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U.S. President Barack Obama

Jim Watson/Pool via Bloomberg

U.S. President Barack Obama speaks during a televised address at the White House in Washington, D.C., U.S., on Monday, July 25, 2011.

U.S. President Barack Obama speaks during a televised address at the White House in Washington, D.C., U.S., on Monday, July 25, 2011. Photographer: Jim Watson/Pool via Bloomberg

President Barack Obama warned that the nation’s burgeoning debt threatens to do “serious” damage to the economy and that Congress must compromise to address future deficits.

“If we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy,” Obama said in a prime-time address from the White House.

He called on lawmakers to put politics aside to reach a deal on a “balanced” approach and blamed the current stalemate on a group of Republicans in the House who are insisting on budget cuts and no tax increases.

House Speaker John Boehner and Senate Majority Leader Harry Reid unveiled their own proposals earlier today. Obama endorsed Reid’s plan and said tonight that Boehner’s measure is simply“kicking the can further down the road.” Both sides will have to compromise further, Obama said.

“Democrats and Republicans agree on the amount of deficit reduction we need,” he said. “The debate is about how it should be done.”

In a televised response, Boehner, an Ohio Republican said, Obama was asking for a “blank check.”

“The president has often said we need a ‘balanced’approach -- which in Washington means: we spend more, and you pay more,” Boehner said in his response. “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.”

Risk of Default

Obama said that a failure to get a deal risks forcing the U.S. to default on some of its obligations. He urged Americans to pressure their representatives in Washington to act.

If Congress doesn’t agree, “interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people,” Obama said. “We would risk sparking a deep economic crisis - one caused almost entirely by Washington.”

As the stalemate in Washington continued, U.S. stocks and Treasuries declined. The Standard & Poor’s 500 Index slipped 0.6 percent to 1,337.43 at 4 p.m. in New York after losing as much as 1 percent. The 30-year Treasury yield rose six basis points to 4.32 percent.

The cost of insuring U.S. debt rose, sending credit-default swaps on Treasuries up three basis points to 56.15, approaching the highest in 17 months, according to CMA Analytics.

Competing Plans

Boehner’s two-step plan would raise the U.S. borrowing limit by up to $1 trillion and later by $1.6 trillion while requiring larger spending cuts. Obama and Senate Democrats say they will oppose a short-term increase in the limit because it would force another debt standoff next year.

By contrast, Reid’s proposal would cut $2.7 trillion in spending and give Obama the full $2.4 trillion in additional borrowing authority he seeks, enough to get through the 2012 elections. Neither plan would raise taxes.

Lawmakers have missed self-imposed deadlines to craft legislation, and credit rating agencies, such as Standard and Poor’s, have threatened to downgrade U.S. debt if Congress fails to produce a plan that addresses long-term deficits.

-- With assistance from Kate Andersen Brower in Washington,Candice Zachariahs in Sydney and Nikolaj Gammeltoft and Jeff Kearns in New York. Editors: Joe Sobczyk, Robin Meszoly Pres