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Text by News Wires

Latest update : 2011-06-29

US President Barack Obama called for new measures to spur the US economy in a press conference Wednesday. This comes amid pressure from both the IMF and the Treasury department that Washington reach a deal on reducing the national deficit.

REUTERS - President Barack Obama called on Wednesday for new measures to spur hiring that are likely to further complicate talks with Republicans to bring the country’s spiraling debt under control.

Obama’s call came as the International Monetary Fund and the U.S. Treasury Department urged Washington to reach a deal soon. His push for new construction loans and an extension of a payroll tax cut could further alienate Republicans already incensed by Democratic demands for new tax revenue.

Challenging lawmakers to make “substantial progress” by the end of this week or cancel plans for the July 4th holiday, Obama also sought to up pressure on Republicans by tying them to tax breaks for millionaires while warning about default.

“If the United States government, for the first time, cannot pay its bills, it it defaults, then the consequences for the U.S. economy will be significant and unpredictable,” he told a White House news conference, reminding Republican Party backers on Wall Street of the stakes involved.

With the country still struggling to emerge from the deepest recession since the 1930s, Obama said Congress needs to take steps to bring down the 9.1 percent unemployment rate even as it weighs medium-term austerity measures.

“There are more steps that we can take right now that would help businesses create jobs here in America,” he said.

Those measures likely would add hundreds of billions of dollars to budget deficits at a time when the White House and lawmakers are trying to narrow them by more than $1 trillion. Congressional Republicans say they have no place in the talks.

“In the middle of a debt crisis, they want to borrow and spend more money as a solution to the problem. This isn’t a negotiation, this is a parody,” Senate Republican Leader Mitch McConnell said earlier on the chamber’s floor.

Since deficit-reduction talks collapsed last week, Republicans and Democrats have made no progress on a deal to permit Congress to extend the government’s borrowing authority.

Treasury Secretary Timothy Geithner said he would not be able to stave off default if Congress does not reach a deal to raise the $14.3 trillion debt ceiling by Aug. 2.

The International Monetary Fund also said failure to reach a deal soon could deliver a “severe shock” to a still-fragile recovery and global markets.

Financial markets have so far shown little concern, but credit-rating agencies have warned they could reassess their outlook on U.S. debt if a deal is not in the works by mid-July.

Congress probably will need weeks to debate and pass the deal once it is reached, and Obama warned that lawmakers may have to stay in session until it is done.

Markets did not react, as the president used his first formal news conference since March to press the Democratic case. But analysts said accusing Republicans of supporting millionaire tax breaks over college aid was a potent message.

This is “the strongest argument that Democrats have made in a while in the whole budget area. They’re talking about trade-offs, a balanced package,” said Andy Laperriere, an analyst with the ISI Group in Washington.

The Bipartisan Policy Center, a centrist think tank, said it would be technically impossible for Treasury to prioritize its payments, and Obama also cast cold water on the idea.

“Are we really going to start paying interest to Chinese who hold Treasuries and we’re not going to pay folks their Social Security checks or we’re not going to pay veterans for their disability checks?” he said.

Geithner said investors would still shun U.S. debt after the August deadline even if Treasury made debt payments its top priority—an approach backed by many Republicans.

“There is no credible budget plan under which a debt limit increase can be avoided,” he wrote in a letter to Republicans.

Negotiators had identified between $1 trillion and $2 trillion in possible spending cuts before talks stalled last week. Republicans say negotiations will not advance unless Democrats drop proposal for $400 billion in new revenue by ending tax breaks benefiting the wealthy and some businesses.

Obama will meet top Senate Democrats later on Wednesday to discuss the deficit negotiations. He has already met with top Republicans but no follow-up meetings have been set.

Republicans want to change the Constitution to require the government to balance its books each year. Such a step, which has little chance of becoming law, could limit Washington’s ability to respond to economic downturns or emergencies.

The budget deficit for the fiscal year that ends Sept. 30 is expected to hit $1.4 trillion, one of the highest as a share of the economy since World War Two.

Date created : 2011-06-29


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