The Dow plunged 513 points into correction territory in its worst percentage decline in more than two years, while the broader S&P 500 shed 4.8%, after anxiety over the economy sent traders racing out of stocks and commodities.
Created by StraitsTimes on 05/08/2011
Last updated: 16/08/11 at 09:36
U.S. stocks fell sharply Wednesday, nearly wiping out the previous session's huge rally, as fears about Europe's ongoing debt crisis resurfaced.
The Dow Jones industrial average (INDU) was down 380 points, or 3.4%, in the afternoon. Earlier, the index fell as much as 468 points.
The Dow Jones industrial average finished the day down 634.76 points Monday after a full-day sell-off accelerated in the final hour of trading as investors struggled to absorb Standard & Poor's decision to downgrade the United States' credit rating.
U.S. crude oil futures slumped more than 6 percent to an eight-month low at the close on Monday, battered by a sell-off spurred by the downgrade of the U.S. credit rating.
Gold hit new highs in Asian trading late Monday as stock markets slumped and the dollar struggled.
Gold futures jumped to $1,718 an ounce, a record high and up 4.2% from Friday’s closing price of $1,648.80 in New York. The metal now is up 21% year to date.
BRUSSELS - FINANCIAL officials from the Group of Seven industrialised nations will discuss how to coordinate action among their countries' central banks following several days of market panic and a downgrade of the US credit, a person familiar with the matter said.
The person spoke on condition of anonymity on Saturday because the level and timing of the contacts had yet to be confirmed.
Standard & Poor's downgrade of the US credit rating on Friday night added to growing fears over debt levels and economic growth in the world's biggest economy and in large European nations such as Italy and Spain. The downgrade is also set to hurt Europe, whose economy is closely linked to the US and whose weak members depend on strong demand abroad for their goods to help them grow.
Many economists see the world's big central banks as the last line of defence at this moment in the crisis, after policymakers in Europe and the US have failed to agree on the kind of shock-and-awe moves that many investors demand.
In the euro zone, the summer recess of national parliaments is delaying the implementation of crucial changes to the currency union's bailout fund that could help save Italy and Spain from expensive bailouts.
Possessing the power to create money, many central banks around the world have intervened in bond and currency markets in recent years in an effort to give their countries' struggling economies a shot in the arm. Just this week, the central banks of Switzerland and Japan moved to push down the value of their national currencies, hoping to spur exports. -- AP
WASHINGTON - GIVEN the size of the US economy and the pre-eminent role of the dollar worldwide, the cut to Washington's credit rating ought to spill over throughout the global economy.
But for the same reason - that the dollar and US debt are so widely held and relied on in finance and trade - many analysts think the impact will not be too heavy, at least in the short run.
Standard & Poor's cut the US's top-rank triple-A rating down a notch, to AA+, for the first time ever on Friday, technically signalling that the country's reliability for paying its debts had decreased. S&P rejected Washington's efforts to demonstrate it had embarked on a clear path to slash the country's deficit and reduce its debt load.
The debt burden topped US$14.6 trillion (S$17.7 trillion) this week, 100 per cent of GDP, virtually the same ratio as Italy, whose debt has been dumped in markets over rising default fears. Meanwhile the government continues to borrow some 40 cents for every dollar it spends, while the economy is barely growing and unable to generate the revenues needed to support its fiscal path.
The consequences of a downgrade are difficult to predict. Japan, cut twice in the past decade to stand at AA now, has a debt-to-GDP burden over more than 200 per cent, but continues to pay extremely low rates to borrow. Goldman Sachs warned last month in a study that the consequences of a downgrade were not easily foreseen.
Theoretically, the ratings cut should at least raise the borrowing costs of the government, to rates higher than AAA countries like Germany, and serve as a warning to get its fiscal house in order. Moreover, it should push down the dollar's value relative to other currencies from strong economies. And because the dollar and Treasuries are so crucial - China alone holds more than US$1.1 trillion worth of US debt and Japan, US$900 billion - any questioning of Washington's ability to pay its debts should unnerve the global financial system. -- AFP
WASHINGTON - STANDARD & Poor's stuck to its guns Saturday after a withering attack on its math skills and historical accuracy in the wake of its stunning first-ever downgrade of the US credit rating.
