WASHINGTON – President Barack Obama has called for new measures to boost employment that are likely to further complicate talks with Republicans to bring the country’s spiralling debt under control.
Mr Obama’s call came yesterday as the International Monetary Fund and the US treasury department urged Washington to reach a deal soon. His push for new construction loans and an extension of a payroll tax cut could further alienate Republicans already incensed by Democratic demands for new tax revenue.
Challenging politicians to make “substantial progress” by the end of this week or cancel plans for the July 4th Independence Day holiday, Mr Obama also sought to increase the pressure on Republicans by tying them to tax breaks for millionaires while warning about default.
“If the United States government, for the first time, cannot pay its bills, if it defaults, then the consequences for the US economy will be significant and unpredictable,” he told a White House news conference, reminding Republican Party backers on Wall Street of the stakes involved.
With the country still struggling to emerge from the deepest recession since the 1930s, Mr Obama said Congress needed to take steps to bring down the 9.1 per cent unemployment rate, even as it weighs medium-term austerity measures.
“There are more steps that we can take right now that would help businesses create jobs here in America,” he said.
Those measures would probably add hundreds of billions of dollars to budget deficits at a time when the White House and politicians are trying to narrow them by more than $1 trillion. Congressional Republicans say they have no place in the talks.
“In the middle of a debt crisis, they want to borrow and spend more money as a solution to the problem,” Senate Republican leader Mitch McConnell said earlier on the chamber floor. “This isn’t a negotiation, this is a parody.”
Since deficit-reduction talks collapsed last week, Republicans and Democrats have made no progress on a deal to permit Congress to extend the government’s borrowing authority.
Treasury secretary Timothy Geithner said he would not be able to stave off default if Congress did not reach a deal to raise the $14.3 trillion debt ceiling by August 2nd.
The International Monetary Fund also said failure to reach a deal soon could deliver a “severe shock” to a still fragile recovery and global markets.
Congress will probably need weeks to debate and pass the deal once it is reached; Mr Obama has warned that politicians may have to stay in session until it is done.
This is “the strongest argument that Democrats have made in a while in the whole budget area. They’re talking about trade-offs, a balanced package,” said Andy Laperriere, an analyst with the ISI Group in Washington.
The Bipartisan Policy Center, a centrist think-tank, said it would be technically impossible for treasury to prioritise its payments, and Mr Obama also cast cold water on the idea.
Mr Geithner said investors would still shun US debt after the August deadline even if treasury made debt payments its top priority, an approach backed by many Republicans. – (Reuters)