Obama, Republicans clash in debt talks, dollar sinks

WASHINGTON,  (Reuters) – U.S. President Barack Obama  clashed with Republi-can lawmakers yesterday in a fierce  White House meeting on deficit reduction that left a deal in  question as the clock ticked toward a debt default.

“Enough’s enough,” Obama said, according to a Democratic  official familiar with the talks.

Barack Obama

The meeting came as Moody’s Investors Service jolted  Washington with a stark warning that the United States may lose  its top credit rating in the coming weeks if the $14.3 trillion  limit on America’s borrowing was not raised.

The warning sent the U.S. dollar tumbling against most  major currencies. Stock fu-tures and debt prices also fell.

Eric Cantor, the No. 2 Republican leader in the House of Representatives, said the talks yesterday became so  acrimonious that Obama walked out, but a Democratic aide called  Can-tor’s account “overblown.”

“He said he had sat here long enough. No other president,  Ronald Reagan wouldn’t sit here like this,” Cantor told  reporters.

The White House and Congress must forge a deal to raise  America’s debt limit by Aug. 2 or the government will run out  of money to pay its bills and default on some obligations. But  they have so far failed due to a sharp divide over taxes.

Federal Reserve Chairman Ben Bernanke yesterday said if  the debt limit was not raised in time, the United States would  pay its bondholders first. That would mean other payments, such  as Social Security to the elderly, would be the first hit — a  political nightmare for both lawmakers and the president.

Eric Cantor

Obama accused Republicans of partisan posturing that was  keeping the two sides from agreement.

The president and lawmakers met for nearly two hours yesterday, to cut a deal. Republicans demand $2.4 trillion in  spending cuts in return for supporting an increase in the debt  limit. Democrats and Obama insist on tax increases for the  wealthy as part of a deal.

The two sides will talk again today, and taxes will  dominate the discussions.

The president has set a Friday deadline for agreeing a way  forward, officials from both parties said.

TENSE MEETING

Democratic officials said Obama has backed $1.7 trillion in  cuts and is prepared to accept more. All sides back some $1.5  trillion in cuts, the officials said.

Cantor, however, said that would not be enough.

“At the end of the meeting, the president said … we’re  going to have to decide by Friday which way we’re going. We  ought to think about things we can do rather than things we  can’t,” Cantor told reporters.

“So I asked him, in that spirit, Mr. President … if we  look at the situation we are very far apart right now. If you  want the full $2.4 trillion increase and you won’t sign  anything else, I don’t know if we can get there.”

Obama repeatedly rejected proposals for a short term  solution to the problem, officials said.

The specter of the Moody’s announcement hung over the tense  meeting.

Treasury Secretary Timothy Geithner said Moody’s emphasized  the need for deficit reduction in addition to a rise in the  debt ceiling, potentially souring one Republican proposal that  would allow Obama to lift the borrowing limit while putting off  talks on deficit reduction for later.

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