US deficit: Obama in further congressional crisis talks

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US President Barack Obama in Washington DC (15 July 2011)
Image caption,
Mr Obama has said all Americans must play their part in reducing the deficit

US President Barack Obama has held further private meetings with congressional leaders aimed at averting a US default.

The US must raise its $14.3tn (£8.9tn) debt ceiling if it is to borrow beyond 2 August and be able to pay its bills.

But cross-party talks have so far failed to make a breakthrough and Mr Obama has warned time is running out.

Republicans have rejected the president's proposals to increase taxes on wealthier Americans to raise funds.

They say doing so would stifle investment and job growth.

Republicans, who control the House of Representatives, say they will not raise the debt limit unless Democrats agree to major spending cuts.

Mr Obama's spokesman Dan Pfeiffer said the president was discussing "various options" during Saturday's private talks with congressional leaders.

In his weekly national address, Mr Obama said all Americans had to play their part in resolving the crisis, saying: "We're all in this together."

"The truth is, you can't solve our deficit without cutting spending," he said.

Ratings down

"But you also can't solve it without asking the wealthiest Americans to pay their fair share - or without taking on loopholes that give special interests and big corporations tax breaks that middle-class Americans don't get."

Mr Obama has said he is prepared to enact cuts to benefits and welfare schemes, but would need Republicans to consider some revenue increases in return.

On Friday, he said a failure to raise the debt limit would mean "effectively a tax increase for everybody".

In the Republicans' weekly address on Saturday, Sen Orrin Hatch of Utah said only a solution which required a balanced budget was acceptable.

This would put the US on "a path to fiscal health and would prevent this White House or any future White House from forcing more debt on the American people," he said.

Analysts say any failing to reach a deal would rattle a world economy still trying to put the 2008 downturn behind it and could potentially lead to the US entering another recession.

On Thursday, Standard & Poor's became the second of the major credit rating agencies to place US debt under review, citing an increasing risk of a payment default.

Another ratings agency, Moody's, warned a day earlier that it might cut Washington's triple-A debt rating.

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