Day 4: Debt Talks Grow More Heated

Posted July 13th, 2011 at 9:00 pm (UTC-5)
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Negotiations to raise the U.S. government’s borrowing limit grew increasingly heated on the fourth day of talks at the White House between President Barack Obama and top lawmakers.

Congressional aides from both the Democratic and Republican parties reported late Wednesday that the day’s meeting ended on a tense note, with President Obama sharply rejecting Republican proposals to buy more time with a short-term deal. Mr. Obama is said to have called on lawmakers to stop their “posturing” aimed at impressing their political supporters, and to work toward a long-term budget compromise.

According to Republican aides, Mr. Obama then stormed out of the meeting. Democratic aides contradict those reports, saying the meeting was over when Mr. Obama and others left.

Talks are scheduled to continue Friday, and Democrats say they plan to raise the difficult issue of tax increases.

Experts say the $14.3 trillion borrowing limit needs to be increased before August 2 if the U.S. is to avoid defaulting on some of its debt. Republicans are demanding sharp spending cuts in exchange for agreeing to increase the debt. Democrats agree that spending needs to be cut, but they argue that closing the budget gap also will require raising taxes and closing tax loopholes for wealthy people and big corporations.

U.S. Federal Reserve Chairman Ben Bernanke Wednesday said the economy will face “calamity” if congressional Republicans and President Obama can not reach an agreement. He said that without a deal, the nation eventually would default and be forced to cut payments to pensioners, soldiers and others. He says that would damage confidence, hurting jobs, and perhaps throwing the nation back into a severe recession.

The credit rating agency Moody’s Investors Service warned Wednesday that it is considering downgrading the U.S. bond rating because of the ongoing wrangling over the debt limit. This likely would lead to higher interest rates for U.S. loans.

On Tuesday, the top Senate Republican, Mitch McConnell, said it may not be possible to reach a long term budget solution, and instead he proposed that the president use parliamentary maneuvers to raise the debt ceiling without Republican support.

The president has proposed a $4 trillion package of spending cuts and revenue increases over 10 years, but the Republicans say they will not allow tax increases, and want to focus only on cutting government spending.

Democrats strongly oppose cuts in social programs for the poor and elderly. They say raising taxes and closing tax loopholes for the wealthy and big corporations is essential because the government needs more revenue to close the budget gap.

Republicans say it makes no sense to raise taxes on wealthy people who can invest in the economy and create jobs. The speaker of the House of Representatives, Republican John Boehner, has said no deal can pass the House unless it rules out tax increases and cuts spending.