US warns of debt-limit risks

The White House on Monday urged Republicans not to link the raising of the US debt ceiling to spending cuts and admitted that President Barack Obama's own vote against an increase in 2006 had been a "mistake."

"He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration's policies, you can play around with," White House press secretary Jay Carney said.

At the time, Obama was a senator from Illinois when he voted against raising the debt ceiling while George W. Bush was president.

Now his own government may soon reach the current $14.3 trillion limit on its borrowing authority by mid-May and will need congressional approval to raise it further.

Republican support is far from guaranteed, and investors are worried that negotiations could soon get bogged down.

Republicans forced Obama's Democrats to accept $38 billion in spending cuts to avert a government shutdown Friday, and have said they will expect major new concessions in return for raising the debt ceiling.

Obama is set to lay out his long-term plan for deficit reduction in Washington later today.

The White House is anxious to separate the debate over the debt limit from the spending fight, but has not yet said whether Obama would veto a debt-limit bill that also has spending cuts attached.

"We should move quickly to raise the debt limit, and we support a clean piece of legislation to do that," Carney said.

House of Representatives Speaker John Boehner, the Republican who was instrumental in securing spending reductions in last week's negotiations, made it clear that he would insist on further cuts as part of the discussions on the debt ceiling.

"My members won't vote to increase the debt limit unless we are taking serious steps in the right direction," he told Fox News on Monday.

Failing to lift the debt ceiling risks the US defaulting on its debt. Carney said it could have an "Armageddon-like" impact on US interest rates and growth.

Reuters