Obama: seniors could be hurt without debt deal
WASHINGTON (Reuters) - President Barack Obama raised the stakes in the third straight day of budget talks on Tuesday by warning that senior citizens and veterans may suffer first if the debt ceiling is not raised by August 2.
The comments came as top Republicans toughened their stance in the deficit reduction talks. Senate Republican leader Mitch McConnell said a "real solution" to the U.S. debt problem was unlikely while Obama was in office.
U.S. business leaders pressed Obama and congressional leaders to act swiftly to raise the $14.3 trillion U.S. debt ceiling -- which caps how much the United States can borrow -- or risk derailing a sputtering economic recovery and endangering the global financial system.
Obama and top lawmakers from both parties were due to meet at the White House at 3:45 p.m. ET.
The president said in an interview with U.S. television network CBS 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 in advance of its broadcast.
"Because there may simply not be the money in the coffers to do it," Obama said. He said veterans checks and disability benefits could also be affected without a deal.
After months of talks, Republican and Democratic leaders are still at an impasse over a deficit reduction deal that would clear the way for Congress to raise the debt ceiling.
While they agree on the need to raise the debt limit before the United States defaults on August 2, both sides have engaged in a furious blame game over the failure to advance the deficit reduction package.
Republicans on Tuesday ratcheted up pressure on Obama and his fellow Democrats, who have accused Republicans of refusing to compromise.
"I have little question that as long as this president is in the Oval Office a real solution is probably unattainable," McConnell said.
But he said Republicans will "do the responsible thing" and make sure the government does not default on its obligations on August 2, when the Treasury Department has warned it will run out of money to pay the country's bills.
White House spokesman Jay Carney called McConnell's comments "unfortunate."
UNCERTAINTY SEEPING INTO MARKETS
Failure to seal a deal by August 2 could spook investors, causing U.S. 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.
Republicans have balked at raising the debt limit without steep spending cuts, while Democrats also want to increase revenue by eliminating tax breaks for the wealthy and corporations in some sectors such as the oil and gas industry.
Republicans oppose any tax increases, which they argue would hurt the anemic economic recovery.
After briefing Republican members of the House of Representatives on the debt talks, House Speaker John Boehner said he was optimistic a deal could be reached. But he called the debt limit increase Obama's problem, a statement that drew immediate criticism from Democrats.
Despite the heated rhetoric, investors assume that Washington will ultimately avert a crisis. Yields fell to seven-month lows on the benchmark 10 year Treasury bond on Tuesday morning, fueled by debt worries in Europe.
But the impasse has investors' attention, and as the clock ticks toward August 2 with no deal in sight, it is contributing to a broadly negative sentiment on Wall Street.
Treasury Secretary Timothy Geithner, who has warned of catastrophic consequences if Congress fails to raise the debt ceiling, held firm on Tuesday to vows that the United States would not default. "Failure is not an option," he said.
Business leaders showed their growing concern by sending Obama and congressional leaders a letter on Tuesday that warned of the consequences if lawmakers did not reach a deal.
(Additional reporting by Andy Sullivan, Thomas Ferraro, Donna Smith, David Morgan, David Lawder, Laura MacInnis and Matt Spetalnick; Writing by Deborah Charles; Editing by Ross Colvin and Vicki Allen)