Tags: Barack Obama | Economic- Crisis | Tea Party | Obama Budget | Obama | debt limit | extension

Obama Backs Down in Debt Battle

By Jim Meyers   |   Thursday, 21 Jul 2011 12:26 PM

President Barack Obama has backed down from his previous refusal to consider a short-term deal to raise the debt limit and now says he would agree to such a move under certain conditions.

Obama had threatened to veto any stopgap expansion of the nation’s debt limit in the belief it would merely delay agreement on a deficit-reduction package, and last week even warned House Majority Leader Eric Cantor not to call his bluff on the issue.

But White House press secretary Jay Carney said on Wednesday that Obama would accept a “very short extension” of the debt limit if a major deficit-cutting agreement is in place.

“We need to meet, talk, consult, narrow down what our options are and figure out in fairly short order which train we’re riding into the station,” Carney said.

The federal government will exhaust its ability to borrow money and pay its bills if the $14.3 trillion debt ceiling is not raised by August 2.

Obama met at the White House on Wednesday with Democratic leaders of the House and Senate, then with House Speaker John Boehner and Cantor in an effort to reach agreement on the debt limit and a deficit-reduction package.

Obama seeks to convince Democrats to accept changes in Medicare and Social Security, and Republicans to agree to tax increases.

Opponents of a short-term deal on the debt limit fear that once the limit is raised, it will reduce pressure to reach an agreement on reducing the $1.5 trillion annual deficit.

“If they don’t come up with a significant and credible long-term deficit reduction program now, the chances of them doing so between now and the next presidential and congressional elections are not very high,” Steven Hess, senior credit officer at Moody’s Investors Service, told USA Today.

Obama told congressional leaders earlier this month that he would veto a short-term deal after Senate Republicans had floated the option of extending the debt limit for several months.

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