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Americas

Obama warns of tax increase if debt ceiling is not raised

Video by Philip CROWTHER

Text by News Wires

Latest update : 2011-07-15

Barack Obama said Friday that Congress should raise the debt ceiling and cut deficits imminently or risk facing a tax increase for all Americans because of an unavoidable rise in interest rates.

AP - President Barack Obama said Friday Congress has a “unique opportunity” to stabilize the U.S. economy for decades by cutting deficits and raising the national debt limit to avoid a first-ever default.

He warned starkly that failure to do so by the Aug. 2 deadline would effectively mean “a tax increase for everybody” if the government defaults, sending up interest rates and likely sparking a global financial crisis.

He said he was ready to make tough decisions and challenged Republicans to do the same.
 
Still, Obama said that Republicans opposition to any new tax revenue was complicating efforts to reach a deficit-cutting deal.
 
“If they show me a serious plan I’m ready to move,” he said.
 
The United States hit its current $14.3 trillion debt ceiling in May and has been juggling its books since then. Republicans, who control the House of Representatives, say they won’t raise the debt limit unless Democrats agree to major spending cuts to reduce the spiraling U.S. deficit. Democrats say cuts must be accompanied by some tax increases. Republicans, prodded by junior members backed by the small-government tea party movement, oppose any tax hikes.
 
The president spoke at the White House Friday after five days straight of meetings with congressional leaders failed to yield compromise, and amid increasingly urgent warnings from credit agencies and the financial sector about the risks of failing to raise the government’s borrowing limit.
 
The president spoke at the White House Friday after five days straight of meetings with congressional leaders failed to yield compromise, and amid increasingly urgent warnings from credit agencies and the financial sector about the risks of failing to raise the government’s borrowing limit.
 
The president spoke at his third news conference in two weeks on an issue that is increasingly consuming Washington and his presidency.
 
On Capitol Hill, meanwhile, Democrats and Republicans in the House emerged from closed-door meetings to reiterate their hardened stances. Republicans announced plans to call a vote next week on a balanced budget constitutional amendment that would force the government to balance its books.
 
Obama dismissed the idea, saying, “We don’t need a constitutional amendment to do that. What we need to do is do our jobs.”
 
Failure to reach compromise has focused attention on a fallback plan under discussion by Senate Republican leader Mitch McConnell and Senate Majority Leader Harry Reid. That plan would give Obama greater authority to raise the debt ceiling while setting procedures in motion that could lead to federal spending cuts.
 
Obama insisted the public was on his side in wanting a “balanced approach” that would mix spending cuts and the tax increases opposed by Republicans.
 
“The American people are sold,” he said. “The problem is that members of Congress are dug in ideologically.”
 
“We have a chance to stabilize America’s finances for a decade or 15 years or 20 years if we’re willing to seize the moment,” the president said, adding later that everyone must be “willing to compromise.”

 

Date created : 2011-07-15

  • ECONOMY

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