In what appeared to be an anonymous but brutal whisper campaign to undermine the company, White House and Treasury officials accused S&P of making a US$2 trillion (S$2.4 trillion) error and misreading basic data in cutting the rating of the world's largest economy to AA+ from triple-A.
Other critics have cited S&P's various upbeat assessments of companies and debt instruments weeks before they failed - including the packaged mortgage securities that sparked the 2008 financial collapse.
S&P officials, however, refused to budge on Saturday on accusations that they had made substantial errors in their assessment of the US debt and deficit. On Friday evening S&P followed through with its four-month-old threat to cut the US rating after what appears to have been tense discussions with US officials. S&P argued that the direction of the country's debt load and rising fiscal deficits meant it could not longer be included among the world's most risk-worthy sovereign borrowers.
It said last Tuesday's 10-year deficit reduction plan was insufficient and raised doubts about whether it would be fully implemented. But it also stressed what it saw as the inability of the US political establishment to commit to an adequate and credible deficit reduction plan.
'Our opinion is that elected officials remain wary of tackling the structural issues' needed to lower US borrowing and preserve the AAA rating, it said. It also singled out opposition Republicans for rejecting tax hikes that would help reduce the deficit. -- AFP
WASHINGTON - INVESTING guru Warren Buffett criticised the Standard & Poor's downgrade of the long-term US credit rating, saying it 'doesn't make sense' and would have a limited impact on markets.
'I don't get it,' the highly-respected founder and chairman of Berkshire Hathaway told Fox Business News late Friday, saying his Omaha, Nebraska-based company would hold onto its considerable trove of US Treasury bills.
'In Omaha, the US is still triple-A. In fact, if there were a quadruple-A rating, I'd give the US that,' he said, hours after the S&P cut the US credit rating from a sterling AAA to an AA+.
Mr Buffett said his firm holds well over US$40 billion (S$48.7 billion) in short end T-bills and that the decision 'doesn't tempt me to sell. We'll stay right there.' The billionaire investment wizard brushed off fears that the downgrade will roil world markets.
'If nothing else takes place, meaning, if all other variables hold and there isn't say, a new problem in Europe, it won't make any difference,' he said, referring to the growing euro zone debt crisis. 'The US, to my knowledge, owes no money in currency other than the US dollar, which it can print at will. Now if you're talking about inflation, that's a different question,' he added.
The S&P has defended its decision, attributing it in large part to political gridlock in Washington and the inability of Democrats and Republicans to agree on major spending cuts or revenue increases. -- AFP
WASHINGTON - STANDARD & Poor's cut the US credit rating for the first time in history on Friday, saying the country's politicians are increasingly unable to come to grips with its massive fiscal deficit and debt load.
S&P cut the US rating from its top-flight triple-A one notch to AA+, and added a negative outlook to it, saying there was a chance it could be downgraded again within two years if progress is not made cutting the huge government budget gap.
It said the 'political brinksmanship' of recent months shows that governance in the country is becoming 'less stable, less effective, and less predictable', raising the risks that it one day might not honour its debt.
It was the first time the US had been downgraded since it received an AAA rating from Moody's in 1917; it has held the S&P rating since 1941. The rating came after a strong pushback from the White House, which called S&P's analysis of the economy deeply flawed and politically-based.
A Treasury spokesperson alleged that there was a 'two trillion dollar error' in the S&P analysis, arguing that the agency admittedly used the wrong baseline and erred on spending plans and debt projections. But Mr John Chambers, chairman of the S&P sovereign ratings committee, defended the decision.
