Obama calls Republicans' bluff on cutting debt

A forthright President Barack Obama told Republican leaders yesterday it was time to take hard decisions to resolve America's budget crisis and that he would refuse to sign a stop-gap package simply to avoid defaulting on the country's US$14.3 trillion ($17.4 trillion) debt.

The moment is nigh to "eat our peas", he said.

Obama called the bluff of Republicans who habitually portray him as a big-government Democrat who won't curb spending to bring the deficit under control.

Responding to their calls for a deficit-busting package as a condition for authorising an increase in the country's debt ceiling, the President raised the stakes saying it was time to tackle all the issues that have brought the United States to the brink of bankruptcy.

"That is not an acceptable approach," he said of stop-gap measures involving a short-term increase in the borrowing limit. "So we might as well do it now. Pull off the Band-Aid. Eat our peas. Now is the time to do it. If not now, when?"

Economists warn that without an agreement on raising the debt ceiling by an August 2 deadline, the United States could be forced to default on its debt for the first time in its history, with potentially destructive repercussions for the country's fragile recovery and for the global economy.

"We are going to get this done by August 2," Obama asserted.

He said it, however, as obstacles to an agreement became more visible. Some top Republican figures, including presidential candidates such as Tea Party favourite Michele Bachmann, continue to declare that they don't want to allow another increase in the debt ceiling whatever deal is reached.

Both sides must be prepared to accept political pain, Obama said.

"There is going to be resistance," he said with detached understatement. "I am prepared to take significant heat from my own party to get this done."

And so must his Republican counterpart, Speaker John Boehner, he said. "I don't see a path to a deal if they don't budge."

For his part, Obama is preparing to give ground by accepting some reductions in social security programmes that have been sacred cows to his party since the days of Franklin Roosevelt.

In return, he is demanding the Republicans open the way to closing tax loopholes on the richest corporations like oil companies, and accept over the longer term higher tax brackets for the very wealthy.

Obama's own political base remains suspicious that he is preparing to give away far too much on the side of spending cuts, for instance on Medicare and social security, while demanding too little sacrifice from the Republicans on raising revenues.

But he faces the reality, however, that the Republicans hold the majority in the House of Representatives and have to vote for whatever is agreed by him and Boehner.

The President is pressing for a deal that would reduce the deficit by US$4 trillion over 10 years.

- Independent