WASHINGTON, (Reuters) – President Barack Obama on Monday called on divided congressional leaders to compromise and break a deadlock over raising the U.S. debt limit that he said risked a “reckless” national default.
Obama made the appeal in an address to the nation as Democratic and Republican leaders remained at loggerheads over divergent debt plans that have highlighted the ideological gulf between them. Even if default is avoided, as most expect, the impasse has raised fears of an unprecedented downgrade of America’s gold-plated credit rating.
As the clock ticks toward an Aug. 2 deadline to act on raising overall borrowing authority so the nation can pay its bills, the stalemate is rattling investors worldwide, sending stocks and the dollar down and pushing gold to a record high.
But market reaction so far has fallen short of the panicky sell-off some politicians had feared after weekend talks broke down.
In his address, Obama spelled out the severe economic consequences of a default or a credit ratings downgrade resulting from failure to strike a deal to raise the $14.3 trillion debt limit and reduce the budget deficit.
“Defaulting on our obligations is a reckless and irresponsible outcome to this debate. … We would risk sparking a deep economic crisis – one caused almost entirely by Washington,” Obama said.
He urged a compromise to reduce the deficit by $4 trillion and share the burden of cuts evenly across society.
The acrimonious partisan debate is heating up the U.S. political climate well ahead of November 2012 elections in which Obama will seek re-election.
Obama warned that a first default in U.S. history would directly affect the lives of ordinary Americans, because the government would not be able to pay bills that include monthly Social Security checks, veterans’ benefits, and government contracts with thousands of businesses.
“I have told leaders of both parties that they must come up with a fair compromise in the next few days that can pass both houses of Congress – a compromise I can sign,” he said.
“And I am confident we can reach this compromise”.