'It's a matter of the medium and long-term budget position of the United States that needs to be brought under control,' he said on CNN. 'This is a problem a long time in the making whether this administration and prior administration,' he said. -- AFP
ATHENS - PRIME Minister George Papandreou urged Greece's European partners on Friday to move fast to enact a recent summit deal on a second rescue for Greece, intended also to prevent contagion.
'The decisions having been taken by the leaders, the appropriate European institutions as well as member-states should proceed now to action and, in particular, the national parliaments, where that is necessary,' he said in a letter to EU commission head Jose Manuel Barroso.
'Provided these decisions are implemented in a timely and effective way, they will equip us with all those institutional and financial tools necessary for tackling swiftly the Euro zone public debt crisis.' Leaders of the 17 euro zone nations agreed a rescue plan worth 160 billion euros (S$276 billion) to help Greece and save the euro currency at a summit in Brussels on July 21.
But, just two weeks later the euro zone is again in a deep and widening debt crisis.
However the agreement has yet to be implemented as governments still need approval from their respective parliaments, many of which have broken up for the summer holidays.
In a letter to heads of government within the euro zone which was released on Thursday, Mr Barroso expressed that the crisis was spreading and was no longer limited to 'the euro-area periphery.' He also hinted at difficulties in negotiations on the small print, such as how easy to make it for the rescue funds to be applied in early-warning preventive mode, or how far to go in terms of demanding hard collateral in exchange for loans. -- AFP
WASHINGTON - THE US Treasury on Friday hit back against a Standard and Poor's downgrade of its AAA credit rating, saying there was a US$2 trillion (S$2.43 trillion) error in the agency's calculations.
'A judgment flawed by a US$2 trillion error speaks for itself,' a Treasury spokesman said, just after the US lost its AAA rating for the first time ever and was downgraded to a AA+.
It was the first time the US was downgraded since it first received a triple-AAA rating from Moody's in 1917; it has held the S&P rating since 1941.
Moody's and a third ratings agency, Fitch, say they continue to study the deficit plan to see if the US merits being kept in their ranks of AAA countries.
Earlier, an official close to the discussions with S&P said: 'There are deep and fundamental flaws with the S&P analysis.' -- AFP
ASIAN stock markets on Friday plunged the most since the darkest days of the financial crisis, as a witch's brew of debt and economic fears sent investors running for the exits.
The market had already slumped for most of the week - on fears that European giants Italy or Spain would require a bailout - which would be difficult for the eurozone given the size of their economies.
Recent economic data from Europe and the United States have led to speculation of a fresh recession.
But these could hardly have prepared investors for what was to come. Wall Street set the pace on Thursday night, as the Dow Jones Industrial Average dropped 513 points, or 4.31 per cent, the worst since late 2008.
Asian shares followed suit, and plunged in a way not seen way since the aftermath of the collapse of Lehman Brothers in September 2008 - a development which triggered the financial crisis.
At 2.30pm, Hong Kong's Hang Seng Index was down about 5 per cent, while Singapore's Straits Times Index (STI) had lost 122.74 points, or 3.95 per cent, to 2,984.27. The STI last lost more than 100 points in October 2008 as the markets digested the Lehman collapse.
Investors fled Wall Street in the worst stock-market selloff since the middle of the financial crisis in early 2009 in what has turned into a full-fledged correction. The Dow and the S&P tumbled more than 4 percent on Thursday and the Nasdaq lost 5 percent on fear the United States is staring at another recession and that Europe's sovereign debt crisis is swallowing two of its largest economies. Analysts predicted further losses even though stocks have fallen on nine of the last 10 days. Two-year Treasury yields fell to a record low as investors sought safety in short-term government bonds. "People are throwing in the towel because they can't find relief on any front," said Milton Ezrati, market strategist at Lord Abbett Co. in Jersey City, New Jersey, which manages $110 billion in assets. -- REUTERS
WASHINGTON - NEW orders received by US factories fell in June, pulled down by weak demand for transportation equipment, government data showed on Wednesday.
The Commerce Department said orders for manufactured goods fell 0.8 per cent after a revised 0.6 per cent increase in May.
