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MENAFN - AFP - 06/12/2012

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(MENAFN - AFP) President Barack Obama warned Republicans not to hold the US economy hostage in a new feud over raising government borrowing, as battle lines hardened in the "fiscal cliff" showdown.

Obama and Republican foes accused each other of intransigence as vital hours passed without serious negotiations on averting a year-end tax and spending crunch that could trigger a new recession in the world's biggest economy.

The president courted CEOs in Washington, and pledged to reject any deal that would let Republicans wield new leverage next year over lifting the US debt ceiling -- the amount the government can borrow to operate and pay its debts.

The New York Times had earlier reported that Republicans may bow to his demand to hike taxes on the rich this month, but then renew their austerity crusade when Obama asks for the debt ceiling to be raised in early 2013.

"We are not going to play that game next year," Obama told the Business Roundtable. "That is a bad strategy for America, it is a bad strategy for your businesses and it is not a game I will play."

Republicans want to make raising the debt ceiling conditional on Obama agreeing to massive cuts in social programs. A similar showdown last year spooked global markets when America came close to defaulting on its debt.

The Treasury says the United States will hit its statutory borrowing limit of 16.39 trillion near the end of the year, but can take emergency measures to keep funds flowing for a few months.

Obama has proposed a new system whereby the president can raise the debt ceiling without asking Congress first -- an idea Republicans have rejected.

And the White House insisted there would be no deal on averting the fiscal cliff without a rise in the top income tax rate for the richest Americans, a promise that was the foundation of Obama's re-election campaign.

Republicans have said they are ready to raise revenues -- but only through closing tax loopholes and capping deductions -- a solution Obama says will not raise sufficient funds to significantly reduce the deficit.

Taxes will go up on all Americans on January 1, when rate cuts dating from the George W. Bush era expire.

Obama wants to extend the tax cuts for the middle class and to raise 1 trillion to pay down the deficit by letting the top rate rise from 35 percent to 39.6 percent for families earning more than 250,000 a year.

House Speaker John Boehner wants to extend all the tax cuts. He told fellow Republicans that Obama "has a responsibility to put forward a plan that can pass both chambers of Congress," according to an official at a caucus meeting.

Obama presented an initial offer last week, while Boehner presented a counter-bid. Both have been rejected outright by the other side.

"We can't sit here and negotiate with ourselves," Boehner told reporters, just 27 days before the US economy could plunge over the cliff.

The Republicans' proposal would raise 800 billion in new revenue by closing tax loopholes and ending some deductions as a sign they are "ready and eager" to negotiate in good faith.

That's part of the broader 2.2 trillion Republican package, including 1.2 trillion sliced from federal spending, with half of that coming directly from Medicare, the federal health program for the elderly.

Boehner insisted that Obama's plan, including 1.6 trillion in new taxes and 600 billion in spending cuts, "couldn't pass either house of the Congress."

But some Republicans have broken ranks with the party and said they could agree to raising tax rates for the wealthy.

"Personally, I know we have to raise revenue; I don't really care which way we do it," Republican Senator Tom Coburn told MSNBC television.

A Washington Post-Pew Research Center poll showed that 53 percent of Americans would blame Republicans if the economy tumbles over the cliff, compared to 27 percent who would blame Obama and Democrats.

The US military, meanwhile, has started to prepare for sweeping budget cuts in view of the December 31 fiscal deadline.

"We think that it is prudent at this stage to begin at least some limited internal planning," Pentagon spokesman George Little told reporters.


 






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