Obama warns Republicans over debt

President Barack Obama bluntly told Republican congressional leaders Wednesday that they must compromise quickly if the government is to avoid an unprecedented default, adding, marking an acrimonious end to a two-hour negotiating session at the White House that produced no evident progress toward a compromise.

He told Republicans, "Don't call my bluff" by passing a short-term debt limit increase he has threatened to veto.

Republicans, many of them elected with the support of conservative tea party activists in 2010, are demanding deep spending cuts as the price for allowing a debt limit increase to pass. But negotiations have bogged down over Obama's demand for tax increases that Republican lawmakers say they won't accept.

Another round of talks is set for Thursday.

But with a threatened default less than three weeks away, Moody's Investors Service announced it was reviewing the US bond rating for a possible downgrade, and the Treasury said the annual deficit was on a pace to exceed $1 trillion for the third year in a row.

With the negotiations at a seeming standstill, Republicans drew a warning of a different sort, from an unlikely source — the party's Senate leader, Sen. Mitch McConnell. He warned fellow conservatives Wednesday that a potentially catastrophic failure to raise the US debt limit would probably ensure Obama's re-election next year.

McConnell's comments were fresh evidence of deep Republican division on an issue of paramount importance to the United States and its economy.

McConnell spoke as Obama and congressional leaders met for a fourth straight day, struggling to avert an unprecedented government default threatened for Aug. 2. The meeting broke up after a little more than two hours.

Talks are deadlocked. Lawmakers have begun advancing measures to determine who would be paid first if negotiations fail. One Democratic senator proposed favoring recipients of Social Security pension benefits. Three Republican lawmakers offered a proposal to give priority to paychecks for members of the armed forces.

Treasury Secretary Tim Geithner has warned that a default could pose a catastrophic risk to the economy, still recovering from the worst recession in decades. The agency announced Wednesday the deficit was on pace to exceed $1 trillion for the third consecutive year, and was likely to top last year's $1.29 trillion (Dh 4.73tr).

McConnell predicted in a radio show that if Congress fails to act, Obama will argue that Republicans are making the economy worse. His comments were partly a rebuttal to conservatives who criticized his Tuesday proposal to let Obama raise the debt limit without a vote of Congress.

Despite an extraordinary commitment of time, the private talks at the White House have made little if any progress since Obama presided over the first session on Sunday.

Officials said negotiators would probably turn their attention to cuts that had been proposed in the earlier negotiations in the Capitol led by Vice President Joe Biden. Participants in those talks disagree about precisely how much they had agreed to, however, and it was unclear what the prospects were for agreement.

With bipartisan talks scheduled to resume on Thursday, two Democratic officials quoted Obama as telling Republicans, "Enough is enough. We have to be willing to compromise. It shouldn't be about positioning and politics and I'll see you all tomorrow."

The officials spoke on condition of anonymity to describe the closed-door meeting.

Talking with reporters at the Capitol after he left the White House, Eric Cantor, the No. 2 Republican in the House of Representatives, said the two sides were far from agreement on a $2.4 trillion package of deficit cuts that would allow the Treasury to borrow through the next election.

Cantor quoted Obama as saying the talks had reached the point that "something's got to give," and demanded Republicans either jettison their demand for deficit cuts at least equal to the size of the debt limit or drop their opposition to tax increases.

"And he said to me, 'Eric, don't call my bluff.' He said, 'I'm going to the American people with this,'" Cantor said.

With hopes for a bipartisan deal dimmed, backup proposals proliferated.

Democratic Senate Majority leader Harry Reid has not rejected McConnell's proposal, and officials say he is developing one of his own to create a commission that could recommend deficit cuts and be assured that Congress would vote on them.
 

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