US financial crisis deepens as Obama and Speaker trade blows

Mr Obama said the long and caustic fight was a “partisan three-ring circus.” Mr Boehner, borrowing the President’s very words, said Mr Obama “would not take yes for an answer”.

Their words swept through the national television audience just hours after Mr Boehner and Harry Reid, leader of the Democratic-controlled Senate, offered competing deals to break the deadlock over raising the Treasury’s ability to continue borrowing money to pay its bills after the current $14.3 trillion limit expires next Tuesday.

Many have predicted dire consequences for the American and global economies should the United States default.

The President and his Democratic allies have sought a plan that would cut the spiralling US deficit and debt through a package of deep cuts in government spending while increasing tax revenues through revocation of loopholes and the rate cuts for wealthy Americans instituted under former President George W. Bush.

Republicans, under the sway of their tea party wing, refuse to even consider higher taxes.

The latest measure Mr Boehner and the Republican leadership have presented in the House, in addition to spending cuts and an increase in the debt limit to tide the Treasury over until next year, called for a second increase in borrowing authority sometime next year that would hinge on approval of additional spending cuts sometime during the election year.

Mr Obama said he opposed such a two-stage move because it was not likely to prevent a downgrading of America’s triple-A credit standing.

The White House backed the new Senate Democratic plan on Monday even though it omitted Mr Obama’s requirement of increased tax revenues. It would raise the debt limit by $2.4 trillion to carry the country into 2013, beyond the next election. It calls for $2.7 trillion in federal spending cuts, but assumes $1 trillion of that would derive from the end of the wars in Iraq and Afghanistan.

Echoing the disgust he voiced on Friday when Mr Boehner walked away from talks, the President said: “The American people may have voted for divided government, but they didn’t vote for a dysfunctional government.”

Concessions from both sides embedded in the competing legislation were largely obscured by the partisan rhetoric. With their revision, House Republicans relaxed their earlier insistence of $6 trillion spending cuts.