Obama: Chance for 'something big' to calm economy

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WASHINGTON (AP) — President Barack Obama said Friday Congress has a “unique opportunity to do something big” and stabilize the economy by cutting deficits even as it raises the national debt limit to avert an unprecedented U.S. default.

Saying he was ready to make tough decisions and challenging Republicans to do the same, Obama attempted to turn the Republicans’ opposition to any tax increases back against them, warning that failure to raise the debt ceiling would mean “effectively a tax increase for everybody.”

Administration officials and private economists say that if the U.S. fails to raise its borrowing limit by Aug. 2 and begins to stop paying its bills as a result, the fragile U.S. economy could be cast into a crisis that would reverberate around the globe.

The United States hit its current $14.3 trillion debt ceiling in May and has been juggling its books since then. Republicans, who control the House of Representatives, say they won’t raise the debt limit unless Democrats agree to major spending cuts to reduce the spiraling U.S. deficit.

Democrats say cuts must be accompanied by some tax increases. Republicans, prodded by junior members backed by the small-government tea party movement, oppose any tax hikes.

Still, Obama said that Republicans opposition to any new tax revenue was complicating efforts to reach a deficit-cutting deal.

“If they show me a serious plan I’m ready to move,” he said.

The president spoke at the White House Friday after five days straight of meetings with congressional leaders failed to yield compromise, and amid increasingly urgent warnings from credit agencies and the financial sector about the risks of failing to raise the government’s borrowing limit.

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The president spoke at his third news conference in two weeks on an issue that is increasingly consuming Washington and his presidency.

The president said he was ready to make tough decisions such as restructuring social programs so that very wealthy recipients would have to pay slightly more for medical benefits. He said he had stressed to Republicans that anything they looked at should not affect current beneficiaries, and he said providers such as drug companies could be targeted for cuts.

On Capitol Hill, meanwhile, Democrats and Republicans in the House emerged from closed-door meetings to reiterate their hardened stances. Republicans announced plans to call a vote next week on a balanced budget constitutional amendment that would force the government to balance its books.

Obama dismissed the idea, saying, “We don’t need a constitutional amendment to do that. What we need to do is do our jobs.”

Failure to reach compromise has focused attention on a fallback plan under discussion by Senate Republican leader Mitch McConnell and Senate Majority Leader Harry Reid. That plan would give Obama greater authority to raise the debt ceiling while setting procedures in motion that could lead to federal spending cuts.

Obama insisted the public was on his side in wanting a “balanced approach” that would mix spending cuts and the tax increases opposed by Republicans.

“The American people are sold,” he said. “The problem is that members of Congress are dug in ideologically.”

He renewed his pitch for a major package of some $4 trillion, about three-quarters of which would be spending cuts along with about $1 trillion in new revenue.

“We have a chance to stabilize America’s finances for a decade or 15 years or 20 years if we’re willing to seize the moment,” the president said, adding later that everyone must be “willing to compromise.”

“We don’t need more studies, we don’t need a balanced budget amendment,” Obama said. He said lawmakers simply needed to be able to make tough decisions and stand up to their political bases.

Copyright 2011 The Associated Press.