US President Barack Obama convened a second consecutive day of crisis national debt talks yesterday, but a polarized Washington appeared far from a deal to stave off a catastrophic default.
Obama met on Sunday evening with congressional leaders, including Republican House Speaker John Boehner, but 75 minutes of talks failed to unblock an impasse that reaches right to the heart of the US’ ideological divide.
Republicans are refusing to raise the US$14.29 trillion US debt limit unless Obama first agrees to curb the ballooning budget deficit, in part by cutting social welfare programs.
The president and Democrats say they are willing to make some cuts to the so-called entitlement programs, but want the Republicans to meet them half way by allowing tax hikes for millionaires and billionaires to increase revenue.
The White House said shortly after Sunday’s discussions concluded that Obama would meet congressional leaders again yesterday — at a time to be decided — after holding a press conference on the crisis.
Asked as he went into Sunday’s talks if the warring politicians would reach a deal in the next 10 days to prevent the US from defaulting on its debt obligations, Obama replied: “We need to.”
However, statements issued after the talks by the parties’ respective Senate leaders, Mitch McConnell for the Republicans and Harry Reid for the Democrats, offered no clue as to how that breakthrough might be achieved.
“It’s baffling that the president and his party continue to insist on massive tax hikes in the middle of a jobs crisis while refusing to take significant action on spending reductions at a time of record deficits,” McConnell said through his spokesman.
“Senator Reid believes the stakes are too high for Republicans to keep taking the easy way out, and he is committed to meeting every day until we forge a deal, however long that takes,” Reid’s spokesman said.
Before Sunday’s White House meeting, Boehner and McConnell warned they might abandon efforts to reach a larger, comprehensive debt reduction deal because Obama and the Democrats insisted on raising taxes on the wealthy.
The Republican move would leave negotiators aiming at a less ambitious framework, striving to save about US$2.4 trillion over the next decade instead of the US$4 trillion still sought by the Democrats.
The talks are part of a final major push to reach a deal to raise the congressionally determined limit on US borrowing, now set at US$14.29 trillion, in the face of a budget deficit expected to hit US$1.6 trillion this year.
The US hit the ceiling on May 16, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.
By Aug. 2, though, the government will have to begin withholding payments to bond holders, civil servants, retirees or government contractors, and the White House has urged a deal by July 22 to have time for Congress to pass it.
Economists warn that if the US defaults, it could lose its ability to borrow, souring fraught financial relations with creditors like China and sending the already sour global economy into a tailspin.
The warning was repeated on Sunday by new IMF managing director Christine Lagarde, who told ABC News that a US debt default “would jeopardize the stability at large.”