President Barack Obama on Monday reiterated that Congressional Republicans and Democrats will resolve the debt ceiling and that the U.S. Government would not default on its debt. But the key, he underscored, is a GOP compromise on the revenue component. Major cuts in spending are already a part of the deal.
We're going to resolve this, Obama said, at a Monday news conference. However, Obama added that there is strong resistance on Republican side to do anything on revenue -- any revenue increase -- and there won't be a deal to raise the debt ceiling and cut the budget deficit if Republicans don't compromise on the revenue issue.
Obama said increasing marginal tax rates has never been discussed -- the revenue the White House is talking about concerns closing loopholes and ending selected subsidies. Republicans remain dead-set against a revenue increase in any form.
We could achieve a more manageable debt level with these cuts. .. and [if Republicans agree on closing loopholes/ending subsidies] give the American people confidence that this town can actually do something, Obama said. We're going to resolve this in a reasonable amount of time, and in a serious way.
However, Obama added that, I don't see a path to a deal if they don't budge [and compromise on ending loopholes, ending subsidies].
Republicans scuttled a possible 'grand bargain' debt ceiling deal Sunday -- one that would have reduced the deficit by more than $4 trillion -- by refusing to agree to any revenue increases -- whether in the form of actual tax increases, or an elimination of subsidies/tax loop holes.
Republicans, feeling pressure from the Tea Party faction, to-date have been resistant to anything that smelled like a revenue increase. Congressional Republicans fear that any GOP Hill member who votes for a revenue increase in any form will be viewed as 'not conservative enough' or a 'caving-in to Obama.'
Various political analysts, including New York Times Columnist David Brooks, a Republican, have characterized the Tea Party's stance as more of a psychological protest than a practical, governing acternative.
Republicans argue that Congress should substantially cut government spending to cut the budget deficit. Meanwhile, Democrats insist that revenue increases must be a part of the talks for any meaningful and enduring deficit reduction to occur.
On Aug. 4, the U.S. Treasury Department is due to pay off $30 billion in maturing short-term debt. In theory, the United States could prioritize debt payments, but U.S. Treasury Secretary Timothy Geithner warned lawmakers in Congress that the prioritization tactic would still cause investors to shun U.S. Treasury securities, commonly known as Treasuries.
Geithner has also repeatedly underscored that failing to raise the debt ceiling will have no constructive outcomes for the nation's fiscal condition, the task of deficit reduction, and U.S. and global stock and bond markets.
Major credit rating servics S&P, Moody's Investors Service, and Fitch Ratings also have said a failure to raise the debt ceiling may have an adverse effect on global confidence in American securities