US debt hits £15 trillion as cut-off looms

City A.M. Reporter
BUDGET talks in the US Congress were locked in stalemate yesterday as Democrats and Republicans waited for the other side to make a new offer on taxes and healthcare.

As the US’s debt pile crossed the $15 trillion mark, members of a 12-member “super committee” fought to find some $1.2 trillion (£764bn) in budget savings over the next decade ahead of a deadline next Monday.

The cut-off, agreed during the debt ceiling crisis in August, needs to be met if the fragile truce between the two political parties is to hold.

Failure to reach a deal would trigger $1.2 trillion in automatic spending cuts that would fall equally on military and domestic programmes. Republicans appear to be more alarmed by that prospect than Democrats, and some have proposed shifting the balance to ease the blow to the Pentagon.

But the combative mood between the parties contains worrying echoes back to the summer debt ceiling negotiations, which took the US to the brink of default and caused the country to lose its coveted AAA credit rating from Standard & Poor’s.

Republicans, who have moved away from their staunch opposition to tax increases, said they would not give any more ground until Democrats consider reforms that would partially privatise the Medicare health-insurance programme for retirees.

“I’m still waiting for a proposal that actually solves the spending crisis,” the panel’s top Republican, Representative Jeb Hensarling, said yesterday.

Democrats have proposed raising the Medicare eligibility age from 65 to 67 but have shied away from sweeping reforms. They proposed a $1 trillion tax increase last week.

“We are not going to accept a plan that gives tax breaks to the wealthiest Americans and balances all this incredible challenge we have on the backs of middle-class Americans,” said Senator Patty Murray, the top Democrat on the committee.

And some 50 lawmakers from both parties are urging the panel to shoot for a much bigger deal that would come closer to the $4 trillion in savings that outside experts say is needed to keep US debt at a manageable level.