US debt talks hit a setback

Julian Harris
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US PRESIDENT Barack Obama was forced back to the drawing board yesterday after Republicans pulled out of a bipartisan plan to cut $4 trillion (£2.5 trillion) from the government deficit over the coming decade.

House of Representatives speaker John Boehner told the Democratic president he would only pursue a smaller, $2 trillion package, similar to that originally pursued by vice president Joe Biden.

Stiff opposition from Republicans over proposed tax hikes were thought to be behind Boehner’s decision.

Boehner’s statement threatened to thrust yesterday’s White House meeting between Obama and congressional leaders into disarray as the clock ticked down on the 2 August deadline for raising the national debt ceiling.

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Boehner, said in a statement. “I believe the best approach may be to focus on producing a smaller measure.”

Obama’s Democrats have proposed raising some taxes in order to continue funding for entitlement programmes despite the government’s mammoth $14.3 trillion debts and a $1.4 trillion annual deficit. Republicans are seeking cuts to government spending.