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Agence France Presse

Obama, Republicans Still Deadlocked on Debt Deal

Olivier Knox

Republican House Speaker Boehner charged Democrats were "just not serious enough" about deep changes to cherished social safety net programs like Medicare health insurance for the elderly and disabled as well as Social Security retirement payments. (photo: REUTERS/Jonathan Ernst)

President Barack Obama on Monday pressed his Republican foes to accept a politically painful compromise on US debt in the face of an August 2 deadline to avert a likely economic calamity.

"I do not see a path to a deal if they don't budge, period," Obama warned as top Democratic and Republican lawmakers headed to the White House for a second straight day of crisis talks with no breakthrough in sight.

The president, whose 2012 reelection bid will hinge on voter perceptions of how he has handled the jobs-poor US economy, portrayed himself as seeking a reasonable middle ground for the good of the country.

"I'm prepared to take on significant heat from my party to get something done. And I expect the other side should be willing to do the same thing if they mean what they say, that this is important," he said.

Obama renewed his call to couple deep government spending cuts with tax increases on "millionaires and billionaires" and wealthy corporations, saying it was important to "share sacrifice" to get the US fiscal house in order.

But Republican House Speaker John Boehner, holding his own press conference just before the negotiations resumed, rebuffed Obama's overtures and refused to shift on tax increases that he warned would "destroy jobs."

Boehner also charged Democrats were "just not serious enough" about deep changes to cherished social safety net programs like Medicare health insurance for the elderly and disabled as well as Social Security retirement payments.

But "I understand that this is going to take sacrifice and it's going to take political capital on both sides, and I'm certainly willing to take my fair share of it," he told reporters.

Boehner faces pressure from the archconservative "Tea Party" movement that helped Republicans sweep to control of the House of Representatives in 2010 elections shaped by stubbornly high unemployment and anger at Obama's policies.

Obama vowed to push "for the largest possible deal" to close the yawning US deficit while raising Washington's ability to borrow -- the so-called "debt ceiling" that has been lifted many times in the past.

"But if each side takes a maximalist position, if each side wants 100 percent of what its, you know, ideological predispositions are, then we can't get anything done," he warned.

Obama, who has pressed for an agreement by July 22 to give lawmakers time to approve it by an August 2 deadline, vowed daily talks to break the impasse but ruled out a "temporary stopgap resolution to this problem."

And asked directly whether the seemingly deadlocked talks would reach a compromise, averting a historic debt payment default, Obama replied: "We are going to get this done by August 2."

The talks were part of a final major push to reach a deal to raise the congressionally determined limit on US borrowing, now set at $14.29 trillion, in the face of a budget deficit expected to hit $1.6 trillion this year.

The US hit the ceiling on May 16 but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.

By August 2, though, the government will have to begin withholding payments to bond holders, civil servants, retirees or government contractors, and the White House has urged a deal by July 22 to have time for Congress to pass it.

Economists warn that if the United States defaults, it could lose its ability to borrow, souring fraught financial relations with creditors like China and sending the already sour global economy into a tailspin.

With US unemployment at 9.2 percent, Obama told reporters he favored including "short-term" responses in the overall debt ceiling deal.

Speaker Boehner and Republican Senate Minority Leader Mitch McConnell said Saturday they were backing off a larger, comprehensive debt reduction deal because Democrats insisted on tax increases.

The Republican move would leave negotiators aiming at a less ambitious framework, striving to save about $2.4 trillion over the next decade instead of the $4 trillion still sought by the Democrats.

US stocks fell sharply in morning trade sparked more by worries over Europe's debt troubles than the US impasse.

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