Obama warns U.S. risks losing credit rating over debt default
Posted Jul 29, 2011 11:45:14 AM.
This article is more than 5 years old.
With only days left to reach a deal, negotiations over raising the American debt ceiling remained stalled in Washington on Friday.
With the threat of a default looming, President Barack Obama warned Americans that the U.S. will lose its top credit rating should it be unable to raise the debt ceiling by midnight on Monday.
Obama stepped up his efforts by taking to the airways to urge Americans to pressure Congress and Republican leaders toward a compromise. The president told supporters that even though it has come down to the wire, he’s confident a bipartisan solution is still achievable.
“There are plenty of ways out of this mess, but we’re almost out of time,” Obama said at the White House.
Meanwhile, Republican leaders have said they will change their latest stalled legislation in order to hopefully gain the votes needed to pass their bill through legislature. House Speaker John Boehner’s revised plan includes raising the country’s borrowing authority by $900 billion while cutting spending by $917 billion. However, in the revised plan a second increase in the debt limit would not take effect until Congress presents a balanced budget amendment for ratification by U.S. lawmakers.
Initially the president indicated he would accept a two-part plan to raise the $14.3-trillion debt ceiling, with the second portion including tax reform and changes to the U.S. entitlement programs Medicare, Medicaid, and Social Security.
However, Obama also said the first debt-ceiling increase should be large enough to extend the debt ceiling beyond the 2012 election. Failure to do so means the country would be likely to, “relive this crisis in just a few short months, holding our economy captive to Washington politics once again.”
It is unclear when the House will vote on the revised bill. The Obama administration has made it public that if the debt ceiling is not raised by August 3, the American government will run out of cash reserves for their social obligations like Medicare, Social Security and defence contracts.
This would lead to a default on American loans, which would then damage the nation’s “AAA” credit rating. This would likely result on increased taxes for everybody.
“For those who say they oppose tax increases on anyone, a lower credit rating would result potentially in a tax increase on everyone, in the form of higher interest rates on their mortgages, their car loans, their credit cards, and that’s inexcusable,” Obama said.
Throughout the week Obama has urged a compromise between Boehner’s Republican plan and the one proposed by Senate Democratic leader Harry Reid. It’s expected that Boehner will form enough vote to pass his plan, but should the Democrats not be happy with it, it’s likely the Democratic Senate will refuse to pass the bill.
In a speech to the Senate, Reid said he and GOP counterpart Mitch McConnell are working on a deal that is likely the last chance to save the U.S. from default. Meanwhile, McConnell blamed Obama for letting things get this far.
“If the president hadn’t decided to blow up the bipartisan solution that members of Congress worked so hard to produce last weekend, we’d be voting to end this crisis,” McConnell said
