Ideological impasse
July 23, 2011
Congressional leaders in the United States are working on new legislation to stop the United States defaulting on loans a day after talks broke down on raising the US debt ceiling.
US President Barack Obama met with leading members of congress on Saturday to forge agreement on the balance of tax and spending cuts that Republicans will accept if they are to agree to raise the level that the government is able to borrow.
"The bipartisan leadership in congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending," said Senate Republican leader Mitch McConnell after the 50-minute meeting.
Top Republican leaders broke off negotiations with Obama on Friday aimed at raising Washington's $14-trillion (9.75 trillion-euro) debt ceiling, just 11 days before a default deadline.
The White House on Saturday urged Congress to "refrain from playing reckless political games" with the economy.
Partisan games
Congress would only raise the debt ceiling by enough to cover borrowing needs for six to eight months, a sum that could be as high as $1.2 trillion. The treasury is set to run out of the money it needs to pay creditors on August 2 if no deal can be struck.
Republicans and Democrats have been unable to hammer out a deal due to ideological differences over the appropriate balance between spending cuts and tax hikes.
Republican Speaker of the House John Boehner said that he and President Obama came to an impasse due to "different visions for our country."
"They insisted on raising taxes," Boehner said in reference to Democrats. "They refused to get serious about cutting spending and making tough choices that are facing our country."
Boehner said he would now seek a deal with the Democrat-controlled Senate.
President Obama, however, maintained that the aborted $3 trillion deficit reduction deal had demanded sacrifices from both sides of the political aisle.
"This was an extraordinarily fair deal," Obama said, claiming that tough spending cuts were being made and restraint had been shown on tax rises. "If it was unbalanced, it was unbalanced in the direction of not enough revenue."
Default jitters
The rating agencies Moody's and Standard and Poor's have threatened to downgrade Washington's credit worthiness if it proves unable to strike a deal, a move that could send shockwaves through the global economy.
"We have run out of time," Obama said with a view toward the impending deadline.
Author: Spencer Kimball, Richard Connor (Reuters, dpa)
Editor: Ben Knight