US President Barack Obama called on Wednesday for new steps to spur job growth and tax hikes on the rich, hardening a stance that will likely complicate deficit reduction talks with Republicans.
The US Senate will change its schedule to stay in session next week despite the July 4th holiday after the president challenged lawmakers to remain in town to deliver “substantial progress” on lifting the debt ceiling, one lawmaker said.
Obama’s call came as the IMF and the US Treasury Department urged Washington to reach a budget deal that would pave the way for the US Congress to raise the nation’s US$14.3 trillion borrowing limit by Aug. 2.
Photo: AFP
Failure to increase the debt ceiling, which caps how much the US can borrow, would likely trigger a default that could plunge the country into a new recession and roil global financial markets, the Obama administration and economists warn.
Obama’s push for new construction loans and an extension of a payroll tax cut could further alienate Republicans already incensed by Democratic demands for new tax revenue.
Obama upped pressure on Republicans by tying them to tax breaks for “millionaires and billionaires” and referencing special treatment for corporate jets a half dozen times, while warning on the risk of default.
“If the United States government, for the first time, cannot pay its bills, if it defaults, then the consequences for the US economy will be significant and unpredictable,” he told a White House news conference, reminding Republican Party backers on Wall Street of the stakes involved.
With the country still struggling to emerge from the deepest recession since the 1930s, Obama said Congress needed to take steps to bring down the 9.1 percent unemployment rate even as it weighs medium-term austerity measures.
“There are more steps that we can take right now that would help businesses create jobs here in America,” he said.
Those measures likely would add hundreds of billions of dollars to budget deficits at a time when the White House and lawmakers are trying to narrow them by more than US$1 trillion.
Congressional Republicans, determined to cut spending, say additional stimulus has no place in the debt ceiling talks.
“The president’s remarks today ignore legislative and economic reality,” Republican House of Representatives leader John Boehner said. “The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. The votes simply aren’t there.”
The budget deficit for the fiscal year that ends Sept. 30 is expected to hit US$1.4 trillion, one of the highest as a share of the economy since World War II.
Since deficit-reduction talks collapsed last week, Republicans and Democrats have made no progress on a deal to allow Congress to extend the government’s borrowing authority.
The Senate will “try and get some work done” next week, Democratic Senator Frank Lautenberg told reporters, but Democratic leaders did not indicate whether a schedule change was in the works.
Analysts said Obama had not broken new ground, but forcefully framed Democrats as backing ordinary Americans while Republicans look out for the wealthy.
This is “the strongest argument that Democrats have made in a while in the whole budget area. They’re talking about trade-offs, a balanced package,” said Andy Laperriere, an analyst with the ISI Group in Washington.
However, Obama “was asked to draw a line in the sand over requiring higher taxes to get a deal, and he declined,” Laperriere said.
Obama, echoing an argument his administration has made for weeks, sought to paint Republicans as siding with the rich and powerful, and especially the extravagance of a private jet, over middle class Americans.
“I think it would be hard for the Republicans to stand there and say that the tax break for corporate jets is sufficiently important that we’re not willing to come to the table and get a deal done,” he said.
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