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US mulls options on debt deal

world Updated: Jul 18, 2011 01:41 IST

White House budget director Jack Lew said on Sunday there was still time to clinch a major deficit reduction deal and he was confident that congressional leaders know a US debt default is not an option.

With time running short President Barack Obama and lawmakers were struggling for ways to lift the debt ceiling and reduce the deficit as an August 2 deadline to prevent a default draws close.

"I think it’s not insignificant that all the leaders understand it would be irresponsible to get to August 2 and not extend the ability of the United States to pay its obligations," Lew said on CNN’s State of the Union.

Lew appearing on Sunday morning talk shows to push Obama’s case for a sweeping deficit reduction deal along with the debt ceiling increase told NBC’s Meet the Press programme: “There’s still time to get something big done. The president has made it clear he wants to do something substantial.”

Obama’s call for a $4 trillion deficit reduction deal snagged when Republicans in the Congress rejected his demand that tax increases on the wealthy be part of the plan.

The Congress must raise the $14.3 trillion limit on US borrowing by August 2 or the government will run out of money to pay its bills causing turmoil in global financial markets and potentially forcing the US into another recession.

After meeting congressional leaders last Thursday at the White House, Obama had said he wanted to hear from them by the weekend about a way forward in the stalled debt talks. But Saturday passed without an announcement of a new White House meeting.

Republicans demanded a deficit-cutting deal in order to support raising the debt limit, but they disagree with Democrats on how to do it.

Officials said Obama, vice- president Joe Biden, and other staff discussed “various options” with lawmakers and other staff on Saturday but no significant progress was reported.