US President Barack Obama has endorsed a rejuvenated Senate plan that cuts spending and raises taxes in return for congressional approval to raise the US debt ceiling. 
By
AFP

Source:
AFP
20 Jul 2011 - 11:27 AM  UPDATED 26 Aug 2013 - 9:20 AM

US President Barack Obama has endorsed a rejuvenated Senate plan that cuts spending and raises taxes in return for congressional approval to raise the US debt ceiling and avoid a default on American obligations.

Obama spoke briefly in the White House press room on Tuesday just hours after a bipartisan group of six senators resumed negotiating the plan.

The senators said they were close to agreement on an immediate $US500 billion "down payment" on cutting the deficit as the starting point toward cuts of more than $US4 trillion over the coming decade that would be finalised in a second piece of legislation.

The plan also would raise revenues by about $US1 trillion over 10 years through a major overhaul of the tax code and cuts to popular benefit programs like Medicare and Medicaid, the federal programs that subsidise health care for the elderly and poor.

There was no assurance such a plan would win support in the Republican-controlled House where most members have vowed not to increase taxes.

The plan largely mirrors one put forward months ago by Obama's debt commission and he said on Tuesday that it "is broadly consistent with what I've proposed".

Congress faces an August 2 deadline for raising the debt limit above the current $US14.3 trillion level.

Failure to do that would leave the Treasury Department unable to pay all the government's bills that come due.

The government would face hard choices of whether to make payments to holders of Treasury bonds or send out cheques to retirees relying on Social Security, the government-run pension plan.

That could create turmoil in financial markets and hobble global economies that are still struggling to recover from the deep recession that began in 2008.

DEBT MEASURE PASSES US HOUSE

The US House of Representatives has passed legislation conditioning a $US2.4 trillion ($A2.25 trillion) increase in the nation's borrowing cap on a tea party-backed plan to require immediate spending cuts and a constitutional amendment requiring a balanced budget.

The 234-190 vote sends the "cut, cap and balance" plan to the Democratic-controlled Senate, where it has virtually no chance of passing.

With the House tally cast, attention is returning to efforts in the Senate to provide President Barack Obama authority to impose an increase in the debt limit without approval by Congress and on a new Senate "Gang of Six" proposal to cut the deficit by almost $US4 trillion ($A3.74 trillion) over the coming decade.

But Obama all along has continued battling for a Grand Bargain of huge spending cuts combined with tax increases and that seems to be coming together among the Gang of Six senators, three from each party.

Obama called it "a very significant step".

It remained unclear, however, if that plan could find sufficient support in the House.

Therefore, Obama said, the Reid-McConnell measure "remains a necessary approach as a bare minimum".

But, he added, "we continue to believe we can achieve more".