In Order to Avoid a Recession, President Obama Calls a Meeting to Raise the U.S. Debt Limit

With the goal of debating the U.S. debt limit, President Obama called a new meeting this Monday, July 11, to negotiate with leaders of the Republicans and Democrats in Congress. The goal of this meeting was to try to convince Congress to vote on an increase in the maximum debt limit by August 2. Obama argues that otherwise, the United States may not be able to meet its financial obligations with creditors and will suffer a new recession.

With the goal of reaching an agreement, U.S. lawmakers started the talks early on Sunday, July 10. Obama made tentative statements before the meeting when a reporter asked whether the leaders will be able to secure a deal within the next ten days. “We need to do it,” he said. In the case that the agreement is not sealed within the next three weeks, the U.S. will default, be unable to obtain more loans and therefore be unable to meet its financial obligations. The country has a federal debt reaching $1.2 trillion this year.

According to Secretary of the Treasury Timothy Geithner, the negotiations are reaching the deadline stipulated by law. With measures taken regarding the suspension of investment in pension funds, it is only possible to exceed the debt limit until August 2. Therefore, the agreement and subsequent vote are urgently needed. Actually, the debt limit cannot exceed $14.3 trillion.

This weekend, Geitner said that “we have to act” to raise the debt limit. Otherwise, “we face catastrophic damage to the American economy.”

In the last six days, Obama warned that this situation could trigger a spiral recession. “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,” said the president in response to questions posed by Twitter users during an event held at the White House.

Besides the meeting, the president will also give a speech and a collective news conference on the impact of the debt crisis experienced by the country. During yesterday’s meeting, Obama claimed a need to reach an agreement, but the situation still splits the opinions of Republicans and Democrats. For the Republican opposition, which controls the House of Representatives, the agreement must be linked to spending cuts in order to reduce the budget deficit. The Republicans are also opposed to tax increases, which the government wants to impose on the richest part of the population, while the Democrats differ on cuts to social programs.

Among the parties present at Sunday’s meeting were Republican House Majority Leader John Boehner, Democratic Senate Majority Leader Harry Reid and House Democratic Minority Leader Nancy Pelosi.

The leader of the House of Representatives, John Boehner, said after the meeting that any agreement related to the U.S. budget should “restrict future spending and not include tax hikes,” thus creating another impasse.