No deal
July 25, 2011
Lawmakers in the United States struggled on Sunday to find a compromise that would allow Washington to raise its debt ceiling and continue paying its bills past a rapidly approaching August 2 deadline, just as Asian markets prepared to open and render the first financial judgment on America's stubborn partisan impasse.
Congressional Republicans and Democrats have cobbled together two competing roadmaps to guide the US out of an economic and political stalemate that deepened on Friday when direct talks between Republican House Speaker John Boehner and Democratic President Barack Obama collapsed.
"We may have a few stressful days coming up, and stressful for the markets of the world and the American people," William Daley, President Obama's chief of staff, told the American television broadcaster CBS.
"But in the end there's no question in my mind the government of America will not default," Daley said.
Political stalemate
Republicans have made spending cuts equal to any raise in the debt ceiling a pre-condition for a deal while at the same time rejecting tax hikes across the board. Democrats, however, are reluctant to cut popular social programs and have demanded higher taxes for wealthier Americans.
With the August 2 deadline rapidly approaching, Boehner subtly encouraged the financially conservative "Tea Party" wing of the Republicans to focus on "what we can pass that will protect our country."
There is a path," Boehner said. "But it's going to require us to stand together as a team. It's going to require some of you to make some sacrifices. If we stand together as a team, our leverage is maximized, and they have to deal with us."
Boehner, however, has also indicated support for an amendment to the US constitution that would require a balanced budget. The Democrat-controlled Senate, however, is unlikely to pass such a measure, suggesting that the partisan divide between the two parties remains deep.
Democrats are drafting their own plan that would call for $2.5 trillion (1.7 trillion euros) of deficit reductions in exchange for raising the debt ceiling by the same amount. The plan reportedly relies solely on spending cuts.
Global reaction
Boehner told members of his House majority that he hoped the framework for a deal would be laid out before financial markets in Asia open. The Asian markets are poised to render the global financial system's first judgment on whether investors have faith in the US political and economic system.
If Republicans and Democrats fail to hammer out a deal by August 2, Washington will default on its $14 trillion national debt, which could send tremors around a world still reeling from the economic crisis.
"The irony of the situation at the moment, with markets opening tomorrow morning, is that the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the eurozone," said Vince Cable, Britain's business secretary and a member of the Liberal Democrats.
The polarization in the United States is more reminiscent of the divisions in developing Latin American nations, according to Peter Hakim, head of the Inter-American Dialogue policy group.
"What's really shocking is the inability to reach agreement," Hakim told the news agency Reuters. "All of a sudden the US is a democracy that is unable to find a compromise. We're polarized."
Argentina's President Cristina Fernandez, whose own nation defaulted on $100 billion in debt a decade ago, openly wondered how the political situation in Washington had become so intransigent.
"When did the American dream become a nightmare?" Fernandez asked.
Author: Spencer Kimball (AFP, Reuters, dpa)
Editor: Darren Mara