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Republican and Democratic lawmakers have been engaged in intensive negotiations for weeks to figure out how to lift the $14.3 trillion debt limit but a devastating default looms as the two parties have yet to reach agreement. President Barack Obama addressed the nation with his frustration over the deadlock: “Once again, the economy will be held captive unless they [Republican lawmakers] get their way. This is no way to run the greatest country on earth.”
“Every day that goes by without a deal will see investors become a bit more defensive,” said Omer Esiner, chief market analyst at Commenwealth Foreign Exchange in Washington to Reuters. The stalemate has shook the American position in global markets and experts say that failure to reduce the government deficit by $4 trillion over the next 10 years will downgrade the United States.
President Obama said in a televised address on Monday “I have told leaders of both parties that they must come up with a fair compromise in the next few days that can pass both houses of Congress – a compromise I can sign. And I am confident we can reach this compromise.” Leaders of both parties have insisted that they will not allow the United States to default but so far, demands from both sides have been irreconcilable.
Republican lawmakers say the lift of the debt ceiling must be accompanied by even larger reduction in spending, reflecting the Tea Party line to shrink government. Meanwhile, the Democrats want to shield Medicare and Medicaid to secure old and poor Americans — they want any cuts in the healthcare system to be balanced by changes in the U.S. tax code, something that Republicans in the House of Representatives have staunchly refused.
Because of the division between Republican control in the House and Democratic sway over the Senate, it seems unlikely that their competing plans will win bipartisan support by August 2, when the US ‘runs out of cash to pay its bills’.