US & Canada

US budget: No new deal in White House talks

President Barack Obama, right, House Democratic Leader Nancy Pelosi, left, and House Speaker John Boehner, centre, meet with Congressional leadership in the Cabinet Room of the White House on 10 July
Image caption Out of focus on the budget; the key players could not bridge the gap in talks at the White House

Talks at the White House to try to break the deadlock over the US national debt have broken up without agreement.

President Barack Obama and congressional leaders have agreed to resume the talks, which ended after 75 minutes, on Monday.

Mr Obama is struggling to marshal support for a budget package that would cut the national debt by $4tn (£2.5tn).

The US risks defaulting on its debts in just over three weeks, when the current federal budget runs out.

Eight top Senate and House of Representatives leaders met - unusually - on a Sunday in the Cabinet Room of the White House.

As the talks got under way, Mr Obama was asked whether they could "work it out in 10 days".

"We need to," he replied.

The Republican Speaker of the House of Representatives, John Boehner, said on Saturday that he favoured a less ambitious target for debt reduction of $2tn.

Republicans baulk at tax increases in the Obama proposals. And his Democrat allies are no more enthusiastic about proposals to cut social welfare and Medicaid.

Before Sunday's meeting, White House aides insisted Mr Obama would hold out for bigger savings.

"He's not someone to walk away from a tough fight," said White House chief of staff William Daley.

"Everyone agrees that a number around $4tn is the number that will make a serious dent in our deficit."

US Treasury Secretary Timothy Geithner was adamant the deadline for a deal - 2 August - could not be extended.

He warned there could be catastrophic damage to the US economy unless Congress agrees to raise the national debt ceiling beyond the current $14.3tn.

If no agreement is reached, the government will effectively start to run out of money to pay civil servants, government contractors, pensioners or holders of government debt.

Economists and the White House have warned that such a default could push the country back into recession and have a global economic impact.

'No alternative'

When it came to the crunch in the past, Congress has voted to raise the debt ceiling, giving government access to the cash it needed.

This year, however, newly-empowered Republicans are determined to prevent any tax increases and want to see aggressive measures to reduce the deficit in exchange for agreeing to raise the debt ceiling.

In a round of interviews before Mr Obama's meeting with Congressional leaders on Sunday, Mr Geithner said the US would not default.

He said Republicans had "no alternative" to making a budget deal with the White House and urged them not to walk away from efforts to reach a large, comprehensive deal on debt reduction.

The Obama administration wanted "the biggest deal possible" on debt reduction, Mr Geithner told NBC's Meet the Press.

Last week Mr Boehner and Mr Obama worked on a massive package of spending cuts and new tax measures that would have reduced the debt by $4tn over 10 years.

Ended in impasse

The proposals included reining in spending on entitlement programmes such as Social Security and Medicare, which Democrats hold dear.

But it also involved tax hikes and closing tax loopholes for the wealthiest Americans, something opposed by many Republicans.

In a statement released late on Saturday, Mr Boehner said he was pulling back from the $4tn package, because of the tax increases it included.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," he said.

"I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the [Vice-President Joe] Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."

A group of Republican and Democratic members of Congress led by Mr Biden had identified about $2tn in cuts in talks over May and June but those ended in an impasse.

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