Economists had forecast a 0.7 per cent decline after a previously reported 0.8 per cent rise.
Manufacturing has shouldered the economy's recovery and the slowdown in factory orders in June further diminished prospects of a strong and swift step-up in growth after a very weak first half.
Data on Monday showed manufacturing activity hit a two-year low in July. Gross domestic product growth slowed to an annual rate of 1.3 per cent in the second quarter after a 0.4 per cent pace in the January-March period.
Manufacturing accounts for about 12 per cent of GDP. -- REUTERS
NEW YORK - THE pace of growth in the US services sector ticked down unexpectedly in July to the lowest level since February 2010, according to an industry report released on Wednesday.
The Institute for Supply Management said its services index fell to 52.7 last month from 53.3 in June. The reading fell shy of economists' forecasts for 53.6, according to a Reuters survey.
The new orders gauge slipped to 51.7 from 53.6, while employment fell to 52.5 from 54.1.
A reading above 50 indicates expansion in the sector. -- REUTERS
NEW YORK - US STOCKS opened mixed on Wednesday after Tuesday's over two per cent drop, following the release of a better-than-expected report on private-sector job creation.
The Dow Jones Industrial Average slipped 2.65 points (0.02 per cent) to stand at 11,863.97 after five minutes of trading.
The broader S&P 500 rose 0.97 point (0.08 per cent) to 1,255.02, while the tech-heavy Nasdaq Composite climbed 6.22 points (0.23 per cent) to 2,675.46.
All three major US stock indices had plunged more than two per cent on Tuesday amid worries about economic weakness in the United States and Europe.
Before markets opened on Wednesday, payrolls firm ADP said a net 114,000 jobs were created by private, non-farm businesses in the United States in July, less than in June but above analysts' consensus forecast of 86,000. -- AFP
GROWING concern about the US economy is overriding any relief investors may be feeling now that Washington appears to have a debt deal that will avert a default by the federal government.
The House of Representatives on Monday evening passed a bill that would raise the US debt limit by at least US$2.1 trillion (S$2.5 trillion) and cut spending by a similar amount over the next decade. The agreement was reached on Sunday night by congressional leaders and President Barack Obama. The Senate is expected to approve it on Tuesday, and it will go to Mr Obama, who has indicated he will sign it.
US investors, however, had a tepid reaction to the deal on Monday, and that continued after the House approved it following the close of trading on Wall Street. The reason: The accord does little to address underlying worries about the economy, analysts and investors say.
Standard and Poor's 500 futures index, a barometer of upcoming trading on the broader US stock market, was down a little less than 2 points late on Monday after the vote in the House. And Japan's Nikkei 225 stock average, which had risen 1.3 per cent on Monday, opened 1.3 per cent lower on Tuesday.
The mild sell-off in Asia reflected Wall Street's pessimism on Monday after a disappointing report on US manufacturing. The Dow Jones industrial average finished down 10.75 points, its seventh consecutive decline. The Dow began the day up more than 140 points before falling by as many as 145.
The potential for an upswing in the US market on Tuesday could be muted because of the widespread expectation that the House would pass the deal and that the Senate will follow. -- AP
WASHINGTON - US PRESIDENT Barack Obama announced late on Sunday that he and top lawmakers had reached an 11th-hour deal to avert a disastrous debt default that would have sown chaos in the world economy.
'I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy,' Mr Obama said in hastily announced remarks at the White House.
In the US Congress, leaders of the Democratic-held Senate and the Republican-led House of Representatives said they would present the framework to their rank-and-file on Monday ahead of final votes to approve the deal.
'We're not done yet: I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days,' Mr Obama said, with time running short before a midnight Tuesday (12pm on Wednesday Singapore time) deadline.
The US government hit its debt limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally - but can only do so through August 2.
Business and finance leaders have warned default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 per cent in the wake of the 2008 global meltdown. -- AFP
The White House enters into intense negotiations with Senate Minority Leader Mitch McConnell, in a last-ditch effort to hammer out a bipartisan deal to raise the federal debt limit.
