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President warns of ‘significant consequences’ if Congress fails to permit more borrowing and US defaults on debts Barack Obama has warned of “significant consequences” for the US economy if stalled financial negotiations lead to Congress failing to permit more government borrowing and America defaults on its debts. The president, in a rare hour-long news conference, called on Republicans to “take on their sacred cows” – including tax breaks for “millionaires and billionaires, oil companies and corporate jet owners” – in reaching a deal on Congress legislating an increase in government borrowing from the present $14.3tn (£8.9tn) limit, without which the US may be unable to meet its obligations within weeks. Negotiations have been deadlocked over the insistence of the Democratic leadership that budget cuts must be accompanied by tax increases in order to reduce the debt. Republican congressional leaders say that the party did not win control of the House of Representatives in last November’s midterm elections on a platform of scaling back government only to increase taxes. Obama has said that if agreement is not reached by early August, then the US risks default – a blow to international confidence in the American economy – and seeing its credit rating downgraded, which would make borrowing more expensive. “August 2 is a very important date, and there is no reason why we can’t get this done now,” he said. “This is not a technical problem anymore. This is a matter of Congress going ahead and biting the bullet and making tough decisions because we know what the decisions are.” Obama said more than $1tn in cuts have already been agreed but that other areas of the budget, including defence spending – considered untouchable by some Republicans – must be scrutinised. He said that retaining tax breaks for the wealthy will be at the expense of programmes for the less privileged. “We’ve got to make some tough choices here,” he said. The president called on Republicans to put aside soundbite politics and act in the interests of the country. “A lot of people say a lot of things to satisfy their base or to get on cable news,” he said. “Hopefully, leaders at a certain point rise to the occasion and do the right thing for the American people. That is what I expect to happen this time. Call me naive, but my expectation is leaders are going to lead.” The president criticised the Republicans’ tactic of stepping back from negotiations when things don’t go their way and then blaming him for lack of leadership, saying it “is just not on the level”. Obama defended himself against charges that he has failed to show leadership. “I’ve already shown I’m prepared to make decisions that are very tough and will give my base of voters further reason to give me a hard time,” he said. The president also criticised a largely symbolic vote in Congress against US involvement in Libya. “We have engaged in a limited operation to help a lot of people against one of the worst tyrants in the world,” he said. “We should be sending out a unified message to this guy that he should step down and give his people a fair chance to live their lives without fear. And this suddenly becomes the cause celebre for folks in Congress? Come on.” Obama repeated his defence of military action in Libya without congressional approval, saying once again that he does not believe the limited American involvement reaches the scale of conflict defined by the War Powers Resolution. Asked if that law is constitutional, he sidestepped the issue by saying that it was not relevant to the Libya intervention. “I don’t have to get to the question,” he said. The president also sidestepped a question about whether he supports the legalisation of same-sex marriage, after the New York state legislature voted to do so last week. Obama said the New York decision is a “good thing” because it was the result of the democratic process. “What I’ve seen happen over the last several years and what happened in New York last week, I think, was a good thing,” he said. “I think that’s how things should work.” But he declined to endorse same-sex marriages when asked if he “personally” is in favour of legalising them. “I’m not going to make news on that today. Good try though,” he said. US politics US Government borrowing Barack Obama US economy Republicans Economics United States Chris McGreal guardian.co.uk