Obama urges compromise to avoid “reckless” default

WASHINGTON, (Reuters) – President Barack Obama on  Monday called on divided congressional leaders to compromise  and break a deadlock over raising the U.S. debt limit that he  said risked a “reckless” national default.
Obama made the appeal in an address to the nation as  Democratic and Republican leaders remained at loggerheads over  divergent debt plans that have highlighted the ideological gulf  between them. Even if default is avoided, as most expect, the  impasse has raised fears of an unprecedented downgrade of  America’s gold-plated credit rating.
As the clock ticks toward an Aug. 2 deadline to act on  raising overall borrowing authority so the nation can pay its  bills, the stalemate is rattling investors worldwide, sending  stocks and the dollar down and pushing gold to a record high.
But market reaction so far has fallen short of the panicky  sell-off some politicians had feared after weekend talks broke  down.
In his address, Obama spelled out the severe economic  consequences of a default or a credit ratings downgrade  resulting from failure to strike a deal to raise the $14.3  trillion debt limit and reduce the budget deficit.
“Defaulting on our obligations is a reckless and  irresponsible outcome to this debate. … We would risk  sparking a deep economic crisis – one caused almost entirely by  Washington,” Obama said.
He urged a compromise to reduce the deficit by $4 trillion  and share the burden of cuts evenly across society.
The acrimonious partisan debate is heating up the U.S.  political climate well ahead of November 2012 elections in  which Obama will seek re-election.
Obama warned that a first default in U.S. history would  directly affect the lives of ordinary Americans, because the  government would not be able to pay bills that include monthly  Social Security checks, veterans’ benefits, and government  contracts with thousands of businesses.
“I have told leaders of both parties that they must come up  with a fair compromise in the next few days that can pass both  houses of Congress – a compromise I can sign,” he said.
“And I am confident we can reach this compromise”.

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