WASHINGTON - DEMOCRATIC US Senate Majority Leader Harry Reid (pictured) announced he would take steps on Friday that could set up a razor's edge final vote on averting a disastrous debt default on an Aug 2 deadline.
'This is likely our last chance to save this nation from default,' Mr Reid said in remarks to open the chamber. 'By the end of the day today, I must take action on the Senate's compromise legislation.'
His announcement came as Republican House Speaker John Boehner struggled to rally his restive majority around his proposal for ending the standoff after twice putting off a vote initially programmed for Wednesday.
Mr Reid was expected to move to end debate on a plan he laid out to raise the US debt limit past the November 2012 election, as sought by President Barack Obama, with a first procedural vote likely around 1.00am (1pm Singapore time) on Sunday.
A second vote would come around 7.30am (7.30pm Singapore time) on Monday, and final passage on Tuesday - when the US Treasury says cash-strapped Washington will run out of cash to pay its bills - a Democratic aide said.
Mr Reid said he would push ahead with his plan as written but also appealed to Republican Senate Minority Mitch McConnell to help him modify it in a way to make it more appealing to Republicans, who control the House of Representatives. 'I have invited Senator McConnell to sit down with me, and to negotiate in good faith knowing the clock is running down. I hope will accept my offer,' the Democratic lawmaker said. -- AFP
WASHINGTON - PRESIDENT Barack Obama on Friday warned the United States was 'almost out of time' to agree a deal to raise the nation's debt ceiling, insisting that a compromise was within reach.
'This is not a situation where the two parties are miles apart,' Mr Obama said in a White House statement, calling for a bipartisan deal and urging Americans to keep up the pressure on Republicans and Democrats to compromise.
'What's clear now is that any solution to avoid default must be bipartisan. It must have the support of both parties that were sent here to represent the American people. Not just one faction,' Mr Obama said.
Bitterly-divided lawmakers are seeking to hammer out a deal to raise the nation's US$14.3 trillion (S$17.21 trillion) debt ceiling before Tuesday when the Treasury says it will run out of the ability to borrow more funds to pay its bills.
The two sides have been wrangling for months over the details of such a deal, which is set to include deep spending cuts.
Mr Obama was speaking after a conservative revolt left the Republican party in disarray scrambling to save a bill proposed by House Speaker John Boehner, even though Senate Democrats and the White House have insisted it will never pass.
'The debt ceiling does not determine how much more money we can spend, it simply authorises us to pay the bills we already have racked up. It gives the United States of America the ability to keep its word,' Mr Obama said. -- AFP
WASHINGTON - THE Democratic-led US Senate voted late on Friday to set aside a House-passed Republican bill to avert a potential ruinous debt default, setting the stage for weekend talks on forging a compromise plan.
Lawmakers voted 59-41 against Republican House Speaker John Boehner's measure to raise the US debt ceiling in two stages to enable allow Washington to pay its bills past a Tuesday deadline.
Democratic Senate Majority Leader Harry Reid said he hoped Republican Senate Republican Minority Leader Mitch McConnell would help work out a final deal the outlines of which were far from clear with the clock ticking down.
The US economy hit its US$14.29 trillion (S$17.2 trillion) debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally - but can only do so through Tuesday.
Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment in the wake of the 2008 global meltdown.
Twenty-two House Republicans joined all 188 Democrats voting in opposing Mr Boehner's legislation, while 218 Republicans backed it - eking out the 216 votes needed for passage in the lower chamber. A key sticking point was the duration of any debt limit increase: Mr Reid and his Senate allies rejected Mr Boehner's plan in large part because it would set the stage for another high-stakes showdown in a few months. -- AFP
In a setback to the negotiations, all 53 members of the Senate Democratic caucus announce their opposition to the plan, in a letter to Speaker of the House John Boehner.
WASHINGTON - US President Barack Obama stepped up the pressure on Republicans over the US debt crisis Monday, scheduling a rare primetime speech to warn of 'incalculable damage' if a compromise is not reached.
