US President Barack Obama suspended budget negotiations for the day yesterday to give US congressional leaders a chance to come up with a “plan of action” on how to unblock talks meant to cut deficits and avert a debt default.
Obama, who had vowed to meet top lawmakers every day until a deal is reached to raise the US debt limit, gave top Democrats and Republicans until today to reconsider their positions in the high-stakes negotiations.
“It’s decision time. We need concrete plans to move this forward,” Obama said on the fifth straight day of debt negotiations on Thursday, according to a Democratic official.
Photo: Reuters
Financial markets are starting to worry that Republicans and Democrats are too far apart to reach a major budget agreement by Aug. 2, when the US would run out of money unless the cap on government borrowing is raised.
Obama, who is running for re-election in November next year, has rejected the idea of a stopgap or short-term agreement that would require the debt ceiling to be raised again next year.
“A short-term solution is not something I will sign,” he said on Thursday.
Republicans are pressing for at least US$1 in spending cuts for every US$1 that the government’s US$14.3 trillion debt ceiling is lifted and say the White House needs to get serious about reducing spending to properly address the debt problem.
Democrats are open to certain cuts, but want some tax increases and other revenue-builders to be included in any deal so that the burdens of the austerity are shared.
Obama thinks a deal worth US$2 trillion could be feasible if both sides bend a bit, officials familiar with the talks said.
Compromises required for such a deal could be awkward for both Democrats and Republicans as the campaign for next year heats up.
However, a failure to raise the debt ceiling stands to hurt the fragile US economy and reverberate worldwide, driving up interest rates and shaking currency, equity and bond markets.
Ratings agencies Moody’s and Standard & Poor’s have also signaled they may cut the gold-plated US credit rating if the borrowing limit is not raised and bills are not paid.
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