Monday, July 11, 2011

Obama, lawmakers divided over deficit

Speaker of the House John Boehner (L), President Barack Obama and Senate Majority Leader Senator Harry Reid (R)

Source: Press TV

US President Barack Obama and Republican leaders have failed to reach a deal over the size and components of a plan to reduce the country's huge budget deficit.

In a White House meeting on Sunday, Obama and his fellow Democrats tried to revive a push for a sweeping USD 4 trillion package that would cut the deficit through spending cuts and tax hikes.

Republicans, however, urged a focus on a smaller, USD 2 trillion measure while insisting on their opposition to tax hikes for the wealthy.

Further talks are scheduled for Monday, when Obama is set to hold a news conference in the morning before reconvening his talks with congressional leaders.

The US Treasury has announced that it will exhaust its borrowing capacity by August 2, which means that it will run out of funds to timely repay all its debts, Reuters reported.

Republicans have balked at raising the USD 14.3 trillion US debt limit without steep spending cuts, while Democrats are pushing to generate revenue by eliminating tax breaks for the wealthy and corporations in certain sectors such as the oil and gas industry.

Asked on Sunday whether an agreement could be reached within the next 10 days, Obama said “We need to.”

Treasury officials have warned that failure to seal a deal by the August deadline could spook investors, causing US interest rates to surge, stock prices to plummet and putting the US at risk of another recession.

The Obama administration says if the debt ceiling is not raised by August, the nation would default on its obligations, with potentially calamitous financial consequences worldwide.

Meanwhile, the new chief of the International Monetary Fund Christine Lagarde emphasized that in case the US fails to raise its debt limit, she foresees "interest hikes, stock markets taking a huge hit and real nasty consequences" for the American and global economies.

"I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also the rest of the world," she said.

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