Business, Economics and Jobs

Obama steps in to address nation as Republicans, Democrats maintain standoff over debt ceiling

U.S. President Barack Obama warned Americans on Monday in an address to the nation that failure to come to an agreement in Congress about raising the debt ceiling would do "serious damage" to the economy, and he called for compromise from both parties.

House Speaker John Boehner, a Republican, retorted in a speech that followed the president's that Obama wanted a "blank check."

A standoff over the debt ceiling, and deadlock over two debt plans presented by Democratic and Republican leaders, has raised the risk of a downgrade of the U.S.'s AAA credit rating and a government default on $14.3 trillion of debt.

The president warned in his address to the nation that if Congress can't come to an agreement on the debt crisis, "We would risk sparking a deep economic crisis, this one caused almost entirely by Washington."

Obama stressed the importance of finding a "balanced approach," which would involve increasing revenue, and he asked millionaires and billionaires to "pitch in."

He blamed the current stalemate on a group of House Republicans who are demanding budget cuts and no tax increases, calling their position a "deep spending-cuts only approach," and dismissed the idea of raising the debt ceiling in steps, part of a plan supported by Boehner, calling that "kicking the can further down the road."

"It's a dangerous game that we've never played before," he said about the standoff, and the looming possibility of default.

He also lashed out at the partisan politics that has surrounded the debt ceiling debate, saying that Americans were tired of it:

"They're fed up with a town where compromise has become a dirty word," he said. "They didn't vote for a dysfunctional government."

U.S. President Obama addressed the nation at 9 p.m.

House Speaker John Boehner responded to Obama immediately after the president's speech, saying that the Republicans didn't want to hand the president a "blank check," and urging Congress to pass the "Cut, Cap and Balance" plan that the House Republicans had come up with.

According to Bloomberg News:

“The president has often said we need a ‘balanced’ approach -- which in Washington means: we spend more, and you pay more,” Boehner said in his response. “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.”

Despite weeks of negotiations, U.S. Democrats and Republicans are far apart on the debt-ceiling issue, with both parties earlier on Monday putting forward separate and very different proposals to avert a possible government default next week.

The White House earlier on Monday came out in support of the plan put forward by Senate Majority Leader Harry Reid, a Nevada Democrat, which would cut spending by $2.7 trillion, according to CBS News:

"Senator Reid's plan is a reasonable approach that should receive the support of both parties, and we hope the House Republicans will agree to this plan so that America can avoid defaulting on our obligations for the first time in our history," said White House spokesman Jay Carney in a statement. "The ball is in their court."

Boehner pushed for a plan that would require two separate votes on short-term increases to the debt limit, which is something that the Democrats have repeatedly rejected and which Obama has said he would veto.

Obama’s decision to step in came after the House Republican leaders' push for a vote on Wednesday on a two-step plan that would allow the federal debt limit to be raised immediately by about $1 trillion and then link an additional increase next year to a new joint Congressional committee being able to come up with more deficit cuts, according to the New York Times.

Senate Democrats called the proposal a “non-starter” and said they would put forward their own plan to reduce the deficit by $2.7 trillion and raise the debt ceiling until after next year’s elections, saying it met the Republicans' demands.

Reid said that Democrats wouldn't support any plan that didn't guarantee an increase in the debt limit through next year, saying that the Republicans were attempting to create a situation to embarrass Obama during the 2012 election year by setting up another confrontation over the debt limit.

House Republicans say they don't want to give Obama what they call "a blank check" so he can avoid another debt ceiling standoff during his re-election campaign, CNN reported.

Reid’s plan would meet Republican demands that the debt ceiling only be raised by the amount of money that it would cut, the spokesman Carney said, according to the Los Angeles Times.

The plan doesn't include any cuts to entitlements, such as Social Security or Medicare, or any new taxes or revenue, which the president had been insisting must be part of any agreement, the Los Angeles Times reported:

But faced with a "my way or the highway" approach unveiled by Republicans Monday, Carney said, Reid came up with a "responsible compromise that cuts spending in a way that protects critical investments and does not harm the economic recovery."

Boehner has been trying to get the his party to support his plan, even suggesting that it had the necessary support to get through Congress, according to CBS News.

Republican Study Committee Chairman Jim Jordan said in a statement on Monday afternoon that he was opposed to Boehner's proposal, and that "only a Balanced Budget Amendment will actually solve our debt problems."

Meanwhile, Dick Durbin of Illinois, the No. 2 Democrat in the Senate, called Republicans "irresponsible" and "hypocritical" for their position on raising the nation’s debt ceiling, the Los Angeles Times reported.

He said he hoped that Reid's proposal would appease House Republicans and pass before the Aug. 2 debt deadline, a deadline that poses potentially serious economic risks. He warned that Republicans were putting the economy and jobs in danger:

“The same Republicans who wanted us to go to war, who want us to stay in war, to spend $10 billion a month to sustain our war in Afghanistan, refuse to give the authority to the president to borrow the money to execute the war,” Durbin said. “That is irresponsible and it’s hypocritical.”

(Read GlobalPost: The Negotiator: Solving the US debt problem)

(Read GlobalPost: Harry Reid on U.S. debt default: "We're about to go over a cliff here")