* Boehner releases letter from economists on debt
* Biden talks likely to resume next week
By Jeff Mason and Andy Sullivan
WASHINGTON, June 1 President Barack Obama
pressed Republicans to back an increase in the U.S. debt limit
on Wednesday during a rare meeting aimed at ending a standoff
that the White House fears could upset financial markets.
Obama met Republicans from the House of Representatives a
day after they defeated their own bill to raise the U.S. debt
limit -- a vote staged to strengthen their demand for huge cuts
in federal spending. The U.S. deficit is expected to reach $1.4
trillion this year.
The White House argues the United States would face
"calamitous" consequences -- including a return to recession --
if Congress does not raise the $14.3 trillion cap on government
borrowing by Aug. 2.
The U.S. Treasury said on Wednesday it was still on track
to exhaust all borrowing capacity by Aug. 2, risking a possible
debt default unless Congress comes to an agreement over
"(Treasury) Secretary (Timothy Geithner) continues to urge
Congress to avoid the catastrophic economic and market
consequences of a default crisis by raising the statutory debt
limit in a timely manner," Mary Miller, assistant secretary for
financial markets at Treasury, said in a statement.
Full coverage of budget, debt issues [ID:nUSBUDGET]
Q+A on U.S. debt talks [ID:nN31300874]
Timeline of U.S. debt debate [ID:nN27148818]
The Treasury Department has been tapping federal employee
pensions and other funds to pay the nation's bills since it
reached the current debt limit on May 16.
Republicans are skeptical that default is inevitable if
government borrowing grinds to a halt and some even question
the disaster warnings that Geithner has been issuing all year.
They insist that significant spending cuts accompany any deal
on the debt ceiling.
Both sides have raised the stakes in recent days.
After Republicans staged Tuesday's vote, House Speaker John
Boehner, the top Republican in Congress, released a letter
signed by more than 150 economists saying any increase in the
debt limit must be matched with spending cuts of equal size.
"An increase in the national debt limit that is not
accompanied by significant spending cuts and budget reforms to
address our government's spending addiction will harm
private-sector job creation in America," the letter said.
TAX INCREASES VS MEDICARE CUTS
In talks led by Vice President Joe Biden, Republicans and
Democrats have identified tens of billions of dollars in
possible spending cuts.
But they must resolve a dispute over the biggest-ticket
items. Democrats say they will not consider cuts to popular
health benefits until Republicans consider tax increases.
The Biden talks are likely to resume next week.
The White House is stepping up pressure on Republicans to
raise the debt limit.
After Obama meets Republican congressman on Wednesday,
Geithner will head to Capitol Hill on Thursday to hold talks
with Republican freshmen -- a group of first-term lawmakers who
won dozens of seats in last year's congressional elections on
promises to cut spending.
Financial markets so far have shrugged off the lack of
progress, but the White House has warned that could change as
the August deadline approaches.
Douglas Holtz-Eakin, a top economic adviser to former
President George W. Bush and 2008 Republican presidential
candidate John McCain, said the White House's warnings of
calamity sounded like blackmail to lawmakers.
"They need to talk less about what will happen and more
about how they're going to get the deal done," he said.
(Additional reporting by Caren Bohan and Pedro Nicolaci da