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updated 4/15/2011 1:15:45 PM ET 2011-04-15T17:15:45

Failure by Congress to raise the U.S. debt limit "could plunge the world economy back into recession," President Barack Obama declared Friday, and he acknowledged that he must compromise on spending with Republicans who control the House to avoid such a crisis.

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"I think it's absolutely right that it's not going to happen without some spending cuts," the president told The Associated Press in an interview in his hometown, agreeing with Republican House Speaker John Boehner's assessment.

Obama urged swift action, saying he doesn't want the United States to get close to a deadline that would destabilize financial markets. He said he was confident Congress ultimately would raise the limit.

"We always have. We will do it again," said Obama, who voted against raising the debt limit as a freshman senator from Illinois.

Story: House passes $6 trillion spending cut plan for 2012

The interview came a day after the Democratic president held the first major fundraising events of his re-election campaign, which was launched a week ago in a nation still reeling from high unemployment as it struggles to recover from economic recession.

"I'm the person who is best prepared for us to finish the job so that we're on track to succeed in the 21st century," Obama said. That's the heart of his argument for voters to give him a second term over more than a half dozen Republicans seeking the White House.

'A smart compromise that's serious'
As the 2012 campaign gets under way, it's being shaped by a deep disagreement over federal spending in Washington between Republicans who control the House and Democrats in power in the Senate and White House.

Obama and Republicans compromised a week ago on a spending bill to avert a government shutdown, a preview of the debate that's certain to dominate the coming months on deficits and the ceiling on money the nation can borrow.

The president said that he doesn't expect either side to get everything it wants in negotiations and that he's pushing for "a smart compromise that's serious."

He warned of dire consequences if the debt ceiling is not raised before it hits its limit of $14.3 trillion; the administration says the latest Congress could possibly act is by early July. But Obama said some longer-term questions about where the government trims its operations will have to be left until after the 2012 presidential election.

Story: Obama visits Chicago to restart money chase

Obama's remarks about the relationship between lifting the debt ceiling and the need for spending cuts was the clearest acknowledgement yet by the president or the White House that the two issues are intertwined.

Republicans, particularly Tea Party-backed lawmakers in the House, have repeatedly said they would not vote to increase the debt cap without a significant step toward long-term deficit reduction — a point reiterated by Boehner on Thursday.

To win a second term, Obama must convince the recession-weary nation that he deserves more time to help the economy recover from a recession that began under George W. Bush.

"I think the economy is going to continue to improve, and I think I'm going to be able to make an effective case that given the extraordinary circumstances that I inherited when I came in — the worst recession since the Great Depression — that not only have I been able to yank this economy out of that hole and get it back on a track to growth but that we've been able to make changes in our economy," Obama said.

He pointed to rewriting Wall Street regulations, overhauling the health care system, investing in clean energy and helping make college more affordable.

The 2012 presidential race is the first in which the Tea Party coalition, which rails against the growth of government, excessive spending and Obama's presidency, will play a major role.

Obama said his views differ from the Tea Party in terms of the proper role of the government in society, but he also said "anytime the American people are actively engaged in the political process, it's good."

U.S. war efforts, Libya
On the subject of the nation's continuing war efforts, Obama refused to estimate how many troops he would pull out of Afghanistan this summer, saying he's waiting for a recommendation from Gen. David Petraeus, who is overseeing the mission.

"I'm confident that the withdrawal will be significant," he said. "People will say this is a real process of transition, this is not just a token gesture."

On Libya, Obama said he doesn't anticipate any stepped-up U.S. military role, even as he conceded that a stalemate exists on the ground. He credited the United States and NATO with averting a "wholesale slaughter" of civilians and said Libyan leader Moammar Gadhafi is under increasing pressure to leave.

The president said Gadhafi is "getting squeezed in all different kinds of ways," running out of money and supplies.

On terrorism, Obama pledged during his first campaign that he would close the Guantanamo Bay prison camp for terror suspects. It's a promise he hasn't kept. He has been opposed by some in Congress, and he said he needs congressional help to close the prison.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Budget passage tees up debt battle

  1. Closed captioning of: Budget passage tees up debt battle

    >>> to washington today, on capitol hill . no frommy like last friday night when the possible government shutdown was looming, hanging over everyone pftsz head. today, just a vote to pass there budget. now we transition nicely into the next fight, even bigger, over the national debt . kelly o'donnell has the story from the hill. good evening.

    >> reporter: hi, there, brian. the house and senate wrote the check to get the government going this year, but john boehner had to sell hard to try to keep conservatives who want bigger cuts on board.

    >> the house will be in order.

    >> reporter: defending the knujt deal that kept the government open, pespeake eer boehner knew dozens of problems would bolt, and they did.

    >> is it perfect, no? but welcome to divided government .

    >> most democrats rejected the plan, but without enough republicans to pass it, democrat support made the difference.

    >> the yeas are 260. the nays are 267.

    >> it eliminates more than $38 billion over the next six months. that includes money that would not have been spent skna. budgeted for things like earmarks.

    >> these are real spending cuts.

    >> a charge boehner took on himself.

    >> every dime in this bill that is cut is a dime that washington will spend if we leave it on the table wrarb.

    >> the budget deal came with strings. congress had agreed to take separate votes on two hot-button issues that republicans demanding. defunding the president's law, and funding for planned parenthood .

    >> it would have a devastating impact on women pfts health across the country.

    >> an even bigger fight issoever here over raising the country's borrowing limit and how to get control over the $14 trillion deficit.

    >> the debate ahead of us is more than spending levels. it's about the role of government itself.

    >> looking inside the house vote, unusual agreement from two indz of the spectrum. nancy pelosi and michelle bachman voted no on the deal, suggesting both parties got some and gave some to get the government going.

    >> kelly, thanks.

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