Obama to meet congressional leaders over debt

Obama: ''We still have to work through some real differences''

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US President Obama has called Democratic and Republican lawmakers to the White House on Thursday for talks on raising the country's debt ceiling, as a deadline for action looms.

The government risks defaulting on its debt if Congress does not enact more borrowing authority by 2 August.

Republicans say they refuse to consider raising taxes, while Democrats hope to protect favoured social programmes.

It is unclear how close the two sides are to a deal.

"I believe that right now we have a unique opportunity to do something big," the president said during a news conference on Tuesday.

"This will require both parties to get out of their comfort zones."

President Obama said he hoped the White House and US lawmakers would reach an agreement on debt within two weeks.

The president said he hoped the meeting on Thursday will "build on the work that's already been done and drive toward a final agreement".

But House of Representatives Speaker John Boehner said he "questions the usefulness of the meeting", according to an aide for the Republican leader.

Mr Obama said he opposed any efforts to "kick the can down the road" with a short-term increase to the nation's borrowing limit, as some lawmakers have suggested.

He added that any agreement over the debt must include not only spending cuts but also tax increases, which Republicans have already ruled out.

Identifying spending cuts

The US currently runs an estimated $1.5 trillion (£932bn) annual budget deficit, and has already exceeded the national debt limit of $14.3tn.

The government's borrowing authority is limited by statute.

Historically, Congress raises the debt limit as a matter of routine, but this year a newly empowered faction of conservative, anti-tax Republicans are keen to extract dramatic cuts in government spending as the price of raising the limit, analysts say.

On Saturday, Mr Obama said Republican and Democratic negotiators had identified $1tn in spending cuts.

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A default by the US government would be a very serious matter, not only for the US but for the global financial system, so the smart money has always said that Congress and the White House would come to an agreement in the eleventh hour”

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And he urged negotiators to consider scaling back tax breaks that benefit wealthy individuals, including low income tax rates for hedge fund managers, benefits for corporate jet owners and subsidies for oil and gas companies.

"It would be nice if we could keep every tax break, but we can't afford them," he said.

"Because if we choose to keep those tax breaks for millionaires and billionaires... then we'll have to make even deeper cuts somewhere else."

Republican Senator Dan Coats of Indiana said on Saturday that reducing spending was the key to reaching a debt ceiling agreement.

"The president and Democrats in Congress must recognise that their game plan is not working," he said.

"It's time to acknowledge that more government and higher taxes is not the answer to our problem. It's time for bold action and a new plan to address our current crisis."

While congressional Republicans remain set against raising taxes, in recent days some senior Republicans have indicated they might consider cutting so-called tax expenditures - loopholes in the tax code and subsidies for special interests.

Last week, Mr Obama and Vice-President Joe Biden met Senate leaders of both parties, after Republican leaders of the House of Representatives walked out of debt talks.

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