Obama call for stimulus may complicate debt talks

WASHINGTON,  (Reuters) – U.S. President Barack Obama  called yesterday for new steps to spur job growth and tax  hikes on the rich, hardening a stance that will likely  complicate deficit reduction talks with Republicans.

The U.S. Senate will change its schedule to stay in session  next week despite the July 4th holiday after the president  challenged lawmakers to remain in town to deliver “substantial  progress” on lifting the debt ceiling, one lawmaker said.

Obama’s call came as the International Monetary Fund and  the Treasury Department urged Washington to reach a budget deal  that would pave the way for Congress to raise the United  States’ $14.3 trillion borrowing limit by Aug. 2.

Failure to increase the debt ceiling, which caps how much  the United States can borrow, would likely trigger a default  that could plunge the United States into a new recession and  roil global financial markets, the Obama administration and  economists warn.

Obama’s push for new construction loans and an extension of  a payroll tax cut could further alienate Republicans already  incensed by Democratic demands for new tax revenue.

Obama upped pressure on Republicans by tying them to tax  breaks for “millionaires and billionaires” and referencing  special treatment for corporate jets a half dozen times, while  warning on the risk of default.

“If the United States government, for the first time,  cannot pay its bills, if it defaults, then the consequences for  the U.S. economy will be significant and unpredictable,” he  told a White House news conference, reminding Republican Party  backers on Wall Street of the stakes involved.

Standard and Poor’s rating agency told Reuters it would  immediately cut the United States’ top-notch credit rating if  it missed a $30 billion debt payment on Aug. 4.

With the country still struggling to emerge from the  deepest recession since the 1930s, Obama said Congress needs to  take steps to bring down the 9.1 percent unemployment rate even  as it weighs medium-term austerity measures.

“There are more steps that we can take right now that would  help businesses create jobs here in America,” he said.

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