x Abu Dhabi, UAESaturday 20 January 2018

US draws closer to budget default

Barack Obama, the US president, and congressional leaders met at the White House early yesterday but the meeting ended after over an hour only with agreement to continue discussions on the debt ceiling.

WASHINGTON // US budget negotiations remained gridlocked yesterday as an August 2 deadline to raise the debt ceiling before a US default creeps ever closer.

Barack Obama, the US president, and congressional leaders met at the White House early yesterday but the meeting ended after over an hour only with agreement to continue discussions.

"The president restated his opposition to a short-term extension of the debt ceiling, explaining that a short-term extension could cause our country's credit rating to be downgraded, causing harm to our economy and causing every American to pay higher credit cards rates and more for home and car loans," a statement from press secretary Jay Carney said.

The meeting came after Mr Obama had summoned party leaders to the White House on Friday and he and John Boehner, the Republican speaker of the House of Representatives, traded accusations over who was to blame for the latest setback.

"I've been left at the altar now a couple of times," Mr Obama, visibly angry, said on Friday. He had just heard that Mr Boehner was breaking off talks with the White House over negotiations to increase America's US$14.3 trillion (Dh52.5 trillion) debt limit, and wondered aloud whether the Republicans "would say yes to anything".

The White House, he said, had offered "an extraordinarily fair deal. If it was unbalanced, it was unbalanced in the direction of not enough revenue."

Mr Boehner shot straight back. In spite of optimism earlier in the week over a plan being drawn up by a bi-partisan group of senators dubbed the "Gang of Six", Mr Boehner said agreement had never been close. The White House, he said, had "moved the goalposts", and asked for an extra US$400 billion in revenue than had previously been agreed. Moreover, he added, the White House "refused to get serious" about cutting expenses and entitlement programs.

The debt limit officially passed on May 16, but the US Treasury said the government could continue paying its bills until August 2. With Congress telling the president it would not raise the debt ceiling without substantial cuts in spending, negotiations were aimed at finding a plan that would seek to substantially reduce the deficit over 10 years.

But as part of any deal, Democrats want tax loopholes closed and part of the deficit covered by increases in revenue. Mr Obama's willingness to consider cuts proposed by Republicans has upset members of his own party, who fear the effect on social benefits, pensions and health programmes.

Republicans, however, will not countenance any tax increases.

Instead, Republicans want all savings to come from spending cuts. The House on Wednesday passed a plan that sought to balance the budget through spending cuts.

Democrats were opposed to the plan, which was easily defeated in the Senate. They said the plan essentially amounted to a wholesale dismantling of entitlement programmes and targeted the poor and middle class.

It asks "nothing of corporate jet owners, it asks nothing of oil and gas companies, it asks nothing from folks like me who've done extremely well and can afford to do a little bit more," Mr Obama said on Friday.

Attention will now likely go back to a stopgap measure similar to one proposed by a Republican senator, which would allow the administration to raise $1.5 trillion over the next year and half, while allowing anti-tax legislators to oppose it.