Obama, lawmakers meet for 1 1/2 hours on debt impasse

WASHINGTON Sun Jul 10, 2011 7:58pm EDT

1 of 6. U.S. President Barack Obama (R) sits down to a meeting with House Speaker John Boehner (R-OH) (2nd R), House Minority Leader Nancy Pelosi (D-CA) (2nd L), House Majority Leader Eric Cantor (R-VA) (L) and other congressional leaders for talks aimed at averting a looming U.S. debt default, in the cabinet room at the White House in Washington, July 10, 2011.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - U.S. President Barack Obama sought on Sunday to break an impasse with Republicans on deficit reduction and avert a potentially catastrophic debt default that could reverberate globally.

The gathering at the White House, which included leaders of both parties, lasted less than 90 minutes, a much shorter session than the four or five hours congressional aides had predicted late last week.

The meeting came a day after Republicans shied away from a broad $4 trillion deficit-reduction deal and urged a focus instead on a $2 trillion plan.

The U.S. Treasury has said it will exhaust its borrowing capacity by August 2, meaning it will run out of money to pay all its debts. Republicans have balked at raising the congressional-set $14.3 trillion debt ceiling without steep spending cuts.

Failure to seal a deal by August 2 could put the United States at risk of another recession, Treasury officials and private economists have warned.

Obama made clear at the start of the talks that they were racing the clock. Asked whether a deficit-reduction deal could be agreed to within the next 10 days, he told reporters: "We need to."

Uncertainty about the outcome of the debt negotiations has contributed to a lack of confidence among U.S. businesses over taxation levels and growth prospects.

Investor worries about the debt ceiling were expected this week to put pressure on the U.S. dollar, which fell on Friday after a grim jobs report. In early Asian trading on Monday, the New Zealand dollar was near a 30-year high against the U.S. dollar and the Australian dollar dipped.

REVOLT OVER TAXES

House Speaker John Boehner, facing a revolt from fellow Republicans over the prospect of higher taxes in a large-scale $4 trillion budget deal, told Obama on Saturday he would only pursue a smaller $2 trillion package.

The move threatened to throw Sunday's meeting into disarray. It followed Democratic complaints to Obama -- whose 2012 re-election prospects are tightly linked to U.S. economic health -- that he should not agree to any reforms of popular entitlement programs that would lead to benefit cuts.

Calling it a "grave moment for the country," Treasury Secretary Timothy Geithner told NBC's "Meet the Press" that Obama and the Democrats would try to get the "biggest deal possible."

In a separate appearance on CBS's "Face the Nation," Geithner warned of the need to reach a deal soon.

"I do believe that this week, and certainly by the end of next week, we have to have agreement on the outlines of a package," he said.

Christine Lagarde, the new head of the International Monetary Fund, said a U.S. default would have global repercussions.

"If you draw out the entire scenario of a default, yes, of course, you have all of that, you know, interest hikes, stock markets taking a huge hit and real nasty consequences," the former French finance minister told ABC's "This Week."

(Additional reporting by Steven Holland, Tabassum Zakaria, Jim Wolf, Thomas Ferraro, Andy Sullivan and Matt Spetalnick; Editing by Bill Trott)

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Comments (65)
ronaldo10 wrote:
Well i don’t understand what Boenher is saying here, is the dude trying to negotiate a smaller package becuz he don’t want a tax hike for the rich? Well if we ‘re going to accept the 2 Million dollar package, are they saying that the middle class who shoulder the entire responsibility/ This is hypocrisy at the highest level, speaking putting the interest of the wealthy ahead of the entire country…..It’s up to the president to stand his ground on the issues that matter most to the country…..

Jul 10, 2011 2:49am EDT  --  Report as abuse
sodome wrote:
Mr. speaker Boehner needs to win to make break even in tomorrow’s battle.
Mr. Obama will play defender, don’t let Speaker to win.

Jul 10, 2011 3:14am EDT  --  Report as abuse
sodome wrote:
In high-states debt talks, in other words is risky business but look on the bright side “No risk no gain”

Jul 10, 2011 3:19am EDT  --  Report as abuse
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