Obama seeks to salvage US debt ceiling deal

With the Treasury set to run out of money to pay all of its bills on Aug. 2, Obama said the window may have closed for a “grand bargain” of spending cuts and tax increases in exchange for Congress raising the US$14.3 trillion debt ceiling.

Credit rating agencies also want spending restraints for the United States to keep its prized AAA rating that makes U.S. Treasurys the solid foundation for global investors and lowers borrowing costs for state governments, businesses, homeowners and consumers.

“We have now run out of time,” Obama said on Friday after John Boehner, the top Republican in Congress, broke off talks on a deficit reduction package worth more than US$3 trillion over 10 years.

Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.

Obama, a Democrat, called Boehner and other congressional leaders to a meeting at 11 a.m. EDT (1500 GMT) at the White House on how the debt ceiling can be raised by Aug. 2.

“They are going to have to explain to me how it is that we are going to avoid default,” Obama said.

Boehner, the speaker of the U.S. House of Representatives, said he would attend. Senate Republican leader Mitch McConnell, Senate Democratic leader Harry Reid and Nancy Pelosi, the top Democrat in the House, were also summoned.

Boehner said he was confident the debt ceiling would be raised next week. But he will have to overcome resistance from tea-party conservatives in his own party and could run into problems for having signaled a willingness to give ground on revenue increases in closed-door talks at the White House.

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