U.S. lawmakers are trading insults with time running out before an August 2 deadline to raise the country’s debt limit.
Top lawmakers are scheduled to meet with U.S. President Barack Obama for a fifth straight day Thursday as they try to reach a deal that would prevent a possible default that could rattle international markets.
Talks have stalled over sharp disagreements about the need to raise taxes.
The U.S. Senate’s top Democrat Thursday lashed out at one of the lead Republican negotiators. Senate Majority Leader Harry Reid called House Majority Leader Eric Cantor “childish” and said he should be excluded from further talks. On Wednesday, Cantor accused the president of storming out of a negotiating session. Cantor himself had walked out of earlier talks with the vice president.
The top Republican in the Senate, Minority Leader Mitch McConnell, criticized the president’s stance, telling colleagues his party will “not be reduced to being tax collectors for the Obama economy.”
Wall Street Warning
U.S. Federal Reserve Chairman Ben Bernanke has warned the country could be facing a “huge financial calamity” if the two sides fail to raise the $14.3 trillion borrowing limit by the August 2 deadline.
Bernanke told a Senate committee Thursday any default would be a “self-inflicted wound” and would erode global confidence in the U.S.
There are growing calls from businesses and banking firms for a solution.
The head of one of the biggest private U.S. financial firms Thursday told reporters it is “imperative that the debt ceiling be fixed.”
JP Morgan Chase Chief Executive Jamie Dimon said it would be irresponsible for the country to default on its debt because the result could be catastrophic.
Moody’s Investors Service warned Wednesday that the U.S. risks losing its top credit rating if lawmakers fail to reach a deal that increases the debt limit and decreases the deficit. A downgraded U.S. bond rating would likely lead to higher interest rates for U.S. loans.
Bernanke says a downgrade could lead to a “vicious cycle” in which higher interest rates make the country’s debt increasingly difficult to pay down.
A Chinese credit rating agency made a similar warning Thursday, saying it has placed U.S. sovereign debt on a negative watch. Dagong Global Credit Rating Company says it will downgrade U.S. credit ratings “if there is no significant change in its repayment ability within the period of observation.” China is the biggest buyer of U.S. sovereign debt.
These warnings about the U.S. credit rating are not the first.
Standard and Poor’s Ratings Services expressed concerns in April, lowering its long-term credit out look for the U.S. from “stable” to “negative.”