Obama, Republicans Grudgingly Grind to Debt Deal

July 7, 2011
Obama: Republicans using borrowing-limit debate like 'a gun against the heads of the American people.'

President Barack Obama on Thursday hosts his Republican foes for talks on an elusive deal to raise the U.S. debt limit and avert an early-August default that could unleash global economic shock waves.

The Washington Post reported that Obama planned to pitch Social Security reform and spending cuts to the Medicare health program, raising the prospect of a grand bargain that could infuriate his fellow Democrats.

Obama and Vice President Joe Biden were to meet with leaders of the Republican-led House of Representatives and Democratic-held Senate today as angry public rhetoric clouded the fate of private deal-making.

Obama accused Republicans of "toying" with refusing to raise the ceiling on U.S. borrowing, and using that like "a gun against the heads of the American people" to reject his calls for hiking taxes on the rich and corporations.

"What I'm hoping to see over the next couple of weeks is people put their dogmas aside, their sacred cows aside, they come together and they say, 'Here's a sensible approach that reduces our deficit,'" he said.

Obama did not mention specific cuts to the bedrock social programs that have been the pride of his Democratic party for decades, but the Post quoted an official as saying that such moves were under consideration.

"Obviously, there will be some Democrats who don't believe we need to do entitlement reform. But there seems to be some hunger to do something of some significance," the official told the Post.

"These moments come along at most once a decade. And it would be a real mistake if we let it pass us by."

The reported proposals would concern the Social Security retirement program and Medicare, a health insurance program for the elderly and disabled.

'Glad to Talk Loopholes'

Key Republicans meanwhile appeared to open cracks in what had been a unified party rejection of closing tax loopholes -- notably those benefiting purchasers of luxury goods like yachts or private jets -- as part of a final compromise.

Republican House Majority Leader Eric Cantor said he would be "glad to talk loopholes" while cautioning that closing such gaps would require "offsetting tax cuts somewhere else" to win support.

And No. 2 Republican Sen. Jon Kyl said his party had already agreed to $150 billion to $200 billion in increased "revenues" -- which he described as coming from boosted "user fees" and sales of government property.

White House spokesman Jay Carney appeared to embrace talk of cuts far deeper than a previously discussed figure of roughly $2 trillion over 10 years, saying that $4 trillion was "certainly something to aspire to."

Republicans have said they will refuse to raise the debt ceiling unless that steps comes paired with spending cuts at least as vast as the increase in borrowing authority and have warned they will block any tax hikes.

Democrats have said they want the richest earners and wealthy corporations to pay "their fair share" at a time when cherished social services and spending on science, education and the military face the axe.

Final Push

The talks are part of a final major push to reach a deal to raise the congressionally determined limit on U.S. borrowing, now set at $14.29 trillion, in the face of a budget deficit expected to hit $1.6 trillion this year.

With the 2012 U.S. presidential campaign heating up, lawmakers also face U.S. public anger over historically high 9.1% unemployment.

The United States hit its $14.29 trillion debt ceiling on May 16, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.

But by Aug. 2, the government will have to begin withholding payments -- to bond holders, civil servants, retirees or government contractors -- and the White House has urged a deal by July 22 to have time to pass it.

In the midst of a blustery public debate, a senior Republican aide revealed that Obama and Republican House Speaker John Boehner had held secret talks at the White House on Sunday, but did not offer further details.

Obama on Wednesday warned that failing to raise the debt ceiling would mean "our credit could be downgraded, interest rates could go drastically up, and it could cause a whole new spiral into a second recession -- or worse."

Copyright Agence France-Presse, 2011

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!