Obama Warns US "Running Out of Time" For Debt Deal

US President Barack Obama pressed polarized lawmakers Saturday to avert what he called economic "Armageddon" by quickly forging a deal to prevent an early August debt default by the world's richest country.

"Simply put, it will take a balanced approach, shared sacrifice, and a willingness to make unpopular choices on all our parts," Obama said in his weekly radio address.

"That means spending less on domestic programs," the president explained. "It means spending less on defense programs. ... And it means taking on the tax code, and cutting out certain tax breaks and deductions for the wealthiest Americans."

The US government reached its debt limit of $14.29 trillion in May, and since then the Treasury Department has used special measures to allow the government to keep paying its bills.

But unless the limit is raised by August 2, the Treasury says, growing spending and debt service commitments will force a default, which would have disastrous ripple effects throughout the global financial system.

On Friday, Obama renewed his call for a "grand bargain," which would cut entitlement programs dear to his fellow Democrats, but Republicans have flatly rejected his call for higher taxes on the rich.

The US president, sure to be judged in the 2012 elections based on his handling of the jobs-poor US economy, also signaled he would not reject a last-minute compromise key lawmakers were drafting behind closed doors.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling by August 2 could send shock waves through a world economy still reeling from the 2008 collapse.

Ratings agencies Moody's and Standard & Poor's have warned they may downgrade Washington's sterling Triple-A debt rating, and leading US creditor China, Wall Street titan JPMorgan Chase and the Federal Reserve have also sounded the alarm.

With time running short, Obama's top Republican foes in Congress called for votes next week on their plan for severe spending cuts on the way to amending the US Constitution to require cash-strapped Washington to balance its budget.

"Our jobs crisis and national debt require real action. So now the debate will move from a room in the White House to the House and Senate floors," said Republican Senate Minority Leader Mitch McConnell.

"It's time for the Democrats to get serious as well. We asked the president to lead. We asked him to put forward a plan -- not a speech, a real plan -- and he hasn't. We will," said Republican House Speaker John Boehner.

The long-shot Republican plan, all but certain to fail in the Democratic-led Senate, pleased conservative lawmakers close to the "Tea Party" movement that fiercely opposes raising the debt limit and seeks deep spending cuts.

In his Friday remarks, the president left open the door to a "fall-back position" being crafted by McConnell and Democratic Senate Majority Leader Harry Reid that would pair spending cuts with a debt limit increase, but called it the "least attractive option" apart from default.

That measure, described by aides who warned it was still in flux, would include some $1.5 trillion in spending cuts but would essentially let Obama raise the debt ceiling with only Democratic support in both chambers.

The proposal, which has incensed conservatives, could also create a commission of US lawmakers to recommend cuts that would circumvent parliamentary hurdles more easily than regular legislation.

Obama assailed the Republican refusal to support his call for raising taxes on the rich and wealthy corporations, warning a default would amount to "a tax increase on everybody" in the form of skyrocketing interest rates.

Republicans have argued that tax hikes would smother investment that feeds job growth at a time when the US economy faces stubbornly high unemployment of 9.2 percent.

US Senator Orrin Hatch of Utah, who delivered the weekly address on behalf of the Republicans Saturday, restates his party's opposition to any tax hikes.

"The solution to a spending crisis is not tax increases," Hatch said. "The only long-term solution is a balanced budget amendment to the constitution. Only by restoring constitutional restraints on the ability of Congress to spend, can we constrain the growth of the federal government."

A new opinion poll by Quinnipiac University found the US public more ready to blame Republicans than Obama by a 48 percent to 34 percent margin in the event of a default.

 

Agence France Presse / By

Posted at July 16, 2011, 3:25am

Sign Up!
Get AlterNet's Daily Newsletter in Your Inbox
+ sign up for additional lists
[x]
Select additional lists by selecting the checkboxes below before clicking Subscribe:
Activism
Drugs
Economy
Education
Election 2018
Environment
Food
Media
World
Today's Top Stories