Obama Urges Congressional Leaders to Gauge Debt Deal Support

Posted July 14th, 2011 at 8:05 pm (UTC-5)
Leave a comment

White House officials say they will discuss on Friday whether they are close to a deal with opposition Republicans on raising the U.S. debt limit.

Officials say Mr. Obama concluded Thursday's meeting with congressional leaders — the fifth straight day of the high-level talks — by suggesting they gauge support among their fellow lawmakers for components of a debt deal.

The White House announced Mr. Obama will hold a press conference Friday morning. He is not expected to hold further negotiations with party leaders until at least Saturday.

Democratic officials told reporters Mr. Obama also reiterated his preference for a “big deal” to reduce the deficit and raise the borrowing limit by up to several trillion dollars each.

Mr. Obama and congressional leaders are in contentious negotiations to raise the $14.3-trillion borrowing limit while also cutting spending. But talks have stalled over disagreements about the need to raise taxes. If the borrowing limit is not raised by August 2, the U.S. may have to stop payments on some of its obligations.

Top U.S. financial officials Thursday issued a new round of warnings about the potential catastrophe that awaits if lawmakers fail to raise the country's debt limit in time.

Treasury Secretary Timothy Geithner said Washington needs to meet its financial obligations and “it's time we move.”

Earlier, Federal Reserve Chairman Ben Bernanke told a Senate committee any failure to raise the debt limit would have a “calamitous outcome.” He warned excessive spending cuts could damage the fragile economic recovery.

The Fed chairman said failure to raise the debt ceiling would be a “self-inflicted wound” and would erode global confidence in the United States.

Moody's Investors Service warned Wednesday that the U.S. risks losing its top credit rating if lawmakers fail to reach a deal that increases the debt limit and decreases the deficit. A downgraded U.S. bond rating would likely lead to higher interest rates for U.S. loans.

Bernanke said a downgrade could lead to a “vicious cycle” in which higher interest rates make the country's debt increasingly difficult to pay down.

There are also growing calls from businesses and banking firms for a solution.

The head of one of the biggest private U.S. financial firms Thursday told reporters it is “imperative that the debt ceiling be fixed.”

JP Morgan Chase Chief Executive Jamie Dimon said it would be irresponsible for the country to default on its debt because the result could be catastrophic.

A Chinese credit rating agency said Thursday it has placed U.S. sovereign debt on a negative watch. Dagong Global Credit Rating Company says it will downgrade U.S. credit ratings “if there is no significant change in its repayment ability within the period of observation.” China is the biggest buyer of U.S. sovereign debt.