REPUBLICANS AND Democrats continued to bicker yesterday, with the US less than a week away from a partial default on its $14.3 trillion debt. Economists and the head of the IMF warned of dire consequences if the dispute is not resolved by August 2nd.
“The clock is ticking and clearly the issue needs to be resolved immediately,” Christine Lagarde, the IMF chief told the Council on Foreign Relations think tank.
In a Reuters news agency poll, 30 of 53 economists surveyed said the US will lose its AAA credit rating from one of the three big ratings agencies – Standard Poor’s, Moody’s or Fitch – if the stalemate continues. Wall Street bankers have predicted that losing the top credit rating will cost the US $100 billion in higher interest rates, could send the US back into recession and shake global markets. Some evoke fears of a stock market crash.
The warnings were made after President Barack Obama and the Republican speaker of the House of Representatives John Boehner delivered “duelling speeches” on prime time television Monday night. “This is no way to run the greatest country on earth,” Mr Obama said. “The American people may have voted for divided government, but they didn’t vote for a dysfunctional government.” Mr Obama appealed to Americans to contact their congressmen to press for an agreement to raise the debt ceiling. Capitol Hill phone lines were jammed yesterday and websites of prominent lawmakers, including Mr Boehner, crashed as worried Americans weighed in on the debate.
Following Mr Obama’s 9pm address, Mr Boehner went on television live. “The sad truth is that the President wanted a blank cheque six months ago, and he wants a blank cheque today,” Mr Boehner said. “That is just not going to happen.” The Republican-controlled House and Democratic-controlled Senate are virtually at war, with each refusing to pass the other’s Bill to cut deficit spending and raise the debt ceiling.
Mr Boehner wants to bring his two-step plan to a vote today. It would require yet another painstaking set of negotiations in early 2012 to enable the country to function until the presidential election.
Congressional observers doubt the Speaker has the 218 votes required to pass the Bill, because the right-wing Tea Party says it does not go far enough in cutting deficits.
The Democratic majority leader Senator Harry Reid said Mr Boehner’s plan would be “dead on arrival” if it reached the upper chamber. The Tea Party is now “in the driver’s seat” in the House, Mr Reid said.
The White House said “the administration strongly opposes” Mr Boehner’s plan and that “the President’s senior advisors would recommend that he veto this bill.”