On Monday, US President Barack Obama called on Republicans and Democrats to find a “fair compromise” on raising the US debt ceiling in order to avoid a “risky and irresponsible” default.
In an address to the nation from the White House, Obama detailed the serious economic consequences of a default or a lowering of the US credit rating if lawmakers fail to reach an agreement by the August 2nd deadline.
“Defaulting on our obligations would be a risky and irresponsible act….We would risk triggering a severe economic crisis, a crisis caused almost entirely by Washington,” Obama said.
The US president is in favor of a compromise to reduce the deficit by $4 trillion, which some of the elected Republicans, including the members of the Tea Party, have so far refused.
The budget impasse between the Republican majority in the House of Representatives, and Democrats, who hold a majority in the Senate, is making some investors nervous as the deadline quickly approaches.
Who is the victim of whom?
Stressing that a lowering of the credit rating of US bonds would trigger a rise in U.S. interest rates and an additional burden for taxpayers, President Obama said that the American people could not become the “victims” of the political calculations of the US Congress. Last week, ForexNewsNow published an overview of possible solutions to US debt crisis.
He added that a default, the first in the history of the United States, would directly affect the daily lives of many Americans because the government would no longer be able to pay the monthly checks from Social Security as well as financial assistance to the elderly, the unemployed, Medicare and Medicaid, US veterans’ pensions or to honor contracts with thousands of multinational companies.
“I told the leaders of both parties that they should reach a fair compromise in the coming days that could be passed by both houses of Congress, and a compromise that I can sign,” Obama declared.
“The American people may have voted for a divided government, but they did not vote for a dysfunctional government,” he added.
The US President concluded “the entire world is watching. So let’s seize this moment to show why the United States of America is still the greatest nation on Earth –- not just because we can still keep our word and meet our obligations, but because we can still come together as one nation.”
In response, the Republican chairman of the House of Representatives, John Boehner, reiterated his opposition to the plan proposed by the president. “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. This does not just happen,” he said.
Less than one week ahead of the August 2nd deadline, Republicans and Democrats are working on separate projects to reduce the deficit and it’s unclear which, if any, will ultimately be put in place.
The U.S. debt ceiling is currently set at $14.3 trillion.