MercoPress. South Atlantic News Agency

While Obama in office, “real solution” to debt ceiling “unlikely” say Republicans

Senate Republican leader Mitch McConnell, no love for President Obama

US President Barack Obama raised the stakes in the third straight day of budget talks Tuesday, warning that senior citizens and veterans may suffer first if the debt ceiling is not raised by Aug. 2.

The comments came as top Republicans toughened their stance in the deficit reduction talks. Hours before heading to the White House, Senate Republican leader Mitch McConnell said a “real solution” to the US debt problem was unlikely while Obama was in office.

As politicians sparred, US business leaders pressed Obama and congressional leaders to act swiftly to raise the 14.3 trillion US debt ceiling or risk derailing a sputtering economic recovery and endangering the global financial system.

Obama said in an interview with US television network CBS before a meeting with top lawmakers from both parties that checks to recipients of the Social Security retirement program may not go out in early August if he and congressional leaders do not agree on a debt deal.

“I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue,” Obama said, according to excerpts of the interview released before its broadcast. “There may simply not be the money in the coffers to do it,” Obama said. He said that veterans’ checks and disability benefits could also be affected without a deal.

Despite months of talks, Republican and Democratic leaders were still at an impasse over a deficit reduction pact that would clear the way for Congress to raise the debt ceiling. Republicans have balked at raising the debt limit without steep spending cuts, while Democrats say new tax revenues need to be part of any deal. Republicans oppose any increase in taxes which they say would hurt the economy.

“I have little question that as long as this president is in the Oval Office a real solution is probably unattainable,” McConnell said in a hard-hitting speech on the Senate floor.

But he said Republicans would ensure the government does not default on Aug. 2, when the Treasury Department has warned it will run out of money to pay the country's bills.

Failure to seal a deal by Aug. 2 could spook investors, causing US interest rates to surge and stock prices to plummet, and could put the United States at risk of another recession, Treasury officials and private economists have warned.

If the debt limit is not raised in August, the Treasury would not be able to pay about 45 percent of its bills without borrowing more money, according to the Bipartisan Policy Centre think tank. That would force the administration to make some difficult choices. One option could be to postpone a disbursement of more than 49 billion USD to Social Security recipients due on Aug. 3.

McConnell unveiled a proposal that would allow Congress to raise the debt ceiling with just a one-third vote. Such a vote would allow the ceiling to be raised with the support of only Democrats, allowing Republicans to wash their hands of the politically toxic issue.

New York Mayor Michael Bloomberg, mentioned among possible successors to Treasury Secretary Timothy Geithner, also weighed in on the debate, saying a default would damage the US credibility around the world.

“America's good name and credit are just too important to be held hostage to Washington gridlock, and I hope that in the end cooler heads will prevail and an agreement will be reached quickly,” he said in a statement.