President Obama said on Friday that time is running out for lawmakers to reach an agreement to raise the federal debt ceiling and significantly reduce the deficit. If they fail to do so, everyone will face the consequences, he warned, which would basically amount to a “tax increase on everybody” in the form of higher interest rates.

“We could end up with a situation, for example, where interest rates rise for everybody all throughout the country – effectively, a tax increase on everybody – because suddenly, whether you’re using your credit card, you’re trying to get a loan for a car or a student loan, businesses that are trying to make payroll – all of them could end up being impacted as a consequence of a default,” said Obama during his third news conference on the issue in two weeks.

Throughout the months-long negotiations, Republicans have insisted that they would not agree to raise the debt ceiling without a commensurate amount in spending reductions. In addition, they have balked at the idea of raising revenues by closing tax loopholes, which would help reduce the deficit.

“We don’t have to do anything radical to solve this problem. Contrary to what some folks say, we’re not Greece, we’re not Portugal,” he said. “It turns out that our problem is, we cut taxes without paying for them over the last decade. We ended up instituting new programs, like a prescription drug program for seniors that was not paid for. We fought two wars. We didn't pay for them. You know, we had a bad recession that required a recovery act and -- and stimulus spending and -- and helping states, and all that accumulated, and there's interest on top of that.”

Obama said that lawmakers shouldn’t be this close to the August 2 deadline. Still, the American public expects them to raise the debt limit and begin putting the nation’s fiscal health in order. The president also said he expects the “logjam” to break within the next 36 hours when he hopes congressional leaders will present him with a plan both sides can agree on.

When asked why he continues to hope that the talks will ultimately produce an outcome, Obama quipped, “I always have hope. Don’t you remember my campaign?”

(Photo: AP Photo/Pablo Martinez Monsivias)