Meetings over the weekend between President Obama and congressional leaders fell apart when House Speaker John Boehner, R-Ohio, and fellow Republicans refused once more to consider any revenue increases to offset spending included in the $4 trillion “grand bargain” Obama proposed as a means to increase the nation’s debt ceiling.
Further talks will take place Monday, Reuters reported, although the potential for any quick agreement is uncertain despite the urgency of the situation. Sunday talk shows reinforced the Republicans’ message that they would not consider anything that increased taxes in the struggle to reduce the national debt, but also underscored the dangers in allowing the debt ceiling to be reached.
Senate Republican Leader Mitch McConnell said on Fox News Sunday that the tax measures the president was asking for were “a terrible idea.” He also characterized as “nice words” the Democrats’ terms of “shared sacrifice” and a “balanced approach.”
According to a New York Times report, Treasury Secretary Timothy F. Geithner said on Face the Nation that if Congress failed to act, consequences would be dire. “Congress has to act,” he said. “If they don’t act, then we face catastrophic damage to the American economy, and the leadership, to their credit, and I mean Republicans and Democrats, fully understand that.” Among the consequences, he cited turmoil in the financial markets, increased interest rates on debt, and a derailment of a recovery that already seems to be sputtering.
No less a personage than Christine Lagarde, new head of the International Monetary Fund (IMF), also weighed in over the weekend on the U.S. debt crisis. In a Washington Post report, Lagarde reinforced Geithner’s message, adding that such an event would threaten to destabilize the world economy. “If you draw out the entire scenario of default, yes, of course, you have all of that—interest hikes, stock markets taking a huge hit and real nasty consequences, not just for the United States, but for the entire global economy, because the U.S. is such a big player and matters so much for other countries,” she said.
While closing tax loopholes had been discussed previously as a possibility, McConnell and House Majority Leader Eric Cantor, R-Va., stood firm in their refusal to consider either expiration of the Bush tax cuts or the closing of loopholes, characterizing them as “massive tax hikes.”
Despite that, political leaders do anticipate some kind of agreement. One thing Obama succeeded in was getting leaders to pledge not to allow the U.S. to default. But the path to that objective appears anything but smooth as Republicans continue to defend tax loopholes and low taxes for corporations and those in higher income brackets, despite statistical evidence showing higher taxes to be beneficial for the economy and a public sentiment strongly in favor of them.