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Obama Calls on Party Leaders to Stave Off Default

July 6, 2011 (Associated Press) WASHINGTON - President Barack Obama summoned leaders of both parties to the White House to hammer out a deal to stave off a U.S. debt default with the potential to trigger a major, worldwide financial crisis.

Speaking Tuesday, Obama called for a deal to raise the country's borrowing limit that not only cuts spending, as opposition Republicans are demanding, but also raises revenues in the form of tax increases - something that they violently oppose.

"We need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people," Obama said at the White House.

Obama said Republican and Democratic leaders from the House and Senate were invited to meet on the issue Thursday at the White House. That would bring the top eight lawmakers together with Obama, Vice President Joe Biden and top administration financial officials.

"It's my hope that everybody's going to leave their ultimatums at the door, that we'll all leave our political rhetoric at the door," Obama said.

Obama spoke as the Aug. 2 deadline for raising the U.S. borrowing limit came closer.

The Obama administration warns that if the debt ceiling is not raised by that date, the U.S. would face its first default, potentially throwing world financial markets into turmoil.

Many congressional Republicans indicate they're unconvinced that such scenarios would occur and say that tax hikes would hurt American businesses. Some Obama administration officials worry that it could take a financial calamity before Congress acts.

The ratings agency Standard & Poor's has warned it would give the U.S. government its lowest credit rating if lawmakers fail to raise the borrowing limit and the United States defaults on its debt, but so far markets have remained unfazed, apparently doubting lawmakers would willingly throw the economy into a tailspin.

Raising the U.S. debt ceiling, usually little more than a formality in most years, has turned into a game of political brinksmanship ahead of the 2012 presidential elections with Republicans demanding huge spending cuts as the price for their support.

Although not required to raise the debt limit, lawmakers and the administration are seeking deficit cuts in the range of $2.4 trillion over the coming decade to balance a similar increase in the debt limit - enough to keep the government afloat past the November 2012 election. Currently, the debt limit is $14.3 trillion.

Obama met with Republican House Speaker John Boehner on Sunday, the first session since Republicans last month abandoned negotiation.

Boehner said he'd be happy to join further discussions at the White House but predicted they "will be fruitless until the president recognizes economic and legislative reality."

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