U.S. President Barack Obama prodded Congress on Friday saying the United States government has a "unique opportunity to do something big" and stabilize the country's economy by reducing deficits -- even if it raises the national debt ceiling in order to avert an unprecedented default next month.
Private economists and U.S. administration officials predict that if the country fails to hike up its $14.3-trillion borrowing limit by Aug. 2 and stop paying its bills as a result, the frail economy will be thrown into turmoil. Repercussions would be felt around the world.
But despite the looming deadline, Republicans and Democrats are fighting over how high the increase should be and what conditions should accompany the change.
The U.S. passed its current debt ceiling in May and has since been struggling to balance its books.
Republicans, who control the House of Representatives, are opposed to increasing the debt limit unless Democrats agree to significant spending cuts to reduce the spiraling deficit.
Democrats, however, are adamant that cuts must be accompanied by some tax increases. Republicans though, prompted by junior members supported by the small-government tea party movement, oppose any tax hikes.
Frustrated by the lack of progress after five-days straight of meetings with congressional leaders, Obama warned Republicans on Friday that a failure to raise the debt limit would mean "effectively a tax increase for everbody."
Obama also pointed to polls that show that many Republican voters favour the approach that he is pursuing.
"The clear majority of Republican voters think that any deficit reduction package should have a balanced approach and should include some revenues," Obama said.
"The American people are sold," he said. "The problem is that members of Congress are dug in ideologically."
The president said he's ready to make hard choices such as restructuring social programs so that those with very high income would have to pay a little more for medical benefits.
With files from The Associated Press
