Lawmakers snipe, Wall Street frets as deadline nears

By Jim Kuhnhenn

Associated Press

Published: Thursday, July 14 2011 8:55 a.m. MDT

The Capitol is seen in Washington, Thursday, July 14, 2011, as Congress and the Obama Administration continue work to raise the debt ceiling.

Alex Brandon, Associated Press

WASHINGTON — Testy lawmakers pointed fingers at one another and President Barack Obama on Thursday as negotiations over raising the national debt limited entered a perilous endgame. Wall Street eyed the standoff with growing anxiety, warning of catastrophe if the U.S. defaults on its obligations.

Obama's blunt declaration that "enough is enough" as Wednesday's talks ended did nothing to quell the rancor as a new day of positioning and posturing began.

Senate Majority Leader Harry Reid took to the Senate floor early in the day to snipe that House Republican Leader Eric Cantor shouldn't even be part of the talks anymore, calling him "childish." And not long after, Senate Republican Leader Mitch McConnell stood to serve notice that the debt problem belonged squarely in Obama's lap.

"Republicans will not be reduced to being the tax collectors for the Obama economy," McConnell said. "Don't expect any more cover from Republicans on it than you got on health care. None."

None of it was a promising prelude to negotiations scheduled to resume at the White House on Thursday afternoon, less than three weeks before an Aug. 2 deadline for increasing the government's borrowing authority.

Obama is demanding that budget negotiators find common ground by week's end, as the financial world watches with increasing anxiety.

"No one can tell me with certainty that a U.S. default wouldn't cause catastrophe and wouldn't severely damage the U.S. or global economy," Jamie Dimon, CEO of JPMorgan Chase & Co., told reporters Thursday. "And it would be irresponsible to take that chance."

Moody's Investors Service said Wednesday it will review the government's credit rating, noting there is a small but rising risk that the government will default on its debt. If Moody's were to lower the ratings, the consequences would ripple through the economy, pushing up rates for mortgages, car loans and other debts. A Chinese rating agency, Dagong Global Credit Rating Co., also warned of a possible downgrade.

Federal Reserve Chairman Ben Bernanke, addressing lawmakers, warned Wednesday that not increasing the nation's debt ceiling and allowing the nation to default on its debt would send "shock waves through the entire financial system."

In the cauldron of the White House Cabinet Room, Obama and top lawmakers bargained for nearly two hours Wednesday on spending cuts. Obama curtly ended the session when Cantor, R-Va., urged him to accept a short, monthslong increase in debt instead of one that would last through next year's presidential election.

"Enough is enough. ... I'll see you all tomorrow," Obama said, rising from the negotiating table and leaving the room, according to several officials familiar with the session.

Reid said that while other Republican leaders were willing to negotiate in good faith, Cantor "has shown he shouldn't even be at the table."

The United States hit its current $14.3 trillion debt ceiling in May and the Obama administration says the government will default on its obligations if the debt limit is not increased by Aug. 2. For a new debt ceiling to last to the end of 2012 would require raising it by about $2.4 trillion.

Republicans, in control of the House of Representatives in part because of the support of tea party activists, say they will not vote to raise the limit if Obama doesn't agree to at least an equal amount of deficit reductions over 10 years.

Obama and the top eight House and Senate leaders met for the fourth time in as many days Wednesday, and, despite the tense ending, agreed to meet again Thursday. Cantor, speaking to reporters after Wednesday's meeting broke up, said the White House had been lowering the amount of spending cuts it would put on the table, offering less than $1.4 trillion over 10 years, mostly in domestic and defense spending outside of the major benefits programs Medicare, Medicaid and Social Security.

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