US debt talks hit wall, Obama warns clock ticking

Failure to seal a deal by Aug. 2 could spook investors, causing US interest rates to surge, stock prices to plummet and putting the US at risk of another recession.

By REUTERS
obama on economy_311 reuters (photo credit: REUTERS)
obama on economy_311 reuters
(photo credit: REUTERS)
WASHINGTON - Deficit reduction talks between US President Barack Obama and Republican leaders ran into trouble on Sunday at a meeting marked by testy exchanges and a failure to mend rifts on taxes and social-spending cuts.
With negotiations aimed at averting a debt default entering a critical phase, Obama made clear that he and congressional leaders were racing the clock to reach a deal needed to avert a debt default.
In a 75-minute meeting at the White House, Obama's Democrats and congressional Republicans were at odds, not only about the specifics of debt and deficit talks, but also on their scope.
Obama's Democrats tried to revive a push for a sweeping $4 trillion package that would cut the deficit through spending cuts and tax increases while Republicans urged a focus on a smaller, $2 trillion measure and underscored their opposition to tax hikes.
A Democratic official familiar with the discussions said that when Republicans in the room said the time was not right for an ambitious deficit-cutting plan, Obama asked them: "If not now, when?"
More talks are scheduled for Monday and the White House said Obama would hold a news conference at 11 a.m. EDT (1500 GMT) before reconvening with congressional leaders.
The Democratic official said the president was prepared to meet every day this week in hopes of breaking the impasse.
The US Treasury has said it will exhaust its borrowing capacity by Aug. 2, meaning it will run out of money to pay all its debts.
Republicans have balked at raising the $14.3 trillion US debt limit without steep spending cuts while Democrats want to increase revenue by eliminating tax breaks for the wealthy and corporations in some sectors such as the oil and gas industry.
Asked on Sunday whether an agreement could be reached within the next 10 days, Obama told reporters: "We need to."
Failure to seal a deal by Aug. 2 could spook investors, causing US interest rates to surge, stock prices to plummet and putting the United States at risk of another recession, Treasury officials and private economists have warned.
Sunday's debt talks of less than 1-1/2 hours were unexpectedly brief. Late last week, the White House said it viewed the talks as "vital" and congressional aides predicted a session lasting four or five hours.