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Default looms as Obama and Republicans argue

Default looms as Obama and Republicans argue
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With time running out before the US hits a limit on borrowing President Barack Obama and his political opponents in Congress the Republicans have again failed to reach agreement.

The US Treasury Department says it will run out of money to cover the country’s bills if Congress does not raise the trillion debt limit by August 2.

The two sides continue to talk but cannot reach an agreement of taxes.

With a so-called “grand bargain” to tame the national debt seemingly off the table, Obama, House of Representatives Speaker John Boehner and other leaders will try for a more modest deal.

But negotiators will have to confront a divide over taxes that has prevented them from reaching a deal so far. Democrats say new tax revenues need to be part of the equation, while Republicans say they will not back any increase in taxes.

Failure to work out a deal on the debt limit could push the US back into recession, send shock waves through global markets and threaten the dollar’s reserve status.

The real deadline is even closer. Participants say a deal should be in place July 22 to ensure Congress has time to act.