Obama warns of recession
Baku, July 7 (AZERTAC). President Barack Obama warned on Wednesday that if the US Congress fails to raise the US debt ceiling it risks triggering a new recession in the world`s largest economy.
Not raising the $US14.29 trillion ($A13.41 trillion) debt ceiling would lead to "a whole new spiral into a second recession or worse," Obama said as he answered questions on the short-messaging service during a Twitter Town Hall being streamed live from the White House.
The debt ceiling "is something that we shouldn`t be toying with," Obama warned, saying if the limit is not hiked "the Treasury will run out of money."
"It will not be able to pay the bills that are owing and potentially the entire world capital markets could decide, you know what, the full faith and credit of the United States doesn`t mean anything.
"So our credit could be downgraded, interest rates could go drastically up, and it could cause a whole new spiral into a second recession or worse."
Earlier Obama`s Republican foes denounced his handling of cash-strapped Washington`s debt woes on the eve of White House talks that the president has called with congressional leaders seeking a deal to avert an early August default.
Republican Senate Minority Leader Mitch McConnell said the negotiations on a package deal to cut the deficit and raise the US debt limit would test Obama`s willingness to do "something big" to get the country`s fiscal house in order.
"Until now, the president`s proposals have been inadequate and, frankly, indefensible," McConnell said in a speech on the Senate floor, taking aim at Obama`s call to raise taxes on the very richest US earners.
But Obama hit back in the Twitter Town Hall meeting saying: "Congress has a responsibility to make sure we pay our bills. We`ve always paid them in the past. The notion that the US is going to default on its debt is just irresponsible."
"And my expectation is that over the next week to two weeks, that Congress working with the White House comes up with a deal that solves our deficit, solves our debt problems, and makes sure that our full faith and credit is protected."
The US ran into its $14.29 trillion debt ceiling on May 16, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations.
But by August 2, the government will have to begin withholding payments - to bond holders, civil servants, retirees or government contractors - if politicians do not raise the ceiling.
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