Obama Changes Course, Says He Will Sign Short-Term Debt Limit Increase if Necessary

With time running out on the August 2 deadline for the U.S. to raise its debt limit ceiling - or default on its loan obligations - President Obama and top lawmakers are coming to grips with the fact that they've painted themselves into a corner. Without a debt limit increase, the U.S. will default on its debt obligations for the first time, sending major shock waves through the global economy and likely wreaking havoc on the domestic economy as well. Originally, President Obama was adamant that he would not sign a short-term debt-limit increase in order to continue negotiations on a larger deal. That was several weeks ago, when there was still time to hammer out and finalize a larger deal.

With no deal in place and no time remaining, the President is now being forced to back off of his earlier stance on the short-term debt-limit increase. As it stands, he's going to have to do that even if an agreement is reached in principle on one of the two leading plans currently working their way through Congress. A third plan, and one that will likely die in the Democrat-controlled Senate, is a fairly aggressive "cut, cap and balance" plan that is favored by most of the new GOP members of Congress.

And while Obama has expressed a willingness to extend the debt limit temporarily, he's also signaled that he will only do it if a larger agreement has been reached. So, there is still work to be done in short order if the U.S. is going to avoid default.

Perhaps most important among all of the drama surrounding the debt and debt limit negotiations is the fact that this is the new political world. With the global economy now drowning in unmanageable debt, there will be no economic recovery. Rather, we'll simply revisit the same failed policies at every annual budgetary event, assigning blame, calling for change and, ultimately, doing nothing to address the problems.