Republican rift heats up debt crisis

Efforts at compromise among House, Senate and President fail

The U.S. Congress remained dangerously split on Wednesday in the face of an unprecedented American default on its debt in just six days, as Republicans clashed with Democrats — and with one another — over raising the federal cap on borrowing.

World stock markets watched nervously for a feared downgrade of the United States triple-A bond rating, shedding value across the board.

The political and fiscal turmoil embroiling Washington — brought on by the striking ascension of a block of newly-elected members of the House who are beholden to the low-tax, small-government Tea Party wing of the Republican party — threatens to throw the U.S. economy back into recession or worse if Congress cannot agree on the normally routine issue of raising the American debt limit by Tuesday.

So far all efforts at compromise among the Republican-controlled House, the Democratic-run Senate and President Barack Obama have failed, raising the level of partisan acrimony.

House Speaker John Boehner, a Republican, was forced late on Tuesday to postpone a floor vote on his plan that originally had been scheduled for Wednesday after the nonpartisan congressional budget office said the proposal would cut spending less than advertised. He promised to rewrite the measure but that will delay any vote until at least Thursday.

Mr. Boehner is struggling, unsuccessfully so far, to mend the rift between more mainstream House Republicans and the Tea Party block that is demanding deeper spending cuts to accompany a short-term, nearly $1-trillion increase in the government's borrowing cap. Many of the increasingly powerful Tea Party group said they would not support their Speaker's position. “We need more drastic cuts,” said Republican Representaive Jason Chaffetz. “I can't support it in its current form.”

Unless he can wrestle the situation under control, Mr. Boehner risks losing leverage in his dealing with Mr. Obama and Democrats controlling the Senate.

Without an infusion of borrowed money, the government faces an unprecedented default on U.S. loans and obligations like $23 billion worth of Social Security pension payments to retirees due on August 3.

Congressional telephones and Email servers were jammed after Mr. Obama urged the public to contact their representatives in his Monday night address to the nation.

The threatened downgrade by credit monitoring agencies of the United States' gold-plated AAA rating absent a solution to the U.S. debt and borrowing crisis is predicted to add at least $100 billion in interest payments to the already ballooning American debt. That would raise interest rates for Americans seeking home mortgages and auto loans and force up the cost of credit card debt. Mr. Obama has called that a silent tax increase, something the Republicans have refused to accept when Democrats have sought increased government revenue to stem the crisis.

While Boehner searched for votes in favour of his plan among House Republicans, some Americans seemed to edge closer to the notion that the August 2 deadline might pass without a solution. The U.S. stock market fell again Tuesday, although not dramatically. California planned to borrow about $5 billion from private investors as a hedge against a possible federal government default. — AP

  • Level of partisan acrimony rises
  • U.S. faces an unprecedented default

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