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'No delaying' deadline to lift US debt ceiling US budget: Congress leaders in talks at White House
(about 7 hours later)
US Treasury Secretary Timothy Geithner says a 2 August deadline on increasing the US debt limit cannot be extended. US President Barack Obama is meeting Congress leaders at the White House to try to hammer out a budget deal.
He said that if Congress did not agree to raise the ceiling beyond the current $14.3tn (£8.9tn), there would be catastrophic damage to the economy. He is proposing a programme that would cut the national debt by $4tn (£2.5tn).
President Barack Obama is to discuss a debt deal with Congressional leaders. But Republicans oppose the proposed tax increases, and Mr Obama's Democrat allies oppose public service cuts.
House Speaker John Boehner said he favoured setting a less ambitious target than an earlier proposal of a comprehensive $4tn debt reduction. It is just over three weeks before the US risks defaulting on its debts, if a federal budget cannot be agreed. Mr Obama said before the meeting that a deal was needed.
The US faces running out of money and defaulting if Congress does not allow the government to take on more debt. US Treasury Secretary Timothy Geithner is adamant the deadline - 2 August - cannot be extended.
If no agreement is reached, the government would be unable to pay civil servants, government contractors, pensioners or holders of government debt. He warns there could be catastrophic damage to the US economy unless Congress agrees to raise the national debt ceiling beyond the current $14.3tn.
Economists and the White House have warned that such a default could push the US back into recession and have a global economic impact. The Republican Speaker of the House of Representatives, John Boehner, has said he favours a less ambitious target for debt reduction than the $4tn proposed.
On Saturday he told the president that a debt reduction package of about $2tn would be more realistic.
If no agreement is reached, the government will effectively start to run out of money to pay civil servants, government contractors, pensioners or holders of government debt.
Economists and the White House have warned that such a default could push the country back into recession and have a global economic impact.
'No alternative''No alternative'
When the Congressionally-set debt limit has been reached in the past, Congress has voted to raise it. When it came to the crunch in the past, Congress has voted to raise the debt ceiling, giving government access to the cash it needed.
This year, however, newly empowered Republicans are determined to prevent any tax increases and want to see aggressive measures to reduce the deficit in exchange for agreeing to raise the debt ceiling. This year, however, newly-empowered Republicans are determined to prevent any tax increases and want to see aggressive measures to reduce the deficit in exchange for agreeing to raise the debt ceiling.
In a round of interviews before Mr Obama's meeting with Congressional leaders on Sunday, Mr Geithner said the US would not default.In a round of interviews before Mr Obama's meeting with Congressional leaders on Sunday, Mr Geithner said the US would not default.
He said Republicans had "no alternative" to making a budget deal with the White House and urged them not to walk away from efforts to reach a large, comprehensive deal on debt reduction.He said Republicans had "no alternative" to making a budget deal with the White House and urged them not to walk away from efforts to reach a large, comprehensive deal on debt reduction.
The Obama administration wanted "the biggest deal possible" on debt reduction, Mr Geithner told NBC's Meet the Press.The Obama administration wanted "the biggest deal possible" on debt reduction, Mr Geithner told NBC's Meet the Press.
Last week, Mr Boehner - the senior Republican in the House of Representatives - and Mr Obama had worked on a massive package of spending cuts and new tax measures that would have reduced the debt by $4tn over 10 years. Last week Mr Boehner and Mr Obama worked on a massive package of spending cuts and new tax measures that would have reduced the debt by $4tn over 10 years.
The proposals included reining in spending on entitlement programmes such as Social Security and Medicare, considered vital by many Democrats. Ended in impasse
The proposals included reining in spending on entitlement programmes such as Social Security and Medicare, which Democrats hold dear.
But it also involved tax hikes and closing tax loopholes for the wealthiest Americans, something opposed by many Republicans.But it also involved tax hikes and closing tax loopholes for the wealthiest Americans, something opposed by many Republicans.
In a statement released late on Saturday, Mr Boehner said he was pulling back from the $4tn package because it involved tax increases. In a statement released late on Saturday, Mr Boehner said he was pulling back from the $4tn package, because of the tax increases it included.
"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," he said."Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," he said.
"I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the [Vice-President Joe] Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.""I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the [Vice-President Joe] Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."
A group of Republican and Democratic members of Congress led by Mr Biden had identified about $2tn in cuts in talks over May and June but those ended in an impasse.A group of Republican and Democratic members of Congress led by Mr Biden had identified about $2tn in cuts in talks over May and June but those ended in an impasse.