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U.S. rushes to avert disastrous default

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The White House and top US lawmakers scrambled Sunday for a deal to stop the world’s richest country from ruinous default on its debt, hours before Asian financial markets opened.

President Barack Obama planned to meet with his top Democratic allies in Congress, Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, at 6:00 pm (2200 GMT) with jittery world markets eyeing Washington for signs of a breakthrough.

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While Republican House Speaker John Boehner was not going to be part of the talks, he spoke by telephone with Obama during the day, said his spokesman, Michael Steel.

Investors, starting with Asia, were set to have their first chance at rendering judgment on the political stalemate in Washington since negotiations between Obama and his Republican foes collapsed late Friday.

A spokesman for Republican House Majority Leader Eric Cantor, Brad Dayspring, sought to tamp down worries of an unthinkable stalemate, insisting on his Twitter feed that “work is being done” toward a compromise to avert an early August US default.

“Note: There are 9 days before Aug 2. For those talking about Asian Markets, would recommend not stoking fear/concern. Work is being done,” he said.

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As the stalemate dragged on, Obama’s chief of staff William Daley braced for “stressful days” ahead.

“But in the end there’s no question in my mind the government of America will not default,” he told CBS television’s “Face the Nation,” as Britain warned “right-wing nutters” in the US Congress posed a worse threat to the world economy than Europe’s own financial crisis.

But Obama, his Democratic allies and Republican foes gave little sign of progress toward a compromise to raise the $14.3 trillion limit on borrowing by the US government, which will run out of cash to pay its bills August 2.

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“This is about what is doable at the 11th hour,” Boehner told “Fox News Sunday.”

“I think a preferable path would be a bipartisan plan that involves all of the leaders.

“If that is not possible, I and my Republican colleagues in the House are prepared to move on our own,” he warned.

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All sides agree cash-strapped Washington must close its yawning budget deficit but disagree on the size and blend of spending cuts and revenue increases as well as on how and whether to slice into the social safety net.

US Treasury Secretary Timothy Geithner said a default would be “unthinkable” and warned against a short-term debt ceiling hike that could force another standoff in the middle of the 2012 election campaign.

Obama is seeking a second term in a contest defined by his handling of the ailing US economy and shaped by Republican anger at government spending.

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But Boehner declared that “there will be a two-stage process, it’s just not physically possible to do all of this in one step.”

Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally so far.

Finance and business leaders have warned failure to raise the US debt ceiling by August 2 would send shockwaves through the fragile world economy, while Obama has predicted a default would trigger economic “Armageddon.”

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Republicans, notably newly elected members close to the archconservative “Tea Party” movement, have rejected Obama’s call for tax hikes on the rich and wealthy corporations, a key bone of contention in the discussions.

British Business Secretary Vince Cable, a Liberal Democrat and one of the most outspoken members of Britain’s coalition government, blamed congressional conservatives for the stalemate.

“The irony of the situation at the moment, with markets opening tomorrow morning, is that the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the eurozone,” Cable told the BBC.

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And Geithner hit out on ABC’s “This Week” at what he called “a vocal, loud, frankly irresponsible minority in their parties who… want to take this country to the edge of default. And that is not acceptable.”

Boehner told members of his majority that he hoped for a framework deal by Sunday afternoon to soothe investor worry, notably in Asia.

Republicans have called for spending cuts over 10 years at least equal to the dollar amount of any debt limit increase.

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Democrats have pledged to defend cherished social safety net programs, which the president has targeted for cuts.

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… then let us make a small request. Like you, we here at Raw Story believe in the power of progressive journalism — and we’re investing in investigative reporting as other publications give it the ax. Raw Story readers power David Cay Johnston’s DCReport, which we've expanded to keep watch in Washington. We’ve exposed billionaire tax evasion and uncovered White House efforts to poison our water. We’ve revealed financial scams that prey on veterans, and efforts to harm workers exploited by abusive bosses. We’ve launched a weekly podcast, “We’ve Got Issues,” focused on issues, not tweets. Unlike other news sites, we’ve decided to make our original content free. But we need your support to do what we do.

Raw Story is independent. You won’t find mainstream media bias here. We’re not part of a conglomerate, or a project of venture capital bros. From unflinching coverage of racism, to revealing efforts to erode our rights, Raw Story will continue to expose hypocrisy and harm. Unhinged from corporate overlords, we fight to ensure no one is forgotten.

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