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This standoff on US debt is now a deadly game of brinkmanship

STAGING an economic tug of war on the edge of a cliff is a risky business -- especially if you lose.

As the rest of the world looks on in bewilderment at the Washington stand-off, the sense of disbelief and seething anger of ordinary Americans is reaching breaking point.

Even so, there seems to be no immediate end to the row in sight.

The most powerful politicians in the US have become hopelessly bogged down in talks on the debt limit. They need to reach a deal by the August 2 deadline.

This powerplay is being fought against the backdrop of another even bigger date: election day on November 6, 2012. Many of the obstacles in the way of a debt agreement are due to both parties positioning themselves for presidential and congressional races next year, in which the economy is going to be the main issue.

Democrats are using the debt talks to argue that they care most about working-class Americans.

In campaign-style rhetoric, they have labelled Republicans as extremists who want to cut social-spending programmes -- such as healthcare for the elderly -- in order to protect perks and tax breaks for the rich.

Republicans, in turn, have accused Democrats of being too beholden to labour unions and other interest groups.

President Obama has cancelled a series of campaign fundraisers this month to stay in Washington for the tense debt negotiations that have worried financial markets.

Legislators and Mr Obama need to reach a deal by next Tuesday or the US will face an unprecedented default on its debt.

In a televised address to the nation on Monday night, Mr Obama warned that there would be a "deep economic crisis" unless there was a compromise.

"We can't allow the American people to become collateral damage to Washington's political warfare," he said.

Moments later, Republican House Speaker John Boehner responded that the president "wants a blank cheque" to continue government spending that is "sapping the drive of our people".

Mr Boehner wants to raise the US debt limit in stages, which would force Congress to confront the politically painful issue again before the elections in 2012. That could tie up Obama in further negotiations next year at a time when he should be campaigning for a second term in the White House.

"I see an absolute political calculus in it," said Norman Ornstein, a political scholar at the American Enterprise Institute.

Having the deficit debate come up again next year, with an even greater risk of default and a lower US credit rating, would help Republicans push Democrats harder for spending cuts, he added.

Most opinion polls show that Mr Obama is favourite to beat any Republican challenger, although his lead is slipping as the high unemployment rate stays stuck.

Republicans have a decent chance of winning control of the Senate in 2012.

The debt argument is already sounding like a full-blown election campaign.

"They'd rather cut social-security benefits than end taxpayer-funded giveaways for billionaires and millionaires," Senate majority leader Harry Reid said of the Republicans.

On the other side of the argument, Kevin McCarthy, the third-ranking Republican in the House, said: "The president continues to put politics over people. His only concern when you listen to him is to bring up the election."

Both sides risk alienating supporters during the campaign season if they give in too much or appear more interested in scoring points than forging a compromise, given the economic risks at a time of 9.2pc unemployment.

OBAMA is risking anger from Democrats on the left, who fear he will agree to too many cuts in government programmes without insisting that Republicans agree to tax increases.

Republican leaders, in turn, must placate conservatives who are fiercely opposed to any increase in taxes.

"Democrats don't realise just how much Republicans oppose tax increases," said Jonathan Collegio, communications director at the American Crossroads political-action committee, which is linked to the Republicans.

He said Mr Obama, for example, had not offered to repeal his healthcare law as a concession to Republicans.

"He's asking Republicans to slice into their sacred cow, while he's not offering a slice into his," said Mr Collegio.

But a hard line could alienate moderates and independents, whose support will be essential to election victory.

Recent polls have shown that Americans are angry with both parties -- but they blame Republicans more.

"The broader issue for the Republicans is . . . if they look like they're the obstructionists then that's a drag on them going into 2012," said Herb Asher, a political scientist at the Ohio State University.

Irish Independent