'If we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy,' he said.
Mr Obama's warning, previewed by a White House official, came as Republican and Democratic leaders of Congress remained deadlocked over a plan to raise the US debt ceiling and deal with the country's ballooning deficits.
The prospect of the world's richest country running out of cash to pay its bills come August 2 sent stocks sliding and gold soaring while the IMF warned of a 'severe shock' to the world economy absent an elusive breakthrough.
'President Obama, like Democratic and Republican presidents before him, will make clear that failure to compromise and raise the debt ceiling would, in the words of former president Reagan, do 'incalculable damage',' the official said, speaking on condition of anonymity.
'With eight days until deadline, compromise is the only reasonable path ahead to keep our economy strong and growing,' the official said. -- AFP
WASHINGTON - REPUBLICAN House Speaker John Boehner announced on Friday he was pulling out of talks with the White House on averting an early August debt default and would work with the Senate to reach a deal.
'I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward,' Mr Boehner said in a letter to members of the House of Representatives.
In a hastily announced public appearance, President Barack Obama angrily assailed Mr Boehner for quitting the table and said he was calling him and other top congressional leaders to the White House for talks at 11am (1500 GMT, 11pm Singapore time) on Saturday.
Boehner's move cast doubt on the fate of efforts to raise the US$14.3 trillion (S$17.3 trillion) US debt limit by Aug 2, when the cash-strapped government of the world's richest nation will run out of money to pay its bills.
A House Republican leadership aide told reporters on condition of anonymity that Mr Boehner believed he needed to have a detailed plan to present to House Republicans by Monday. The aide also said that the two sides had been on track for a package that would have cut some US$3-US$3.5 trillion over 10 years.
Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to pay its bills and continue operating up to the deadline Finance and business leaders have warned failure to raise the US debt ceiling by then would send shock waves through the world economy, while Mr Obama has predicted a default would trigger economic 'Armageddon'. -- AFP
President Obama and House Speaker Boehner reportedly discussed a $3 trillion deficit-cutting deal. The deal upsets many Democrats for not including enough tax rises to offset spending cuts. In response, Obama repeats some revenues will need to be part of any accord.
WASHINGTON - US PRESIDENT Barack on Saturday renewed his call for a compromise in solving America's debt problem, saying it would take a 'balanced approach' and 'shared sacrifice' for Democrats and Republicans to come to an agreement.
'Simply put, it will take a balanced approach, shared sacrifice, and a willingness to make unpopular choices on all our parts,' Mr Obama said in his weekly radio address.
'That means spending less on domestic programmes,' the president explained.
'It means spending less on defence programmes. ... And it means taking on the tax code, and cutting out certain tax breaks and deductions for the wealthiest Americans.'
The US government reached its debt limit of US$14.29 trillion (S$17.42 trillion) in May, and since then the Treasury Department has used special measures to allow the government to keep paying its bills.
But unless the limit is raised by Aug 2, the Treasury says, growing spending and debt service commitments will force a default, which would have disastrous ripple effects throughout the global financial system. By Aug 2, the government will have to begin withholding payments - to bond holders, civil servants, retirees or government contractors - and the White House has urged a deal by July 22 to have time to pass it. -- AFP
Ratings agency Standard & Poor's says there is a one-in-two chance it could cut the U.S. credit rating if talks remain stalemated. Obama suspends talks and gives party leaders 24-36 hours to deliver a deadlock-breaking "plan of action."
A dismal jobs report focuses new attention on the sputtering economy. Obama says uncertainty about the debt ceiling talks is hurting economic expansion.
Obama invites top lawmakers to the White House to restart negotiations and clinch a deal by July 22.
Obama and Boehner meet secretly to discuss "grand bargain" that would save roughly $4 trillion over 10 years through a tax code overhaul and trims to benefit programs. -- REUTERS
US home prices rose in June for a third consecutive month, but fell compared to a year earlier.
