With the Aug. 2 deadline for a decision on the nation’s debt ceiling right around the corner, President Obama walked out on high-pressure negotiations Wednesday saying “I’ve reached my limit.” The nation could face economic disaster if it defaults on debts and receives a lower credit rating.
Debt ceiling debates still at an impasse
With nothing short of the country’s economic future in the balance, the debt-ceiling debates are at a tense impasse. House Republicans continue to refuse to approve the increase without a promise of no raised taxes. The president and fellow Democrats insist that the nation’s debts can not be addressed with spending cuts alone.
Deadline is rapidly approaching
The U.S. hit its current debt ceiling of $14.3 trillion in May. The Obama administration says the government will default on its debts if the ceiling is not increased by about $2.4 trillion by Aug. 2.
McConnell’s backup plan
Senate Republican Leader Mitch McConnell has proposed a backup compromise plan in which President Obama could raise the debt ceiling by requesting it and approving proposed spending cuts. Then Congress would have to vote on the request. At that point, Obama could veto the vote, forcing Congress to muster a two-thirds majority to override the veto.
‘Enough is enough’
After a tense nearly two hour session Wednesday, House Majority Leader Eric Cantor (R-Va.) urged the President to accept a short term increase instead of one to last until next year’s presidential election. Obama rose and abruptly ended the meeting.
“Enough is enough,” Obama said, according to Cantor. “I’ve reached my limit. This may bring my presidency down, but I won’t yield on this.” The president reportedly walked out, saying “I’ll see you all tomorrow.”
Party split on describing the event
Cantor said the President “stormed out of the room.” Democrats, however, say Cantor’s characterization of the event was “completely overblown.” An unnamed Democratic aide said the meeting was “tense but constructive.”
Bond rating could be downgraded
Wall Street, which has until now functioned as if the debt ceiling would be raised, is now reacting to the possibility that it will not. Moody’s Investors Service, a credit rating agency that performs international financial research and analysis on businesses and governments, has broached the possibility of downgrading the nation’s impeccable Aaa rating. Dagong Global Rating Co., a Chinese rating service, also cautioned the U.S. of a possible downgrade.
Ben Bernanke, chairman of the Federal Reserve, said if the debt ceiling is not raised and the nation’s credit rating drops, it would send “shock waves through the entire financial system.” Rates for mortgages and other types of loans would rise dramatically.
Sources
FOX: http://www.foxnews.com/politics/2011/07/13/moodys-considers-downgrading-us-credit-rating-amid-stalemate-over-debt-limit/?icid=maing-grid7|maing9|dl1|sec1_lnk2|77741
CBS: http://www.cbsnews.com/stories/2011/07/14/politics/main20079379.shtml
Moody’s: http://www.moodys.com/
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