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Obama slams Republicans over debt talks

US president Barack Obama has slammed the Republican plan to increase the country’s borrowing limit, claiming the impasse could spark a “deep economic crisis”.

The US is urgently seeking a solution to extend its borrowing scheme ahead of the August 2 deadline set by the US Treasury, which says that by that point it will run out of cash to pay its bills.

Obama said the two-step plan offered by the Republicans was “no way to run the greatest country on earth”. Obama himself supports a plan by senate democrats to raise the debt limit in a single move that would be accompanied by $2,700bn in spending cuts. It is believed this move would give the US government enough borrowing authority to reach until the 2012 presidential election.

The Republicans in the House of Representatives want to initially increase the debt ceiling by $1,000bn, and have a second vote in six months for a further increase tied to deeper fiscal reforms.

Obama believes this move may still impact the AAA credit rating of the US and would not solve the debt problem.

He said: “Once again, the economy will be held captive unless the Republicans get their way. We can’t allow the American people to become collateral damage to Washington’s political warfare.”

There are hopes that similarities in both plans mean an agreement can be reached, however there are also concerns that no agreement will start to impact upon markets. Gold reached an all-time high yesterday amid the concerns.

The IMF said that the US must raise the debt ceiling rapidly, as a loss of confidence in US sovereign debt would have severe knock-on effects for the rest of the world.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Odd to think that President George W Bush inherited a budget surplus when he took over in 2001.

    One big tax cut, two wars and a financial crash later and the US is close to meltdown – which the rightwing ‘nutters’ seem quite happy about.

  2. My wife and I were in both the US Senate and the House of Representatives a month or two ago.

    In both places the debates were characterized by the Democrats making pledges to spend more money and the Republicans explaining (in words of one syllable) that the money was all gone. Spent. The cupboards are bare.

    What we are seeing in the US is a re-run of the last Labour administration in the UK. Spend, spend, spend, tax, tax, tax. But eventually common sense has to intervene and that is what the Republicans are trying to interject into American finances.

    The US has a different perspective on this: Because of the Declaration of Independence, the Revolutionary War and the US Constitution they know that smaller government is the right approach. Obama wants the European socialist model but most Americans don’t want that because they know it will cost them their freedom, just as it has cost us ours.

    Obama is an aberration, a one-term pony who doesn’t respect the office that he holds.

  3. But the Republicans are just as keen to spend money as the Democrats. After all, it was GOP presidents who ran up the massive deficits in the 80’s and first decade of this century, and Republican Congressmen are the worst at adding pork-barrell spending into legilsation to benefit their own districts.

  4. Everyone knows that when you borrow more than you earn at some point the books have to be rebalanced. The American economy has been built on debt for years. Currently in the trillions it will have to be paid back or reduced at some point. Over the last two decades the way has been to just borrow more. Now it would appear that there is a President in power that realises it has to be reduced. This means spending cuts and increased taxes especially for the more wealthier who will probably have a good accountant to avoid them anyway. A deal will be done but not the one that should be.

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