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US split as debt default clock ticks

business Updated: Jul 31, 2011 00:44 IST
Yashwant Raj
Yashwant Raj
Hindustan Times
Yashwant Raj

On Saturday, American Congressmen were desperately trying to prevent their country from defaulting on debt payments for the first time in its history.

Faced with a deadline of August 2 - next Tuesday - lawmakers were struggling to pass a bill, raising the Congress-imposed debt limit of $14.3 trillion so the US could meet its domestic and international obligations.

All three major credit rating agencies have warned that the US runs the risk of losing its sterling AAA rating if the debt limit was not raised by next week, raising interest rates all around.

The House of Representatives, which is dominated by Republicans, passed late Friday night a bill sponsored by Speaker John A Boehner.

But it failed to pass the Democrats-dominated Senate, which is now discussing its own bill. The Senate is likely to vote on it late Saturday.

The bill must be cleared by both the House and the Senate before it goes to the president for his assent.

"Any solution to avoid default must be bipartisan," President Barack Obama said as the House debated Boehner's plan.

There are expectations that a new proposal - being pushed by majority leader in the Senate, Harry Reid, a Democrat - will be supported by Republicans.

Reid is proposing to raise the debt limit by $2.4 trillion with spending cuts of the same amount over the next few years.

Boehner's plan proposed almost the same hike, but in two phases of $900 billion right away and $1.8 trillion later, depending on the recommendations of a committee of lawmakers.