U.S. President Barack Obama has asked Democrat and Republican lawmakers to put politics aside to reach a compromise on the nation's debt crisis, warning that failure to do so "could cost us jobs and do serious damage to our economy."
In a televised address to the nation Monday night, Obama told the American people that the bickering between lawmakers on both sides of the political spectrum has left the country "with a stalemate." The president said the impasse could prevent him from moving forward with efforts to rein in the deficit and keep the United States from defaulting on its bills.
Obama said that for the last decade, the United States government has "spent more money than we take in," a situation made worse by the economic downturn.
"Every family knows a little credit card debt is manageable," Obama said. "But if we stay on the current path, our growing debt could cost us jobs and do serious damage to our economy."
Obama said failure to reach a deal by next week will lead the government to default on its debts, which will send interest rates soaring, prevent businesses from hiring and leave little money for investments in education, infrastructure and social programs such as Medicare.
While the president said both parties carry some responsibility for the current crisis, he laid the blame for the failure to reach a deal squarely on Republicans who have rejected Obama's debt-crisis plan because it doesn't contain the deep cost-cutting measures they would like.
Earlier Monday, both Democratic and Republican leaders were busy selling their debt-crisis strategies to their respective parties, ahead of the looming Aug. 2 deadline and after weeks of fruitless discussions to end the stalemate.
The two parties have reached an impasse over the crisis, with Obama seeking an extension to the debt ceiling and Republicans demanding deep cost-cutting measures in return for any co-operation.
Some members of the so-called Tea Party wing of the Republican caucus have been accused of opposing Obama's proposition in favour of pandering to conservative voters who got them into office.
Washington has reached its current debt-ceiling limit of $14.3 trillion, and will likely begin to default on its bills as of Aug. 2 if the limit isn't increased.
North American markets took a hit as uncertainty over the U.S. debt limit dragged on. The Dow Jones industrial was down 88.36 points to 12,592.8, while the Nasdaq composite index fell 16.03 points to 2,842.80. In Canada, the S&P/TSX slipped 58.68 points to finish the day at 13,435.95.
On Monday, Republican Speaker John Boehner and Senate Democratic Leader Harry Reid began selling their respective plans to their caucuses before publicly releasing their proposals later in the day.
Boehner's plan proposes the following:
- Introduce an immediate US$1.2 trillion in cuts and spending caps over 10 years
- Increase the U.S. debt ceiling by $900 billion (which would last a few months)
- Create a committee tasked with finding nearly $2 trillion in additional cuts
The plan would also require a constitutional amendment that would force the federal government to run balanced budgets.
Reid's plan, by comparison, would do the following:
- Spending cuts of $2.7 trillion over 10 years
- Introduce no new taxes (a key provision for Republicans)
- Raise the debt ceiling to a level that will cover the government through all of 2012, a key factor for Obama and the Democrats.
Boehner criticized the Democratic proposal for being "full of gimmicks," while Reid blamed the impasse on "extremists" in the Republican Party.
During his speech, Obama at first praised Boehner for working with him for weeks on a "balanced approach" to solving the crisis. But he said the Republicans' new proposal would "force us to face the threat of default, but six months from now."
"We know what we have to do to reduce our deficits," the president said. "There's no point in putting our economy at risk by kicking the can further down the road."
Immediately after Obama spoke, Boehner was given a few moments of television time to rebut the president's remarks.
"The president has often said we need a 'balanced' approach, which in Washington means we spend more, you pay more," Boehner said.
"The sad truth is that the president wanted a blank cheque six months ago, and he wants a blank cheque today. That is just not going to happen."
The U.S. has never been in a federal default position, and there have been warnings that the situation could result in higher interest rates, a reduced credit rating for the U.S., and the stoppage of some government cheques.
Obama said lawmakers can't allow Americans to become "collateral damage" in a war between Democrats and Republicans, and said he hopes both sides "will ultimately put politics aside.
"This is not the way to run the greatest country on earth," Obama said. "It's a dangerous game that we've never played before and we can't afford to play it now."
With files from The Associated Press
