US Congress scrambles for debt deal; eyes on Asia

WASHINGTON: The U.S. Congress will struggle on Sunday, July 24 to
hammer out a deficit deal and assure investors before Asian markets open
that America can avert a catastrophic default and hold onto its prized
credit rating.
Congressional staff planned to work through the night after President
Barack Obama told lawmakers in an emergency White House meeting to find
a way to lift the $14.3 trillion limit on U.S. borrowing that would
allow the world's largest economy to pay its bills past next year's
November election.
But new acrimony flared late Saturday on Capitol Hill over that
timetable, adding to the difficulties facing negotiators who have been
at impasse for weeks over the role of taxes in any deficit reduction
plan.
An aide to Republican leaders said lawmakers were working on a plan
for $3 trillion to $4 trillion in savings over 10 years, but another
high-ranking Republican official said no numbers had been set.
It was not clear if this package contained additional tax revenue alongside cuts in government spending, as Obama has demanded.
Republican leaders want "to show progress" by 4 p.m. EDT (2000 GMT)
on Sunday, before financial market trading gets under way in Asia, and
have legislation to unveil Monday.
"Congressional leaders are working in good faith with the goal of
having something to present to their members on Monday," a second
Republican aide said.
The United States will run out of funds to service its debt on Aug. 2
if Congress does not approve additional borrowing. Republicans have
insisted the White House agree to deep spending cuts for long-term
deficit reduction before they approve any increase in America's debt
burden.
Negotiations toward that agreement have whipsawed for weeks, finally
hitting a brick wall over taxes, one of the most ideologically divisive
issues in U.S. politics.
A Democratic aide said Republicans were pushing a package that raised
the debt limit and cut spending in two steps, while Democrats want a
single deal to cover borrowing through 2012.
Michael Steel, a spokesman for House of Representatives Speaker John
Boehner, the top Republican in Congress, said that "a two-step process
is inevitable."
Disagreement on that issue prompted Senate Democratic leader Harry
Reid to express new disappointment with the process, saying Republican
"intransigence" was "pushing us to the brink of a default."
Treasury Secretary Timothy Geithner and White House chief of staff
Bill Daley were scheduled to speak on several Sunday television news
shows to hammer home Obama's argument that a deal must include more
revenue from taxes.
TAX DISPUTE
The frantic drive toward a deal over the weekend began after closed-door talks between Obama and Boehner collapsed on Friday.
Those talks broke down as Republican leaders balked at a White House
plan to raise revenues by $3.5 trillion to $4 trillion over 10 years,
complaining it contained $400 billion more in additional tax revenue
than they could stomach.
Obama, angry at the collapse of negotiations, chided Republicans and
warned time had run out to lift the debt limit. The White House kept up
the pressure on Saturday, urging Congress not to play "reckless
political games" and warning against stop-gap measures that fail to
tackle the deficit.
Boehner must overcome stout resistance from Tea Party movement
conservatives in his own party, who adamantly oppose any steps to raise
tax revenue.
Rating agencies say they will cut America's Triple-A credit rating if
the United States fails to meet debt payments, likely triggering global
market turmoil. Even if the United States does not default, its rating
will be under pressure if Congress fails to tackle long-term deficit
reduction.
Financial markets are growing more edgy and U.S. banks and businesses
are making contingency plans for the possibility of a debt default that
would drive up interest rates, sink the dollar and ripple through
economies around the world. – Reuters