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US budget: Congress leaders in talks at White House US budget: Congress leaders in talks at White House
(40 minutes later)
US President Barack Obama is meeting Congress leaders at the White House to try to hammer out a budget deal.US President Barack Obama is meeting Congress leaders at the White House to try to hammer out a budget deal.
He is proposing a programme that would cut the national debt by $4tn (£2.5tn).He is proposing a programme that would cut the national debt by $4tn (£2.5tn).
But Republicans oppose the proposed tax increases, and Mr Obama's Democrat allies oppose public service cuts.But Republicans oppose the proposed tax increases, and Mr Obama's Democrat allies oppose public service cuts.
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.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.
US Treasury Secretary Timothy Geithner is adamant the deadline - 2 August - cannot be extended. He was joined by eight top Senate and House of Representatives leaders in the Cabinet Room for an unusual Sunday meeting.
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. As the talks got under way, Mr Obama was asked whether the White House and Congress could "work it out in 10 days".
"We need to," he replied.
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.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. On Saturday he said a debt reduction package of $2tn would be more realistic.
White House aides insist Mr Obama will hold out for bigger savings.
"He's not someone to walk away from a tough fight," said White House chief of staff William Daley.
"Everyone agrees that a number around $4tn is the number that will make a serious dent in our deficit."
US Treasury Secretary Timothy Geithner is adamant the deadline for a deal - 2 August - cannot be extended.
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.
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.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.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 it came to the crunch in the past, Congress has voted to raise the debt ceiling, giving government access to the cash it needed.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 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.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.
Ended in impasseEnded in impasse
The proposals included reining in spending on entitlement programmes such as Social Security and Medicare, which Democrats hold dear.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 of the tax increases it included.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.