Obama: Republicans using ‘extortion’

US President Obama has said he is willing to hold budget talks with Republicans, but not until they agree to lift “threats” against the economy.

Republicans “don’t get to demand ransom in exchange for doing their jobs,” Mr Obama said, by demanding concessions in policy before reopening government.

The US government shut down last week when Congress failed to agree a budget.

Republican leaders on Tuesday renewed their calls for Mr Obama to open negotiations over ending the impasses.

Republican House Speaker John Boehner told reporters he was “disappointed that the president refuses to negotiate”.

He said the president’s position not to talk with Republicans “until [they] surrender” was not sustainable, and any discussions regarding the debt ceiling must address how the nation is “living beyond its means”.

At the White House, Mr Obama said he had spoken to Mr Boehner and was “happy to talk with him and other Republicans about anything”.

But Mr Obama said any negotiations on the ongoing government shutdown or the debt limit “shouldn’t require hanging the threats of a shutdown or economic chaos over the heads of the American people”.

“We can’t make extortion routine as part of our democracy,” Mr Obama said. “Democracy doesn’t function this way. And this is not just for me. It’s also for my successors in office, whatever party they’re from.”

‘Very deep recession’

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image of Mark MardellAnalysisMark MardellNorth America editor

Mr Obama said he understood why it was difficult for Republicans to vote to lift the debt ceiling – it’s a lousy name that suggested the debt itself was being increased.

There are no more rabbits in the hat, Mr Obama said. If it didn’t happen there would be economic chaos.

But the barest glimmer of a suggestion came when he said that the Republicans could vote to lift the threat for the period that it took to negotiate.

That was pretty much a throwaway line, but it could be a way forward for some.

But not others. One conservative strategist I spoke to told me his side thought that breaching the debt ceiling would not be a disaster and they would be trying hard to get that line out.

He also warned of the repercussions of defaulting on the government’s debt should Congress fail to raise the borrowing limit, currently set to be reached on 17 October.

Mr Obama said breaching the borrowing limit could disrupt capital markets, undermine international confidence in America, permanently increase the nation’s borrowing costs, add to its deficits and debt, and pose the “significant risk of a very deep recession”.

The US government partially shut down operations on 1 October after Republicans who control the House of Representatives refused to approve a budget, saying they would only do so if Mr Obama’s healthcare reform law were delayed or stripped of funding.

Mr Obama and the Democrats have thus far refused, noting the law was passed in 2010, subsequently approved by the Supreme Court, and was a central issue in the 2012 election which Mr Obama won handily.

At the same time, the Republicans have refused to approve an increase in the US debt limit unless it is accompanied by significant spending cuts and other policy concessions.

Mr Obama maintains Mr Boehner could end the current government showdown by allowing the House to vote on a “clean” budget bill that does not alter the health law, because that could pass with votes from both Democrats and moderate Republicans.

But doing so would risk damaging his standing with the most conservative elements of his caucus, analysts say.

‘Too much shock’

US and foreign officials and economists have warned of severe economic consequences if the US defaults on its debt because the government is unable to borrow money to fund its obligations.

“Failure to lift the debt ceiling would be a major event. Prolonged failure… would almost surely derail the US recovery,” said International Monetary Fund economic counsellor Olivier Blanchard on Tuesday.

“But the effects of any failure to repay the debt would be felt right away… leading to potentially major disruptions in financial markets both in the United States and abroad.”

Philippine President Benigno Aquino warned that what happens in the US “affects us all”.

“The US economy is the number-one economy in the world,” he said while attending the Asia-Pacific Economic Cooperation (Apec) in Bali.

“The world economy obviously is not in a position to withstand too much shock at this time.”

At the White House, Mr Obama said that if the US eventually dealt with the impasse “the way we should”, then “folks around the world will attribute this to the usual messy process of American democracy but it doesn’t do lasting damage”.

He sought to reassure US bond holders and others that the country remained good for its debts, despite the shutdown.

“My message to the world is the United States always has paid its bills and it will do so again,” Mr Obama said.

The shutdown has already had a significant impact in the US.

Hundreds of thousands of workers have been sent home without pay, national parks, museums, and tourists sites have been closed, research has halted, and more.

Visitors to the iconic Grand Canyon in Arizona have got no further than locked gates around the site, which normally attracts 18,000 visitors a day as weather cools about summer highs.

Workers in small towns that depend on Grand Canyon tourism for their livelihoods are having to resort to food banks.

On Monday, US defence contractor Lockheed Martin said it would put 3,000 workers on unpaid leave, warning that number would rise if the government shutdown continued.

That announcement followed United Technologies’ decision to lay off 2,000 employees temporarily, saying manufacturing had halted because there were no government inspectors working to sign off products.