Fri, Oct 04, 2013 - Page 1 News List

Obama warns of catastrophic default


US House Speaker John Boehner speaks to reporters following his meeting with US President Barack Obama at the White House in Washington on Wednesday.

Photo: Reuters

The US limped into day three of a government shutdown yesterday with US President Barack Obama warning markets that the crisis could trigger a catastrophic US debt default.

Obama met with top Republican leaders for an hour on Wednesday, but the talks failed to end the crisis that has sent hundreds of thousands of government workers home, and shut museum sites and national parks throughout the country.

Conservative Republicans want to dismantle or amend Obama’s healthcare law as a condition for approving stop-gap funding for the new fiscal year, which began on Tuesday. The president is refusing to tinker with the legislation, his signature healthcare reform bill widely known as “Obamacare.”

Both sides accused the other of refusing to negotiate and there is no end in sight to the latest crisis to hit bitterly divided Washington.

Heightening tensions, Obama sent Wall Street a blunt warning that the political crisis that has paralyzed the US federal government could yet trigger a catastrophic debt default, but when he met with Republican House of Representatives Speaker John Boehner and Senate minority leader Mitch McConnell, there was no sign of a breakthrough. Hundreds of thousands of federal workers are staying home, museums and national parks are shut, much scientific research is on hold and the shutdown is now threatening sluggish economic growth.

“The president reiterated one more time that he will not negotiate,” Boehner said, emerging empty-handed into a warm Washington night to address reporters after the West Wing talks.

On that point at least, the two sides agreed.

Obama said in an interview with CNBC that he would not negotiate on budget matters until Republicans had passed a bill to reopen the government and raise the US$16.7 trillion US debt ceiling.

The cap must be raised within two weeks or Washington could default on its government debt and payments for the first time, a result that could hurt the credit rating of the world’s largest economy.

Democratic Senate majority leader Harry Reid emerged from the talks complaining about Boehner’s attitude and vowing not to allow the healthcare law to be overturned.

In his interview, Obama challenged his opponents to directly address the financial community.

Obama was asked whether Washington was simply gripped by just the latest in a series of political and fiscal crises which reliably get solved at the last minute.

In unusually frank comments on issues that could sway markets, Obama warned that investors should be worried.

“This time’s different. I think they should be concerned,” Obama said. “When you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble.”

Obama said he would not negotiate until lawmakers pass a temporary financing bill and raise the debt ceiling, but after that he would be “prepared to have a reasonable, civil negotiation around a whole slew of issues.”

The US president warned it would set a terrible precedent to allow lawmakers of any party to hold a White House to ransom over the government’s borrowing limit.

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