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Republicans accuse Obama of wanting 'blank ch -

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ALI MOORE, PRESENTER: In Washington, Barack Obama and the Republicans' John Boehner have blamed
each other for the deadlock over the US debt crisis.

President Obama has condemned the Republican's demands for deep budget cuts saying the debt ceiling
must be raised by Congress.

For his part, Mr Boehner says the president wants a blank cheque to keep spending.

With the August 2 deadline now just days away, we're joined by Lateline's Washington correspondent
Craig McMurtrie.

Well Craig, the president and the Republicans are taking quite distinct positions, what are they
proposing?

CRAIG MCMURTRIE, WASHINGTON CORRESPONDENT: At this stage, House Republicans are proposing $3
trillion in spending cuts in two steps based on two votes - one now to lift the debt ceiling, the
other next year which would drop basically in the middle of a presidential election campaign in
2012.

For their part, Senate Democrats are proposing $2.7 trillion in cuts on one vote, pushing out the
next consideration of lifting the debt ceiling beyond that 2012 poll. But they're including savings
from winding down wars, and Republicans are saying that's a gimmick.

Last night Americans heard from both John Boehner and Barack Obama. John Boehner attacked the
president, saying that he wasn't serious about spending cuts, and as you can hear, Barack Obama
fired back in kind by saying Republicans aren't being fair by only talking about cuts. And he urged
Americans to ring their Congressional representatives and express their displeasure.

BARACK OBAMA, US PRESIDENT: So defaulting on our obligations is a reckless and irresponsible
outcome to this debate. And Republican leaders say that they agree we must avoid default.

But the new approach that speaker Boehner unveiled today, which would temporarily extend the debt
ceiling in exchange for spending cuts, would force us to once again face the threat of default just
six months from now. In other words, it doesn't solve the problem.

JOHN BOEHNER, US SPEAKER OF THE HOUSE: And the sad truth is that the president wanted a blank
cheque six months ago, and he wants a blank cheque today. This is just not going to happen.

You see, there's no stalemate here in Congress. The House passed a bill to raise the debt limit
with bipartisan support, and this week - while the Senate is struggling to pass a bill filled with
phoney accounting and Washington gimmicks - we're going to pass another bill, one that was
developed with the support of the bipartisan leadership of the US Senate.

Obviously, I expect that bill can and will pass the Senate and be sent to the president for a
signature. And if the president signs it, the crisis atmosphere that he has created will simply
disappear.

ALI MOORE: John Boehner there and before him the president. Given those words, Craig McMurtrie,
what chance of compromise?

CRAIG MCMURTRIE: Yes, well that's the big question, of course. There is still a feeling in this
town that because a US default is just inconceivable, that there will be some sort of
accommodation, but both plans in both Houses have problems.

Democrats need to be able to overcome a filibuster in the Senate. To do that they will need some
Republican votes. There's no evidence that Democrats can rely ... can get those Republican votes.

House Republicans, John Boehner, for his plan, he needs some support from the freshmen class of
Republicans, these conservative Tea Party-backed Republicans, and there's no clear evidence at this
point that he can rely on carrying his own party, that they will hold the line because they believe
that already there's too much compromise and many of them aren't that bothered at the idea of a US
default.

ALI MOORE: You say that but given the broader view that it's unimaginable, I mean is there any
sense in Washington of who might have the upper hand at this stage of negotiations?

CRAIG MCMURTRIE: Well, in terms of the argument in Washington, you'd have to say the Republicans
have the upper hand, possibly for three reasons. One, they were the ones that tied the raising the
debt ceiling to the demand for a deficit reduction plan.

That now seems to be a given. They are also the ones who lobbied for a $1 for $1 exchange - every
dollar the debt ceiling is raised there needs to be a dollar in cuts. Democrats now seem to be
accepting that.

They've held the line all the way through, saying that they weren't going to accept any tax
increases, including closing tax breaks for the wealthy. Now, Democrats and the president have
fought against, that but in the Senate Democrat plan there's no suggestion of closing tax breaks
for the wealthy.

So in Washington, Republicans appear to be winning the argument, but if you look at opinion polls
around the country, people seem to be blaming both parties but they are blaming Republicans more.

ALI MOORE: Well the markets, you know, like nothing less than uncertainty, how are they responding
to this?

CRAIG MCMURTRIE: Well, so far the markets seem to be holding their nerve. Treasury yields are up,
the dollar is down, the trading day begins again in a few minutes here in Washington.

There is concern though that as this goes down to the wire, market nerves will fray and there's
real concern here about America holding on to its cherished AAA credit rating. It's always had a
AAA rating.

Ratings agencies have warned that there is a significant possibility of a downgrade, with all that
that entails, and as politicians here search for quick fixes to try to get some sort of a deal to
lift the debt ceiling, they may not offer the sort of structural changes to deal with America's
deficit problem that the market and the ratings agencies are really looking for.

ALI MOORE: Craig McMurtrie in Washington. It's going to be a very interesting few days, many
thanks.