U.S. "running on fumes" if no debt limit deal: White House

WASHINGTON Wed Jul 27, 2011 4:14pm EDT

WASHINGTON (Reuters) - The United States will be "running on fumes" if its debt limit is not raised by August 2, the White House said on Wednesday, as it sought to kill talk that this was not a real deadline to strike a deficit deal.

Some analysts figure that incoming tax receipts will allow the United States to stave off default for a week or more after its borrowing authority expires on Tuesday.

White House press secretary Jay Carney said that at midnight on August 2 the country will lose its authority to borrow for the first time, meaning there is no alternative for Democrats and Republicans other than to compromise over a deal to reduce the deficit and lift the debt ceiling.

"People keep paying their taxes. Revenue comes in. Money comes in. The problem is there is not enough money because we can no longer borrow money to pay all our bills. You're basically running on fumes," Carney told reporters. "It is a crisis situation."

Rating agencies warn they could downgrade the top-notch U.S. AAA credit rating if the United States misses debt payments or if it fails to take significant steps toward controlling the long-term budget deficit.

Carney said that if there is no deal by August 2, the failure of Congress to have acted would send shock waves through financial markets. "There will be assessments made by investors around the globe about what the heck is happening in Washington," he said.

(Reporting by Tabassum Zakaria and Alister Bull; Editing by Will Dunham)

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Comments (2)
stambo2001 wrote:
So, there is not enough incoming revenue to pay existing bills. How is allowing the debt to get higher going to do anything but make the situation worse? You have to be a seriously deluded nut-bar to be a proponent of raising the debt ceiling. It’s maddening to try and understand the logic of that if you can’t afford the $100 you owe to want to borrow another $100 dollars. It’s that much more insane when you know your incoming revenue not only is deficient but also diminishing to boot. They just want to close their eyes, plug their ears and pretend the issue will just go away. Decades of that response is the very reason we’re where we are at today.

Jul 28, 2011 7:14am EDT  --  Report as abuse
BiteRight wrote:
Most big-name insurance corporations are mandated by their charter to invest in only AAA sovereign bonds. So if the U.S. credit rating is downgraded even by the slightest margin, the impact on global finances is still tremendous.

Jul 28, 2011 8:09am EDT  --  Report as abuse
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