Tuesday, July 5, 2011

So Far, No Movement on Looming Debt Crisis

Updated at 5:45 p.m. EDT

President Obama said today he wants "to do something big" to tackle the deficit and debt problem, not just agree to a quick fix like the stunt-like approach GOP. Sen John Cornyn pitched with his proposal to only do a "mini deal" for now.

"Now, I've heard reports that there may be some in Congress who want to do just enough to make sure that America avoids defaulting on our debt in the short term but then wants to kick the can down the road when it comes to solving the larger problem of our deficit," Obama said during an appearance in the White House briefing room.

"I don't share that view. I don't think the American people here sent us here to avoid tough problems. That's, in fact, what drives them nuts about Washington, when both parties simply take the path of least resistance, and I don't want to do that here. I believe that right now we've got a unique opportunity to do something big, to tackle our deficit in a way that forces our government to live within its means, that puts our economy on a stronger footing for the future and still allows us to invest in that future," Obama added.

Obama invited the leaders of Congress back to White House Thursday for another debt limit negotiation, saying lawmakers need to check their agendas at the door.

"Even as we continue discussions today and tomorrow, I have asked leaders of both parties and both houses of Congress to come here to the White House on Thursday, so we can build on the work that's already been done and drive towards a final agreement," Obama said. "It's my hope that everybody's going to leave their ultimatums at the door, that we'll all leave our political rhetoric at the door, and that we're going to do what's best for our economy and do what's best for our people."

Obama repeated his vision of "a balanced approach" that includes cutting "spending in domestic programs, in defense programs, in entitlement programs," as well as "spending in the tax code, spending on certain tax breaks and deductions for the wealthiest of Americans."

"This will require both parties to get out of our comfort zones, and both parties to agree on real compromise," Obama said. "I'm ready to do that. I believe there are enough people in each party that are willing to do that. And what I know is that we need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people."


There was some talk over the weekend of a potential mini-deal on the looming debt crisis, but the White House says that is all it was: Talk. President Obama, as of now, wants a full deal and does not want a Band-Aid approach, rejecting the idea floated by Sen. John Cornyn (R-Tex.).

So the U.S. Senate is in session today with the hope of resolving the debt crisis ahead of a hard Aug. 2 deadline. Obama has set his own deadline of July 22 to allow the review of the final dead, once it is reached.

The federal debt stands at $14.3 trillion.

The GOP leadership also will have to sell any deal that includes new revenue to its rank and file members, especially the Tea Party faction which has taken up the cause of protecting the rich from tax increases and corporations from having to give up their tax loopholes.

At Obama's urging, Senate Democratic leader Harry Reid called the Senate into session, foregoing its usual Fourth of July holiday break.

If Republicans and Democrats do not raise the federal debt limit it would put the federal government in the position of defaulting on some of its bills and that would likely send the financial markets into a tailspin. There are fears that it could trigger another economic crisis on par with what we saw in 2008 at the end of the Bush administration.

Republicans want about $2 trillion in budget cuts, while Obama is looking for somewhere in the vicinity of $400 billion in tax loopholes wiped off the slate. For the first time, the White House reportedly has signaled that it would consider cuts to Medicare and Medicaid, if Republicans will bend on their refusal to allow the elimination of the corporate tax loopholes.

Obama has proposed eliminating tax breaks for the hugely profitable oil and gas industry, hedge fund managers and owners of corporate jets.

The debt fund debate comes as The New York Times reports that median pay for top executives at 200 large companies last year was $10.8 million. Those salaries work out to a 23% gain for the CEOs over 2009 levels, as compared to only a .5% hike in pay for rank and file workers. Given inflation, workers on the bottom rung actually lost money.

Philippe P. Dauman, the chief executive of Viacom, stands atop the list with an $84.5 million salary last year, after inking new long-term deal that includes one-time stock awards, the Times reported.

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