Obama, congress wrestle over debt: middle class vs rich
By Pat Reber Jul 10, 2011, 16:17 GMT
Washington - Political lines had been drawn deep in the sand in advance of US President Barack Obama's planned meeting later Sunday with congressional leaders from both parties as a stalemate continues over the nation's debt limit and deficit.
The fight is increasingly pitting wealthy Americans against the middle class and senior citizens.
A reported deal in which Obama and John Boehner - leader of the opposition Republican in the lower parliament chamber, or House of Representatives - had each agreed to give a bit evaporated Saturday night as Boehner backed away.
Under the original deal, the government would have targeted saving 4 trillion dollars over the next 10 years. Obama, the liberal Democrat, would have backed painful cuts in some social programmes like social security and health care for the poor and aging.
Boehner would have agreed to something anathema for conservative Republicans - up to 1 trillion dollars in tax increases, according to some reports.
But late Saturday, Boehner suggested that he and Obama had talked again and agreed to lower their goals for savings in the Sunday night talks, because 'the White House will not pursue a bigger debt reduction agreement without tax hikes.'
That could mean lowering sites back down to the 2.4 trillion dollars in savings that had been agreed to with Democrats in earlier talks.
On Sunday, Treasury Secretary Tim Geithner warned that, without a deal by the end of the coming week - or at the latest the following week - the situation would become dire.
'On August 2, we're left running on fumes,' Geithner told CBS news.
At issue is the 14.3-trillion-dollar debt limit that was reached in May. Since then, Geithner has found backup ways to keep the government funded.
But by August 2, 'we have no capacity to borrow.' There are 500 billion dollars in principle payments due in August, plus checks to be written to 80 million Americans for social security and veteran's benefits, Geithner warned.
Conservative Republicans oppose raising the debt ceiling until massive cuts are made in social spending in the current budget negotiations. A failure to raise the ceiling could harm the US credit rating and risk increases in interest rates, private credit rating firms have warned.
'The world is going to be progressively more concerned about whether this town can figure a way to solve this problem,' Geithner said.
Responding to Boehner's retreat, the White House immediately insisted that Republicans would have to accept a larger savings package to be paid for with higher taxes on the wealthy.
'We cannot ask the middle class and seniors to bear all the burden of higher costs and budget cuts,' a White House statement said. 'We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree.'
Republicans insist that the wealthy should continue to receive the tax reductions enacted under the former Bush administration, when revenues were generating a surplus. But two costly wars and a disastrous recession have eaten huge holes into the budget that Democrats say can only be filled by taking back those tax breaks.
To give dramatic emphasis to his stance, Obama often uses the example of tax breaks for corporate jet owners to symbolize the expensive benefits for the wealthy and special interests like the oil industry.
But Republicans fire back that government spending has gotten out of control. Fired up by the fiscally conservative Tea Party movement, the Republicans insist that the bulk of the savings need to come from savings, not more taxes.
That leaves little room for negotiation.
'There has to be a deal. The leadership in Congress understands that failure is not an option,' Geithner said. 'The president wants to do the largest possible deal that is going to do the most for the economy.'
Geithner said that Obama has 'made clear he's willing to do some very difficult things' and the other side must make similar concessions. Obama has proposed 'totally sensible tax reforms,' such as asking the wealthiest 2 per cent of Americans to share a modest part of the burden, Geithner noted.
The bitter debate takes place against a growing backdrop of economic unease as the US unemployment rate rose again in June.
Additionally, senior citizens are worried that the retirement fund and medical benefits programme they paid into during their working years will be slashed by Republicans, who have proposed a program under which seniors would pay an added 6,500 dollars a year for their health insurance.