President Obama resorts to 'last-ditch option' in debt crisis

Two weeks before a “catastrophic” U.S. government default could bring bedlam to global financial markets, President Barack Obama is resorting to a “last-ditch option” to get Congress to raise the country’s borrowing limit by Aug. 2, the White House said Monday.

With debt talks stalled, the Senate is working on a fall-back plan proposed by Mitch McConnell, (R-Ky.) that would authorize Obama to unilaterally raise the $14.3 trillion debt ceiling in three stages through the 2012 election, giving him full responsibility for the results.

A mostly symbolic House vote is expected Tuesday.

Meanwhile, Sen. Tom Coburn, (R-Okla.) unveiled a plan to cut the nation’s deficit by $9 trillion during the next decade, including $1 trillion in tax increases opposed by most of his fellow Republicans.

His plan would raise the age to collect full Social Security benefits to 70 and cut farm and housing subsidies, Medicare, student aid, and funding for community development grants.

“We don’t have the luxury anymore of pursuing one [option] only,” said White House spokesman Jay Carney. “We have to make sure ... that, no matter what happens, the United States does not default.”

Obama has set a Friday deadline for congressional leaders to agree on a budget deal.

(with Reuters)