Obama calls crisis debt talks as default looms

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US President Barack Obama angrily summoned top lawmakers for crisis talks Saturday on averting a disastrous early August debt default that could send shockwaves through the fragile global economy.

With an August 2 deadline fast approaching, Obama warned that polarized lawmakers must have a plan for raising the $14.3 trillion US debt ceiling by the time skittish world markets pass judgment Monday on the stalemate.

"We have run out of time," Obama said at a hastily called press briefing late Friday, declaring himself "confident" ultimately of a breakthrough "that avoids a self-inflicted wound to the economy at a time when things are so difficult."

Obama convened the emergency meeting shortly after Republican House Speaker John Boehner delivered the shock announcement that he was quitting negotiations with the president in favor of talks only with Senate leaders.

"A deal was never reached, and was never really close. In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country," Boehner said in a letter to his colleagues.

But Boehner, who said he left the talks because Obama insisted on tax increases, later told reporters he would attend the Saturday meeting and insisted: "I don't believe that our relationship is permanently damaged."

Boehner, House Minority Leader Nancy Pelosi, Democratic Senate Majority Leader Harry Reid, and Republican Senate Minority Leader Mitch McConnell were expected at the White House.

Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to pay its bills and continue operating up August 2.

Finance and business leaders have warned failure to raise the US debt ceiling by then would send shock waves through the world economy, while Obama has predicted a default would trigger economic "Armageddon."

Republican aides said the deal left on the table included plans to cut some $3-$3.5 trillion from US debt over 10 years by paring down annual spending as well as slicing into social safety net programs dear to Democrats.

"I've been left at the altar," said Obama, noting that his party would have resisted that accord. "One of the questions that the Republican Party's going to have to ask itself is, can they say yes to anything?"

Boehner and Obama were at odds on a range of issues, but a key sticking point was the White House's push for increasing tax revenues from the rich and wealthy corporations, something Republicans fiercely opposed.

The speaker sharply criticized Obama's call for "increasing taxes on the very people that we expect to invest in our economy and to create jobs."

Obama has insisted that the debt-limit increase be large enough to last through his November 2012 reelection bid, avoiding a politically dangerous vote in the heart of a campaign defined by his handling of the US economy.

But with time ticking down, it was hard to see how polarized congressional leaders could work out a large-scale deal, turn it into legislation, and push it through the Democratic-led Senate and Republican-held House of Representatives.

Spurring them on, a senior White House official told reporters late Friday that "there's a very real prospect" that Washington may lost its sterling Triple-A debt rating "for failing to take serious action to control our deficit" even if lawmakers agree on a debt-limit increase.

On Thursday, ratings agency Standard & Poor's reiterated its warning that it could downgrade the US debt rating if politicians cannot reach a deal.

"We believe any additional stresses caused by a protracted standoff in the US would likely amplify already tense market conditions in Europe in light of significant fiscal imbalances in Greece, Portugal, and Ireland," S&P said.

The response from the other congressional leaders did little to fuel expectations that a deal could quickly be reached, though most agreed that a short-term deal was undesirable.

McConnell called the talks collapse "disappointing" and vowed to tackle "the nation's unsustainable debt" but "without job-killing tax hikes."

Reid stressed that "we must avert a default at all costs" but condemned Republicans for an "ideological opposition to ending taxpayer-funded giveaways for millionaires, corporate jet owners and oil companies."

Pelosi said it was time for Boehner to act like an "adult," and vowed to protect social safety net programs dear to Democrats but targeted by Obama and Boehner alike for savings.

Boehner said at a press conference later that "no one wants to default on the full faith and credit of the United States government. And I'm convinced that we will not."

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