Plain-talking plea as Obama debt plan is back on table
The US government has until 2 August to raise the deficit ceiling above its current level of $14.3 trillion (8.9 trillion) or risk defaulting on its obligations - a prospect that would have "Armageddon-like" economic consequences, the US treasury has warned.
But with days of White House talks failing to reach compromise and Washington embarking on a round of Congressional theatrics, many political pundits had written off the chances of a far-reaching settlement over the issue.
But in an unexpected development, Mr Obama has announced that a bi-partisan group of senators tasked with finding consensus had re-formed following a previous split.
Moreover they had come up with a plan that was "broadly consistent" with the approach the White House was urging.
The proposal included "shared sacrifice" with "everybody giving up something", Mr Obama said.
The White House has been pushing for a $4 trillion package made up a mix of spending cuts, changes to the US's expensive healthcare programmes for retirees and tax increases on the rich.
The so-called "grand bargain" approach favoured by Mr Obama appeared to be dead in the water.
Instead, a back-up plan was being readied under which the White House would have the power to raise the debt ceiling without Republican backing or any concession from the party over its insistence on no tax increases.
The announcement of an apparent revival in the chances of reaching an overarching deal came as Republicans in Congress prepared to push forward a plan that is already doomed.
The so-called "cut, cap and balance" bill would allow the White House to raise the deficit ceiling in return for more than $100 billion being stripped from next year's budget and commitments to restrict future spending to a fixed percentage of the economy.
A vote in the House of Representatives was due to take place yesterday evening. But even if it passes, the Republican- controlled lower house, the Democrat-led Senate will shoot down the proposal.Moreover, the President has already said he will veto the plan in any case.
The president's press secretary Jay Carney went further, calling the plan nothing more than "classic Washington posturing, kabuki theatre".
After revealing the news of a revived plan by the so-called "gang of six" bi-partisan group of senators, Mr Obama said he now hoped Republican and Democrat leaders would "start talking turkey".
Bill Galston, a political analyst at respected Washington think tank Brookings Institution, said that despite the seemingly entrenched positions, neither party would risk a government default.
"I have a blind faith that the parties will get something together because the consequences of not doing so are incalculable and potentially dire," the former aide to president Bill Clinton said.