Data analysis company Corelogic's home price index rose 0.7 per cent in June from the month before, though prices fell 6.8 per cent compared to last year.
Excluding distressed sales, prices declined just 1.1 per cent year-over-year.
The expiration of the home buyer's tax credit last year helps explain the year-over-year price decline, according to Mark Fleming, chief economist for CoreLogic. He added that price drops were more concentrated in the distressed sales market.
Home prices, including distressed sales, have fallen 31.7 per cent from their peak in April, 2006.
May year-over-year total home prices declined 6.7 per cent, revised from 7.4 per cent, while May year-over-year prices excluding distressed sales declined 2.1 per cent, revised from 0.4 per cent. - REUTERS
Democratic legislators discuss a scaled-back deal that would avert default but force Congress to tackle the debt ceiling issue again before the 2012 elections. The White House rejects the idea. -- REUTERS
The International Monetary Fund says the United States must lift its debt limit soon to avoid a "severe shock" to global markets and a still-fragile economic recovery. Obama calls for new steps to spur job growth and tax hikes on the rich, irking Republicans who remain focused on deficit cuts. -- REUTERS
Republicans declare an impasse in the Biden talks, saying Democrats are insisting on roughly $400 billion in new revenue by closing tax breaks for the wealthy and certain business sectors. -- REUTERS
Some 34 Senate Republicans vote to repeal tax breaks for ethanol, a sign that there may be some wiggle room in the party's no-tax-increase stance. -- REUTERS
In a sixth meeting of the Biden group, Treasury Secretary Timothy Geithner argues that tax increases need to be part of the equation, but Republicans remain unmoved. -- REUTERS
The House of Representatives rejects a measure to raise the debt limit in a vote staged by Republicans to pressure Obama to agree to accompanying spending cuts. Senior Democrats decry the vote as a political stunt, although 82 Democratic lawmakers join Republicans in defeating the bill. -- REUTERS
The "Gang of Six" talks falter as a leading conservative, Republican Senator Tom Coburn, drops out due to an impasse over healthcare. -- REUTERS
The United States reaches its $14.3 trillion debt limit. The Treasury Department begins tapping other sources of money to cover the government's bills. -- REUTERS
House Republicans release a spending outline for the coming fiscal year that has deep cuts in education, labor and health programs cherished by Democrats. -- REUTERS
House Speaker John Boehner, the top Republican in Congress, says any increase in the debt ceiling must be matched by an equal amount of spending cuts. The Treasury Department estimates it needs at least $2 trillion to cover borrowing through the November 2012 elections. -- REUTERS
Biden and negotiators from both parties hold their first meeting as top Republicans say there will likely be no broad agreement on tax reform and healthcare. -- REUTERS Photo: AFP
The House passes a budget that would cut spending by $6 trillion over 10 years, in part by scaling back medical care for the elderly and the poor. -- REUTERS
After Obama's initial proposal is criticized as inadequate, the president lays out a new deficit-reduction plan that would save $4 trillion over 12 years. He proposes that Vice President Joe Biden lead deficit-reduction talks.
Obama and congressional leaders bring the government to the brink of a shutdown before they agree on a budget for the current fiscal year that cuts $38 billion from last year's levels. Billed as the largest domestic spending cut in U.S. history, it actually causes the government to spend $3.2 billion more in the short term. -- REUTERS
The House passes a budget for the current fiscal year that would cut $61 billion from last year's levels. The Democratic-controlled Senate defeats it one month later. -- REUTERS
Sometime this month, six Republican and Democratic senators, known as the "Gang of Six," began talks on a long-term deficit-reduction deal they can present to their parties.
A report by a bipartisan deficit reduction panel commissioned by Obama advocates $3 trillion in spending cuts and $1 trillion in revenue increases - mainly by closing loopholes in the tax code - over 10 years. -- REUTERS
Republicans win control of the House of Representatives on a promise to scale back government spending and tackle budget deficits that have hovered at their highest levels relative to the economy since World War Two. -- REUTERS Photo: REUTERS