Geo World

US debt talks teeter on edge of collapse

WASHINGTON: White House talks to avert a disastrous early August debt default teetered on the edge of collapse late Friday as Republican House Speaker John Boehner abruptly quit the negotiations. US President Barack Obama condemned Boehner's decision and angrily called top lawmakers to the White House for emergency negotiations at 11:00 am (1500 GMT) Saturday, warning "we have run out of time" with an August 2 deadline looming. "I expect them to have an answer in terms of how they intend to get this thing done over the course of the next week. The American people expect action," the president said at a hastily called public appearance. Obama said Boehner, House Minority Leader Nancy Pelosi, Democratic Senate Majority Leader Harry Reid, and Republican Senate Minority Leader Mitch McConnell must "have some answers" to reassure skittish global markets. Obama insisted that any agreement to raise the $14.3 trillion debt limit last through his November 2012 reelection bid and declared himself "confident" of reaching a deal to do so because of critical stakes for the US economy. "I cannot believe that Congress would end up being that irresponsible that they would not send a package that avoids a self-inflicted wound to the economy at a time when things are so difficult," he declared. Obama's remarks came just a half-hour after Boehner telephoned him to say he was backing out of often acrimonious negotiations that had centered, Republican aides said, on a plan to cut $3-$3.5 trillion from US debt over ten years. Boehner said in a letter to members of the House of Representatives that he was walking away because the Democratic president was insisting on increasing tax revenue collected from the rich and wealthy corporations. "I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward," Boehner said in a letter to members of the House of Representatives. 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 August 2. 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." A House Republican leadership aide told reporters on condition of anonymity that Boehner believed he needed to have a detailed plan to present to House Republicans by Monday. Boehner and Obama were at odds on a range of issues, but a key sticking point was the White House's push for increasing tax revenues from the rich and wealthy corporations, something Republicans fiercely opposed. "A deal was never reached, and was never really close. In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country," Boehner said in his letter to the House. "The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs." The response from the other congressional leaders did little to fuel expectations that a deal could quickly be reached. McConnell called the collapse "disappointing" and vowed to tackle "the nation's unsustainable debt" but "without job-killing tax hikes." Reid stressed that "we must avert a default at all costs" but condemned Republicans for an "ideological opposition to ending taxpayer-funded giveaways for millionaires, corporate jet owners and oil companies." Reid and Pelosi flatly opposed any short-term deal, said it was time for Boehner to act like an "adult," and vowed to protect social safety net programs dear to Democrats but targeted by Obama and Boehner alike for savings. Boehner said at a press conference later that "no one wants to default on the full faith and credit of the United States government. And I'm convinced that we will not." US Treasury Secretary Timothy Geithner, Federal Reserve Bank Chairman Ben Bernanke, and New York Federal Reserve Bank President William Dudley met at the US Treasury Department earlier to discuss the effects of a default. "While we remain confident that Congress will raise the debt ceiling soon," the department said in a terse statement, the officials "met today to discuss the implications for the US economy if Congress fails to act." (AFP)