Obama to face fresh test of resolve over budget talks Jack Lew, the US Treasury secretary, said on Tuesday that the administration would not negotiate over congressional approval to lift US borrowings, drawing a line in the sand ahead of high-stakes budget talks with Republicans in coming weeks. But after a fortnight in which President Barack Obama has zigzagged between diplomacy and military action on Syria, and backed away from nominating Lawrence Summers to head the Federal Reserve, Republicans plan to test the president's resolve. Washington faces two fiscal crises in the next month pitting the White House against Republicans in Congress, both of which are littered with partisan mines to make passage difficult in such a short period of time. Congress must approve a new budget by the end of the month or face a government shutdown, and also lift the country's borrowing limits by around mid-October to fund public spending at the threat of triggering a sovereign default. The stand-off coincided with the release from the non-partisan Congressional Budget Office of its latest dire warning about the long-term fiscal outlook in the US. According to the CBO, federal debt held by the public - now at 73 per cent of gross domestic product - will reach 100 per cent of the economy in 2038, a trajectory it dubbed unsustainable. Mr Obama goes into the budget negotiations buffeted by his struggle to control policy on Syria and controversy over his handling of the choice of a new Fed chief. But the Republican leadership in Congress is even weaker. Tea Party-backed Republicans are demanding that approval for spending measures be linked directly to the withdrawal of funding for Mr Obama's signature legislative achievement on health reform. The initial budget proposal put forward last week by John Boehner, the Speaker, and Eric Cantor, the majority leader, attempted to finesse this issue and was immediately shot down by their Republican colleagues. In a speech on Tuesday in Washington, Mr Lew reiterated the White House's position on "Obamacare," which was passed in 2010, upheld by the Supreme Court in 2012 and starts in earnest within weeks. [Mr Obama] will not negotiate over the debt ceiling. He will not accept measures that would tie a debt-limit increase to defunding or delaying [Obamacare]," said Mr Lew. With only two weeks to go for a new budget to be passed and Republicans unable to coalesce around a new position on the budget and "Obamacare," the likelihood of a government shutdown is growing. "There are about 50 to 60 [Republicans in the House] who are willing to drive the car over the cliff and call it a victory," said John Lawrence, a former chief of staff to Nancy Pelosi, the Democratic House minority leader. Although America's short and medium-term outlook has improved over the past year on the back of a stronger economy, and a mix of higher taxes and spending cuts, the CBO report showed that government outlay, largely on health and pensions for the elderly, is still on track to rise sharply as baby boomers retire. There are about 50 to 60 [Republicans in the House] who are willing to drive the car over the cliff and call it a victory. John Lawrence, former chief of staff to Nancy Pelosi, Democratic House minority leader Federal spending for Social Security, the pension programme, and the biggest healthcare programmes including Medicare, will account for 14 per cent of GDP by 2038, a much bigger share than the 7 per cent average of the past 40 years, the CBO said. Government spending on everything else, including investments in infrastructure and education, is slated to shrink. Revenues, now at 15 per cent of GDP, will rise to 19.5 per cent of the economy by 2038, just above the 17.5 per cent average of the past 40 years, but below levels that could match the spending in current US policy. Mr Obama and Republicans in Congress have made repeated attempts over the past few years to strike a "grand bargain" on fiscal policy that could reform the big so-called "entitlement" programmes to make them financially sounder and brighten the long-term US fiscal picture. But they have always failed, with Republicans resisting higher taxes on the rich demanded by Democrats in exchange for cuts to programmes. Instead, lawmakers and the Obama administration have struck piecemeal agreements that have produced near-term fiscal tightening - which many judge to be too aggressive and focused in the wrong places - but have been unable to tackle the country's longer-term fiscal problems. "It is time for lawmakers to look at the tough choices that are before them and work towards a bipartisan agreement," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which has been pushing for a big fiscal deal. "Jumping from crisis to crisis with one short-term solution after another is not going to change the skyrocketing trajectory of our debt," she said. But some, particularly Democrats, argue that the focus on America's long-term debt problems is misplaced, given that interest rates are still low and there is little sign of an impending debt crisis in the markets - and that the bigger problem is boosting the economic recovery and lowering the unemployment rate.