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White House: GOP holding economy ‘hostage’ over debt ceiling

By Reuters
Tuesday, May 10, 2011 13:27 EDT
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WASHINGTON (Reuters) – The White House took a dim view on Tuesday of Republicans’ demand that President Barack Obama accept more than $2 trillion in spending cuts in exchange for their agreement to raise the $14.3 trillion U.S. debt limit.

House of Representatives Speaker John Boehner, the top Republican in the Congress, on Monday laid down a tough new yardstick in talks over the debt, saying spending cuts must exceed any boost to the borrowing limit.

White House spokesman Jay Carney said both Democrats and Republicans agree on the need for deficit reduction. But it would be tantamount to holding the U.S. economy “hostage” by tying the debate over the debt limit to budget cuts, he said.

“To hold one hostage to the other remains extremely unwise,” Carney told reporters on Air Force One as Obama flew to Texas.

The White House believes Obama has already offered a balanced plan that would achieve $4 trillion without cutting entitlement programs for the elderly and poor.

Obama believes bipartisan negotiations led by Vice President Joe Biden, which resume on Tuesday, can lead to an agreement on further substantial reduction, a senior White House official said.

“But it is simply irresponsible to declare that you will tank the U.S. economy if you don’t get what you want,” the official said.

Treasury Secretary Timothy Geithner has warned of economic catastrophe if the federal government’s borrowing authority is not increased and has told Congress that he will be able to stave off default until August 2 by drawing on other accounts once the debt limit is reached.

An increase of $2 trillion will be needed to cover the country’s borrowing needs through the November 2012 elections, Treasury officials have told lawmakers, but Congress could opt for a smaller increase if more time is needed to hash out a deal.

Obama wants to raise taxes on wealthier Americans and shield popular entitlement programs like the Social Security and Medicare programs for the elderly.

(Reporting by Steve Holland and Jeff Mason; Editing by Vicki Allen)

Reuters
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