White House warned of horrendous economic consequences

Cantor pulled out of the latest session of talks, while Boehner said "tax hikes are off the table" Crucial high-level talks on raising the US borrowing limit collapsed after Republicans walked out, accusing the White House of provoking an impasse with demands to raise spending and taxes .
The move sparked fears that Congress will fail to raise the 14.29 trillion dollar debt ceiling by an August 2 deadline and cause the United States to default on its obligations, sending shockwaves through the global economy.
Republicans, who won the House of Representatives last November amid public anxiety over government debt, will only back raising the borrowing limit in return for steep cuts in the annual deficit set to hit $1.6 trillion this year.
House Republican leader Eric Cantor pulled out of the latest scheduled session of talks chaired by Vice President Joe Biden on the issue because he said Democrats continued to insist that any deal must include tax increases.
"I believe it is time for the president to speak clearly and resolve the tax issue," he said, adding the tax row had to be resolved before talks could go on.
House Speaker John Boehner, who it emerged Thursday held unannounced talks with President Barack Obama at the White House a day earlier, added: "tax hikes are off the table."
Completing what appeared to be a coordinated assault, Senate Republican minority leader Mitch McConnell criticized Obama in unusually personal language.
"It's worth asking: Where in the world has President Obama been for the past month?" McConnell said.
"He's in charge. I think most Americans think it's about time he starts acting like it."
The White House in turn accused Republicans of seeking to safeguard tax cuts for the rich at the expense of America's most vulnerable citizens, striking notes likely to be prominent in the coming 2012 presidential election campaign.
Biden signaled in a statement that it was now up to Obama and Boehner to weigh in to determine the final scope of an agreement and said the talks would remain in abeyance pending their guidance.
He praised all sides in the talks for forging progress, but reiterated that the White House would seek a "balanced" approach -- code for some revenue increases through tax hikes as well as spending cuts for high earners.
"The only way to make sure we begin to live within our means is by coming together behind a balanced approach that finds real savings across the budget - including domestic spending, defense spending, mandatory spending, and loopholes in the tax code," Biden said.
"We all need to make sacrifices, and that includes the most fortunate among us.
The US government hit its legal borrowing limit on May 16 and the talks are designed to secure congressional approval to raise the ceiling.
The White House has warned of horrendous economic consequences which could impact the global economy if the US government is not allowed to borrow any more money and is forced to default on its debt.
The Treasury, which has performed a number of intricate financial measures, says it will run out of maneuvering room on August 2.
But both sides hope a deal will be done long before then, to allow for congressional debate and votes on raising the ceiling.
Financial rating agencies have warned of a possible downgrade of the top US debt rating without an increase in the debt ceiling. And a failure to reach a deal could potentially lead to a default with catastrophic consequences.
Both Obama and Republicans have agreed on a figure of roughly $4 trillion in budget cuts that they say is vital to reining in the deficit in the long-term and putting the economy on a sustainable path to fiscal prudence.
But they are still sharply at odds about how to make the savings.
Republicans claim Obama is interested in preserving big government programs and wants tax increases which would harm the economy.
The White House says Republican budget plans would place the very survival of popular social programs like Medicare health plans for the elderly at risk, and would also cut vital investments in clean energy and education.