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US on brink of economic crisis after negotiations over outline of $3tn cuts package and tax rises break down The US is on the brink of a major economic crisis after negotiations between Barack Obama and Republican Congressional leaders over the national debt dramatically broke downon Friday. Obama, showing anger, passion and verbosity rare in public in his two-and-a-half years as president, called a press conference at the White House at short notice to express his frustration with the Republicans. He told reporters there had been “a breakdown in trust” between the White House and the Republican leadership. In a snub to the president, the Republican leader in the House, John Boehner, failed to return calls from the White House throughout the day, with his office saying he was unavailable. Boehner finally called the president on Friday evening to inform him the Republicans were walking away from weeks of negotiation aimed at resolving the country’s debt crisis. The collapse in talks comes with 10 days left until the US, for the first time in its history, faces the prospect of defaulting. If it fails to raise its $14.3tn (£8.7tn) borrowing ceiling, there will be serious consequences for not only the US economy but other countries around the world. The Republican withdrawal came just a day after Obama and Boehner had seemed close to an agreement on the broad outlines of a package to cut $3tn in federal spending over the next 10 years, and to raise some taxes. But Boehner was unable to sell it to diehard Republicans in the House, many of whom were elected last year with the support of the Tea party movement, which seeks deep cuts in spending but no tax rises. In a letter published just minutes after Obama began to speak, Boehner said: “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.” He blamed Obama for failing to agree to deep cuts in social security and other welfare benefits and for demanding that taxes be raised. “For these reasons, I have decided to end discussions with the White House,” Boehner said. An exasperated Obama called Democratic and Republican Congressional leaders to meet at the White House at 11 o’clock on Saturday morning to offer alternative proposals for dealing with the looming deadline on the debt ceiling. The president insisted that the debt ceiling had to be raised or Americans across the country would suffer. “We’ve got to get it done. It is not an option not to do it,” he said. If there is no deal, he said, he could not guarantee that the 70 million cheques due to go out to social security recipients, veterans and others on 3 August, the day after the deadline, would be sent. The US chamber of commerce expressed nervousness over the prospect of America’s credit rating being downgraded. Federal payments to state governments could also be hit. State governors are laying down emergency plans, with California, among others, looking for alternative sources of borrowing to tide it over. Banks and businesses are also working feverishly preparing for worst-case scenarios. The crisis is the biggest test of wills yet between Obama and hardline Republicans endorsed by the Tea party movement. It dwarfs the stand-off earlier this year when the federal government faced shutdown. According to the Treasury, America reached its borrowing limit of $14.3tn on 16