The White House reportedly believes it must strike a budget agreement with Congress by July 22 to avoid a risk of defaulting on the national debt
, Democratic officials briefed on the negotiations said Thursday. The federal government has exhausted its borrowing power, and needs to reach an agreement on cutting federal deficits in exchange for a vote to raise the nation’s $14.3 trillion debt limit. The Senate leaders canceled its July 4 recess next week to work toward a compromise with the Republicans.
The president, in a rare hour-long news conference, called on Republicans
to “take on their sacred cows” – including tax breaks for “millionaires and billionaires, oil companies and corporate jet owners”.
Republicans, however, have insisted on spending cuts alone, opposing even largely symbolic Democratic proposals to raise revenue by eliminating specialty tax breaks for owners of yachts, corporate jets and thoroughbred race horses.
The federal government would need a $2.4-trillion increase in the debt limit to get through the end of 2012, and Republicans are demanding a comparable amount in spending cuts — though their spending plan would also require raising the debt ceiling. Obama has said that if agreement is not reached by early August, then the US risks default – a blow to international confidence in the American economy – and seeing its credit rating downgraded, which would make borrowing more expensive.
Aug. 2 is the day when, officials say, the government will reach its debt ceiling and will no longer be able to borrow what it needs to keep operating and repay existing debt. “August 2 is a very important date, and there is no reason why we can’t get this done now,” he said. “This is not a technical problem anymore. This is a matter of Congress going ahead and biting the bullet and making tough decisions because we know what the decisions are.”
Obama said more than $1tn in cuts have already been agreed but that other areas of the budget, including defence spending – considered untouchable by some Republicans – must be scrutinised.
The White House believes a package of at least $2 trillion in combined spending cuts and tax revenue, spread over a decade, is possible. Before talks broke down, the two sides identified more than $1 trillion in spending cuts, including as much as $200 billion in savings from Medicare and Medicaid, according to those familiar with the talks.
Obama this year proposed $760 billion in new revenue, in part by limiting deductions for households whose earnings are in the top 2%, a move that would raise $300 billion over 10 years. Obama also proposed ending various corporate and individual tax deductions, including oil and gas subsidies, and a change in how businesses report the value of their inventories.