US debt ceiling talks collapse
Talks to find a resolution to halt the spiralling US debt ceiling fell apart last night.
Republican House Speaker John Boehner ended talks with the US President Barack Obama claiming that Mr Obama “moved the goal posts” by insisting on a tax rise. Mr Obama countered by saying that Mr Boehner rejected an “extraordinarily fair deal.”
Mr Obama offered to cut $650 billion of entitlement programmes including Medicare and Medicaid. Additionally, the President said that he offered to cut $1 trillion of discretionary spending in return for a $1.2 trillion increase in revenues through a rise in income tax. This appears to be what the Republican house leader Mr Boehner couldn’t agree too.
Republicans are unwilling to accept tax rises as a method of resolving the problem and Democrats are loath to reduce healthcare and welfare programmes for pensioners and the poor.
President Obama has called a meeting of congressional leaders at 1100 US time today at the White House where the aim will be to agree a deal that stops the US defaulting on its debt before the deadline of August 2nd.
In a news conference Mr Boehner said that they had been close to a deal until President Obama had added a further $400 billion in tax increases to the $800 billion that had been agreed through rewriting the tax code system.
President Obama said:"It is hard to understand why Speaker Boehner would walk away from this kind of deal."
Mr Boehner told reporters at the news conference that he didn’t believe his relationship with Mr Obama was irreparably damaged and that he would attend today’s meeting.
For the first time President Obama publicly admitted that a default was possible, though he was quick to add that he is still confident that the $14.3 trillion limit on US borrowing would be increased before the August 2nd deadline.
In a letter written to Republican supporters, Mr Boehner said: "A deal was never reached, and was never really close. In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country."
Mr Boehner added that he has decided to end talks with the White House and start debating with Senate leaders in an attempt to move forward.
Former Treasury Secretary Henry Paulson, a Republican said: "Failing to raise the debt ceiling would do irreparable harm to our credit standing, would undermine our ability to lead on global economic issues and would damage our economy."
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