US president Barack Obama insisted today he was prepared to make "tough choices" for a sweeping deficit-reduction deal to avert a US default, despite Democrats warning him not to make too many concessions.
With the deadline to raise the US debt ceiling now just 11 days away, the president appealed for compromise by both parties as he and the top Republican in Congress, House of Representatives speaker John Boehner, pursued a plan for up to $3 trillion in spending cuts.
"I'm willing to sign a plan that includes tough choices I would not normally make, and there are a lot of Democrats and Republicans in Congress who I believe are willing to do the same thing," Mr Obama said at a town hall-style meeting at the University of Maryland.
While an agreement did not look imminent, Mr Obama faced increasingly vocal complaints from his own Democrats on a deal-in-the-making that could mean painful curbs in popular health and retirement programs but no immediate increase in taxes.
"I've never seen frustration higher," Democratic senator Dianne Feinstein said after a week of sometimes chaotic efforts to sort through conflicting options and stave off a potentially devastating default on the nation's financial obligations.
Negotiations between Republicans and the White House toward a deal to raise the $14.3 trillion limit on America's borrowing are at a critical phase, with less than two weeks before the world's biggest economy runs out of money to pay its bills.
Mr Obama maintained that it would be impossible to achieve the kind of "historic" deficit-reduction deal he is seeking without including revenue increases through such measures as reforming the tax code and ending tax breaks for wealthier Americans.
But congressional sources have said that the deal now being crafted with Mr Boehner might leave tax reform and other major revenue-boosting steps for later.
Republicans and many Democrats are refusing to raise the debt limit unless it is accompanied by steep spending cuts to tackle rising budget deficits. An unprecedented national default could push the United States back into recession and trigger global financial chaos.
Treasury secretary Timothy Geithner met today with Federal Reserve chairman Ben Bernanke and New York Fed president William Dudley to talk about the implications for the US economy if Congress failed to raise the debt.
They remained confident Congress would act in time, they said in a joint statement.
The hope in Washington is that a wide-ranging, 10-year package of deficit cuts being worked out will be enough to save America's triple-A credit rating. Rating agencies have threatened a U.S. bond downgrade without a comprehensive deficit-cutting deal.
"We have never defaulted on our debt and we're not about to do it now," Mr Obama said.
Seeking to ratchet up pressure on lawmakers, he said the consequences if they failed to act on the debt limit would include higher interest rates and greater reluctance by businesses to hire and invest.
"If we don't solve it, every American will suffer," he said.
Casting himself as a centrist in the bitter debate, Mr Obama is trying to appeal to moderate independent voters he needs to win re-election in 2012. Still the two sides remain far apart on the main issues.
"There was no agreement, publicly, privately. Never an agreement and frankly not close to an agreement," Mr Boehner told reporters, referring to reports that he and Mr Obama were nearing a deal.
"And so, I would just suggest it is going to be a hot weekend here in Washington DC," he said.
With Congress out of session on Saturday and Sunday, any action was expected to stay behind the scenes. Mr Boehner told fellow Republicans that the House will need to pass debt-ceiling legislation by Wednesday to give the Senate enough time to pass it by August 2nd, according to an aide. There are doubts, however, that such a time frame can be achieved.
Mr Obama and Mr Boehner took discussions on a so-called "grand bargain" behind closed doors this week. Talks have whipsawed and stalled over raising tax revenue, which Democrats insist must be a part of any spending cut deal while Republicans reject tax increases.
Reuters
