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Efforts Intensify to Avert US Debt Crisis

US President Barack Obama answers a question during a news conference at the White House, June 29, 2011 (file photo)

One day after President Barack Obama urged the U.S. Congress to intensify efforts to avert a debt crisis, the Senate appears to be doing just that. A recess has been canceled, and the president has been invited to Capitol Hill for direct talks with lawmakers.

If President Obama hoped to spark a reaction from Congress on the urgency of U.S. debt negotiations, he appears to have succeeded. At the president's urging, Senate Majority Leader, Democrat Harry Reid canceled next week's scheduled Independence Day holiday recess.

Meanwhile, the chamber's top Republican, Minority Leader Mitch McConnell, urged a more immediate step. "I would like to invite the president to come to the Capitol today to meet with Senate Republicans," McConnell said.

McConnell said Obama should hear a direct Republican response to Wednesday's presidential news conference, where Obama urged greater flexibility from Republicans on ways to trim the federal budget deficit.

The White House declined the on-the-spot invitation. Press Secretary Jay Carney says the president is well-aware of the Republican stance on the budget, but he reaffirmed the president's commitment to continue negotiations.

The back-and-forth activity comes ahead of an August deadline to raise the federal borrowing limit or face a possible default on America's $14 trillion national debt. Republicans have insisted on trimming the federal budget deficit as a condition for raising the debt ceiling.

Members of both major political parties agree that federal spending must be cut. But Democrats say they favor limited cuts in domestic spending, combined with higher taxes on the wealthy. So far, Republicans have refused to consider raising taxes on any segment of society.

"Our problem is not that we are taxed too little. Our problem is we are spending way too much," said Republican Senator Jon Kyl of Arizona.

Republicans say tax hikes proposed by Democrats would punish small businesses that create jobs as well as America's struggling middle class.

Democrats largely have abandoned hope of raising federal income tax rates on anyone, wealthy or otherwise. Instead, they now advocate ending special tax breaks that benefit the well-to-do and certain corporate interests, such as the petroleum industry.

Democrats took to the Senate floor to criticize preferential tax treatment enjoyed by the richest Americans, such as accelerated tax deductions available to racehorse owners.

"Horse racing may have been called 'the sport of kings,' but that does not mean that the owners of horses, those millionaires and billionaires, need royal tax treatment," said Democratic Senator Jeff Merkley of Oregon.

New York Democratic Senator Charles Schumer took aim at interest deductions for purchasing luxury yachts. "The deduction Congress helped create for middle class families to realize the American dream of homeownership is helping millionaires and billionaires get a 35 percent discount on their yachts," Schumer said.

Republicans counter that even if such tax breaks were eliminated, the fiscal impact would be minimal - at most, a few billion dollars from a $1.6 trillion federal deficit. Democrats respond that the issue is one of fairness and shared sacrifice.

Senator Schumer says that if Democrats accept budget cuts to programs that benefit the poor and disadvantaged, Republicans must be willing to end tax breaks for the wealthy. "We will not get anywhere unless both sides compromise," Schumer added.

Republicans say Democratic attempts to preserve federal spending levels and raise tax revenues will hurt an already-struggling U.S. economy and make the debt crisis even more severe.

"Who really thinks that the answer to a $1.6 trillion deficit is more deficit spending? Where in the world does that idea come from?" asked Senator McConnell.

Allowing taxes to rise would violate a pledge many Republican lawmakers made when running for Congress. Similarly, allowing sweeping cuts to educational programs and America's social safety net would anger core constituencies of the Democratic Party. Both sides agree on the need to put the United States on a sustainable fiscal path. But with only weeks to go before the federal government reaches its borrowing limit, a bipartisan debt-reduction deal shows no sign of materializing.