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US President Barack Obama warned of a "deep economic crisis" if Washington fails to raise the US debt limit, and urged Americans in a speech to demand that Republicans compromise in stalled talks to avoid a default.
A day shy of the one-week mark before the United States begins to run out of money to pay its bills, Obama in a nationally televised address called the debt talks stalemate that now has dragged on for weeks "a dangerous game" that the country "cannot afford to play."
As the president spoke from the East Room of the White House, the dollar plunged to a four month low in Tokyo early Tuesday amid growing jitters as the impasse between Republicans and Democrats over the US debt crisis deepened.
Obama cast the blame for the stalemate on Republicans' refusal to raise the $14.3 trillion debt ceiling unless there is agreement to make deep spending cuts without increases in taxes on the wealthy.
If Congress fails to raise the debt ceiling by August 2, the resulting economic disaster could include higher interest rates for the US government as well as for American consumers.
Failure to compromise, Obama said in his speech from the White House, "would risk sparking a deep economic crisis -- one caused almost entirely by Washington."
He rejected a Republican proposal for a temporary increase in the debt limit, arguing it would leave the underlying problem unresolved and lead to a repeat of the current crisis in just six months' time.
"That is no way to run the greatest country on Earth. It is a dangerous game we've never played before, and we can't afford to play it now," he said.
With a potential US default as of Tuesday just a week away, Obama appealed to Americans to "make your voice heard" to members of Congress.
Obama's 9:00 pm (0100 GMT) speech was only his seventh formal address to the nation, and the first since he unveiled a timeline for a US troop withdrawal from Afghanistan in June.
The top Republican leader in Congress, John Boehner, responded with a late-night speech of his own Monday, blaming Obama for the crisis, and warning that while the United States cannot default on its debt obligations, Americans nevertheless would demand deep cuts in spending.
Boehner -- who has flatly rejected Obama's call for tax hikes on the rich and on wealthy corporations -- is proposing a two-step plan with increases first to February or March 2012, and later to 2013.
"Time is running short and it would be irresponsible for the president to veto this common-sense plan and run the risk of default," said Boehner, who is the speaker of the House of Representatives.
"I would encourage the Senate to pass this plan and the president to sign it," he said.
The prospect of the world's richest country running out of cash to pay its bills come next Tuesday sent stocks sliding and gold soaring while the IMF warned of a "severe shock" to the world economy absent an elusive breakthrough.
Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally but can only do so through August 2.
At that point, US leaders will face an agonizing choice about cutting an estimated 40 cents of every dollar in spending and defaulting either on debt payments or on other obligations like government health or retirement benefits.
Finance and business leaders have warned that failure to raise the US debt ceiling by then would send shockwaves through the fragile world economy, while Obama has predicted a default would trigger economic "Armageddon."
Meanwhile, there were signs that the stand-off was exacting a political toll on the president.
A poll released early Tuesday by the Washington Post and ABC television showed weakening support for Obama's economic agenda, and found that the percentage of people who said Obama has made the economy worse has jumped six points since October to 37 percent.
Republicans also took a hit in Americans' esteem however, according to the survey. About as many people blamed Republican policies for the bad economy as they do Obama.
But the poll found that 65 percent disapproved of the GOP's handling of jobs -- still the top economic issue -- compared to 52 percent for the president.
All sides in the dispute agree Washington must reduce its deficit but disagree on the size and blend of spending cuts and revenue increases as well as on how and whether to slice into the social safety net.
The International Monetary Fund pressed US politicians to raise the debt ceiling "expeditiously to avoid a severe shock to the US economy and world financial markets" with the deadline now looming large.
Weighed down by the impasse, US stock markets fell and safe-haven Swiss francs soared amid worries about both the dollar and the euro, while gold climbed to a record $1,624 an ounce before falling back slightly to $1,614.
Meanwhile, US Secretary of State Hillary Clinton tried to mollify America's allies and creditors in Asia, promising during a trip there that "intense" wrangling among the White House, its Democratic allies, and Republican foes would reach an 11th-hour compromise. |
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