of mostly spending cuts._PAGEBREAK_BOTH SIDES CRITICALRepublicans and Democrats traded accusations over the lack of an agreement after Sunday's meeting.A spokesman for US Senate Democratic Leader Harry Reid said Republicans were intent of "taking the easy way out" and said any deal had to be balanced between spending cuts and higher revenues.But Boehner told participants in Sunday's meeting that Republicans consider as "fundamental principles" that any deal restrain future spending and include "no tax hikes."In addition to taxes, one major sticking point in the talks has been Democratic resistance to cuts in major social welfare programs such as the Social Security retirement program and Medicare health plan.Investor worries about the debt ceiling were expected this week to put pressure on the US dollar, which fell on Friday after a grim jobs report.Christine Lagarde, the new head of the International Monetary Fund, warned that a US default would have global repercussions."If you draw out the entire scenario of a default, yes, of course, you have all of that, you know, interest hikes, stock markets taking a huge hit and real nasty consequences," the former French finance minister told ABC's "This Week." Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
