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Obama to host debt talks amid rancor, wide divide

world Updated: Jul 13, 2011 11:20 IST

President Barack Obama will seek to put deficit-reduction talks with Republicans back on track on Wednesday after days of partisan rancor that has heightened fears of potentially disastrous debt default.

Obama's Democrats and Republican lawmakers are sharply divided over tax and spending issues as they try to meet an August 2 deadline for Congress to raise the $14.3 trillion debt ceiling.

The Treasury Department has said that without a debt limit increase by that date, the country could face a default that could cause chaos in financial markets and derail the fragile US economic recovery.

The president will host talks at the White House with Republican and Democratic leaders at 4pm (2000 GMT) on Wednesday, the fourth meeting in as many days.

This week's talks have been marked by acrimony on both sides and a lack of progress.

Democrats, who say any deficit reduction plan should include a mix of spending cuts and tax increases, have accused Republicans of intransigence for refusing to consider revenue increases. Republicans contend that Democratic insistence on tax increases would put the economy at risk.

At a White House meeting on Tuesday, House of Representatives Speaker John Boehner, the top US Republican, pressed for a balanced budget agreement and urged Obama to put into writing his proposal for a "grand bargain" that would reduce the deficit by $4 trillion over the next 10 years.

Senate minority leader Mitch McConnell, a Republican, offered a backup plan for raising the debt ceiling that would put the burden on Obama and Democrats for raising the debt ceiling and allow them to reject spending cuts if they chose.

The White House said on Obama remains focused on reaching a deficit agreement as well as a deal to raise the debt limit.

Obama's hopes of re-election in 2012 are likely to hinge on winning back independent voters upset over a stubbornly high unemployment rate of 9.2% and anxious over spiraling debt and deficits. He wants to persuade those voters he is intent on tackling the country's fiscal problems.

A Democrat close to the debt negotiations said Obama on Tuesday sought to shift the focus back to deficit reduction by discussing areas of agreement on spending cuts that were identified in earlier talks led by Vice President Joe Biden.

There was also discussion about Obama's proposal for automatic caps on the deficit.

Treasury Secretary Timothy Geithner warned the participants not to put the country's Triple-A credit rating at risk.

In an interview with CBS News on Tuesday, Obama said the debt impasse could jeopardize the timeliness of government benefit checks for older Americans, veterans and the disabled. The government is scheduled to make a large payment on August 3 to recipients of the Social Security retirement program.

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