15 Jul 2011

US debt talks getting tetchy

1:45 pm on 15 July 2011

Talks among political leaders in the United States to avoid a credit default have been testy.

President Barack Obama and Republican leaders have failed to break the deadlock over raising the US debt ceiling by early next month.

Senate Majority Leader Harry Reid, (Democrat) took to the Senate floor on Thursday, to denounce House Republican Leader Eric Cantor.

During talks on Wednesday evening, Congressman Cantor reportedly told President Barack Obama that revenue increases simply were not going to happen.

The BBC reports he told the president to accept a short-term deal instead of a budget that would carry through to the presidential election in November 2012.

That brought a strong reaction from Mr Obama, who reportedly said: ''Enough is enough .... I'll see you all tomorrow,'' before leaving the room.

A deal to close the US deficit is needed by 2 August.

The United States reached its debt ceiling of $US14.3 trillion on 16 May.

The BBC reports Congress has regularly voted in the past to raise the debt ceiling, giving the federal government access to the cash it needed.

This year, however, Republicans want steep cuts in government spending in return for raising the limit.

Mr Obama has proposed a package of up to $US4 trillion in budget deficit reduction over the next 10 years.

On Wednesday at the White House, President Obama was said to have demanded that budget negotiators find common ground by the end of the week.

US Fed chief Ben Bernanke has said a default would cause a ''major crisis''.

Rating cuts

Credit rating agencies say they won't hesitate to cut the current AAA rating for the United States.

Standard Poors says that even if it keeps up with interest payments, the US could be downgraded if it fails to keep with its obligations.

Moody's has also put the US on official review.

Mr Bernanke says failing to resolve this crisis could knock America's reputation across the world.