US debt crisis continues as Congress talks falter

Washington — With global markets on edge, congressional Democrats and Republicans struggled through another day of difficult talks but failed to agree on cutting U.S. spending and raising the debt limit — a necessary measure to prevent an unprecedented Aug. 2 default.

Political leaders had hoped to strike a deal Sunday to reassure investors around the world that the nasty partisan fight in Washington was nearing an end, lifting fears that the United States would be unable to cover its debts when the current borrowing limit expires a week from Tuesday.

Instead, House Republicans and Senate Democrats readied rival debt-limit emergency fallback plans in hopes of reassuring world financial markets.

The stakes are high. Major global credit ratings agencies have threatened to downgrade the U.S. government’s triple-A credit rating unless there are assurances that the United States will not go into default for the first time in its history. A default could mean that the U.S. government could not pay all its bills starting next month, including interest and principal on Treasury bonds, Social Security checks to retirees, and payments to government contractors.

Lowering the U.S. credit standing likely would raise the cost of U.S. government borrowing. Americans seeking home mortgage or car loans would see interest rates climb, as would people with outstanding credit card balances.

President Barack Obama says that effectively amounts to a tax increase on Americans. Many economists think default could push the U.S. economy back into recession or worse, while causing chaos in the global economy.

Both Republicans and Democrats in Congress and Obama have sought to position themselves to avoid possible blame./ap

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