Saturday, 9 July 2011

US debt talk parties 'far apart'

7 July 2011 Last updated at 19:57 GMT

 From left, Eric Cantor, Nancy Pelosi, John Boehner, Mr Obama, and Harry Reid Mr Obama and top Congressional Democrats and Republicans met at the White House on Thursday Democrats and Republicans remain "far apart on a wide range of issues" in budget talks aimed at averting a looming default on US government debt, President Barack Obama has said.

Mr Obama spoke after concluding a meeting with congressional leaders and said talks would resume on Sunday.

The deadline to raise the $14.3tn (£8.9tn) US debt ceiling is 2 August.

Republicans have demanded steep reductions in the US budget deficit as the price of a debt increase.

"All the leaders came here in a spirit of compromise and of wanting to solve problems on behalf of the American people," Mr Obama told reporters on Thursday following morning discussions at the White House with senior Republican and Democratic House and Senate leaders.

"Everybody acknowledged that in order to do that, Democrats and Republicans are going to be required in each chamber" for an eventual vote.

Mr Obama said the sides had acknowledged they would suffer politically, "but our biggest obligation is to make sure we're doing the right thing by the American people."

Before the Sunday talks, leaders from both parties and their staffs would continue to meet, Mr Obama said.

Among other issues, the two sides are at odds over whether to force cuts in popular social programmes and whether and how to raise additional tax revenue to close the budget gap, which Republicans are resisting.

Soon after the Thursday morning meeting broke up, Democratic House Minority Leader Nancy Pelosi said cuts to the Social Security retirement programme and the Medicare healthcare programme for pensioners should not be considered.

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Mr Obama's latest offer of cuts is designed to make a specific argument - that he is willing to go the extra mile but that the Republicans are so entrenched in their narrow political foxhole that they would rather cause another economic crisis than make a single compromise”

End Quote image of Mark Mardell Mark Mardell BBC North America editor

Read Mark's thoughts in full

"We are not going to balance the budget on the backs of seniors, women and people with disabilities," she told reporters after the meeting with Mr Obama and other Congressional leaders.

The US currently runs an estimated $1.5 trillion (£932bn) annual budget deficit, and has already exceeded the national debt limit of $14.3tn.

The US government's borrowing authority is limited by statute but has traditionally been raised as a matter of routine by Congress.

However, a newly empowered faction of conservative, anti-tax Republicans are keen to extract dramatic cuts in government spending as the price of raising the limit, analysts say.

At the White House on Thursday, Mr Obama met at a conference table with House and Senate leaders of both parties, including Republican House Speaker John Boehner, Republican Senate Leader Mitch McConnell, House Democratic Minority Leader Nancy Pelosi, Senate Democratic Majority Leader Harry Reid, and senior lieutenants on both sides.

Backbench resistance

Talks have proceeded in a halting fashion in recent months, with top Republican leaders walking out last month over Democrats' insistence on considering new sources of tax revenue, including closing loopholes in the tax code and eliminating tax breaks that primarily benefit the wealthy.

On Thursday, Mr Obama indicated the "hard bargaining" had yet even to begin.

Continue reading the main story US government currently runs a $1.5tn budget deficit, requiring it to issue debt in the form of treasury bills, bonds and other securitiesPublic debt was $14.3tn on 31 May, up from $10.6tn when Mr Obama took office in January 2009Most is held by the public, with the rest held in US government accountsCongress has voted to raise the US debt limit 10 times since 2001

Sources: US Treasury, Congressional Research Service, Congressional Budget Office

Mr Obama is reported to have proposed a $4tn deficit reduction package that could include money-saving changes in the social security and Medicare programmes for pensioners and the Medicaid programme for the poor, which Democrats had previously rejected.

Among other new developments, Republican Senator Jon Kyl has said his side had agreed to raising revenue by selling broadband spectrum and raising user fees, Reuters reported.

And Eric Cantor, a senior Republican Congressman, said Republicans could support eliminating some tax breaks in exchange for other tax cuts elsewhere.

"I can tell you one thing, that we are united as Republicans to say now is not the time to raise taxes," Mr Cantor said on MSNBC television on Thursday morning.

But even if the White House and congressional leaders of both parties strike an agreement, they will have to win approval from rank-and-file party members, who may be less interested in the bargain.

Without action in Congress to raise the debt limit, the US risks defaulting on its debt. A broad range of economists and political figures have warned that could trigger a global financial crisis.

US budget gap 1971 -2021

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