Obama hosts lawmakers for crisis debt talks

President Barack Obama and top lawmakers held crisis talks yesterday to avert a disastrous US debt default, just 10 days away, that could send shockwaves through the fragile global economy.

Obama called the emergency White House summit late Friday after talks on forging a compromise blending ambitious deficit-cutting plans with raising the $14.3 trillion US debt limit collapsed amid angry finger-pointing.

Ahead of the meeting, which began just after 11 a.m., Obama renewed his demand that any final deal raise tax revenues from the rich and wealthy corporations, a proposal fiercely opposed by his Republican foes who quit ongoing negotiations over the issue.

“That’s the heart of this approach: Serious cuts, balanced by some new revenues,” the president said in his weekly address, forecasting “plenty of haggling over the details in the days ahead”.

Representative Jeb Hensarling, delivering the Republican rebuttal, warned that “job creators are fearful that our $14 trillion debt is going to lead to higher taxes, which could harm their businesses and destroy even more jobs”.

Obama met with Republican House Speaker John Boehner, House Minority Leader Nancy Pelosi, Democratic Senate Majority Leader Harry Reid, and Republican Senate Minority Leader Mitch McConnell.

Obama and Boehner expressed confidence Friday of finding a way to avoid a ruinous and unprecedented US debt default on August 2, when the cash-strapped government of the world’s richest nation won’t be able to pay its bills.

Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to pay its bills and continue operating up to that fast-approaching deadline.

Finance and business leaders have warned failure to raise the US debt ceiling by then would send shock waves through the world economy, while Obama has predicted a default would trigger economic “Armageddon”.

There was no clear path forward, though some observers focused on a complex legislative manoeuvre, crafted by Republican Senate Minority Leader Mitch McConnell, that would essentially let Obama raise the debt ceiling with just Democratic votes.

That approach, under which Obama would suggest spending cuts equivalent to any debt hike, faced stiff opposition among House of Representatives Republicans backed by the archconservative ‘Tea Party’ movement.

Boehner told reporters on July 14 that he had “no idea” whether the House would sign off on the plan, but stressed it “might look pretty good a couple of weeks from now” as a last-ditch solution.

Obama warned late Friday, after the speaker bolted ongoing talks, that he expected lawmakers on Saturday to have a plan for averting a default by the time skittish world markets pass judgment Monday on the stalemate.

“We have run out of time,” Obama said at a hastily called press briefing late Friday, declaring himself “confident” ultimately of a breakthrough “that avoids a self-inflicted wound to the economy at a time when things are so difficult”.

Republican aides said the deal left on the table included plans to cut some $3-$3.5 trillion from US debt over 10 years by paring down annual spending as well as slicing into social safety net programs dear to Democrats.

Boehner, who said he left the talks because Obama insisted on tax increases, later told reporters he would attend the Saturday meeting and insisted: “I don’t believe that our relationship is permanently damaged.”

And “no one wants to default on the full faith and credit of the United States government. And I’m convinced that we will not”, the speaker said.

Obama has insisted the debt-limit increase be large enough to last through his November 2012 re-election bid, avoiding a politically dangerous vote in the heart of a campaign defined by his handling of the US economy.