Obama to address the nation and demands US debt decision amid global alarm

After days of tense negotiations and downgrade warnings from credit ratings agencies Moody's and Standard & Poor's, Obama yesterday told lawmakers "it's decision time" and set a press conference for today.

The ratings agencies have warned the United States risks losing its sterling Triple-A debt rating and leading US creditor China, Wall Street titan JPMorgan Chase and the Federal Reserve have also sounded the alarm.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling above the current US$14.3 trillion by August 2 could send shock waves through a world economy still reeling from the 2008 collapse.

Republicans, whose votes Obama needs to raise the congressionally set limit, have demanded sweeping spending cuts in return while rejecting calls from the White House and Democrats for tax hikes on the rich and corporations.

Obama said he hoped for "a big deal" previously described as running about $4 trillion dollars in spending cuts, but said a smaller US$2 trillion deal was possible, the Democratic aide said.

US Treasury Secretary Tim Geithner told the group that skittish world markets believed "the debt ceiling must be raised, and we must put in place a plan to deal with our deficit and debt," according to a senior Republican aide.

Republican House Speaker John Boehner seized on that message to warn that "nothing the administration is offering to this point will resolve our debt problem" and pressed Obama to cut spending, the aide said.

Democratic House Minority Leader Nancy Pelosi said House Democrats favored a "grand bargain" to cut some US$4 trillion while averting a default and protecting cherished social safety net programs.

The White House and key lawmakers seemed to be rallying behind efforts by McConnell and Democratic Senate Majority Leader Harry Reid to craft a complex legislative escape hatch to avert a default, cut spending and avoid tax hikes.

McConnell's proposal would effectively let Obama raise the debt ceiling with support just from Democrats, who would shoulder the political responsibility but get to protect social programs.

"This remains a fallback option," a Democratic aide said.

But a new opinion poll by Quinnipiac University found the US public more ready to blame Republicans than Obama by a 48 percent to 34 percent margin in the event the talks collapse.

Washington hit its debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally, but can only do so until August 2.