U.S. lawmakers head for showdown over debt

Tue Jul 26, 2011 4:59pm GMT

By Andy Sullivan and Matt Spetalnick

WASHINGTON (Reuters) - President Barack Obama's Democrats and their Republican rivals on Tuesday headed for a showdown over competing debt plans one week before a deadline for averting a potentially disastrous U.S. default.

With the two sides further apart than ever and the threat of a far-reaching U.S. credit downgrade looming, IMF chief Christine Lagarde urged swift resolution of the impasse, warning that failure to reach an agreement would have serious consequences for the world economy.

"The clock is ticking and clearly the issue needs to be resolved immediately," Lagarde told the Council on Foreign Relations think tank.

But there was no compromise in sight after Obama and Republican House of Representatives Speaker John Boehner delivered duelling televised addresses late on Monday and gave no ground in the bitter debate over how to raise the nation's $14.3 trillion (8.72 trillion pound) debt ceiling by August 2 to prevent an unprecedented default.

The continuing gridlock -- and signs that neither of the competing plans is likely to win bipartisan support -- alarmed investors worldwide. U.S. stocks and the dollar fell while gold hovered near record highs. There was no hint of panic, however, as markets held out hope the stalemate could still be broken.

A Reuters poll showed that 30 of 53 economists surveyed think at least one of the major credit agencies will strip the United States of its top-notch credit rating and most also say wrangling over debt has already damaged the economy.

Boehner on Tuesday kept up efforts to rally support for his plan, which could come up for a vote in the House as early as Wednesday but is in doubt because of resistance from some conservatives in the Republican camp aligned with the Tea Party movement.

"It's reasonable, it's responsible. It can pass the House and it can pass the Senate," Boehner told reporters.   Continued...

U.S. House Speaker John Boehner (R-OH) is pictured as he speaks to the press about U.S. debt reduction talks on Capitol Hill in Washington, July 25, 2011.   REUTERS/Jason Reed
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