President Barack Obama would veto a deal to raise the debt ceiling if it doesn’t extend the limit through 2013, White House Chief of Staff William Daley said, warning that “markets around the world” would react negatively to a short-term measure.
“We’ve got to get past this debt ceiling vote” Daley said on NBC’s “Meet the Press” program. “It’s time to get some certainty.”
Daley spoke as congressional negotiators were working on reaching a deal after talks broke down between the administration and House Republicans. Obama is pressing for a debt-ceiling increase before the Aug. 2 deadline set by the Treasury Department that will extend beyond next year’s elections.
In a separate interview on the Fox News Sunday program, House Speaker John Boehner, an Ohio Republican, said a framework for a deal “‘is not in place as we sit here.”
He said the Obama administration never put forward a plan for dealing with the debt limit and the deficit. “At some point they’ve got to lay their cards on the table,” he said.
Daley said the U.S. is now getting into a situation where “markets around the world will question whether the political system can come together and compromise.”
He endorsed an approach under consideration by Senate Minority Leader Mitch McConnell and Majority Leader Harry Reid to allow Obama to raise the debt ceiling without congressional approval. “It would not be this sword being held over the American people’s heads once again,” he said.
Daley said company chief executives want Washington “to take out the uncertainty in the system” and that the reason ratings agencies are considering a downgrade is “they don’t have faith that this political system of ours can deal in a serious way with the deficit.”
The markets could turn tumultuous if a plan isn’t negotiated over the weekend, said Christian Cooper, head of U.S. dollar derivatives trading in New York at Jefferies & Co.
“The markets will be under very real pressure at the open because the assumption will be there is really no resolution to this,” Cooper said. “The breakdown in negotiations has crossed the line from the political posturing of the last few weeks to potentially a very real crisis.
“The Tea Party is effectively playing Russian roulette with the bond market and they will, with certainty, lose,” Cooper said, referring to a faction of Republican lawmakers that has ratcheted up the pressure for deep cuts in federal spending to curb the deficit. Jefferies is one of 20 primary dealers that trade with the U.S. Federal Reserve.
Warning on Markets
Treasury Secretary Tim Geithner told congressional leaders at a White House meeting yesterday with President Barack Obama that delaying a deal risked an adverse reaction from credit- rating companies and financial markets. He noted Asian markets open tonight, said an official familiar with the meeting.
Boehner is pressing for at least $3 trillion in spending cuts in a two-step plan to accompany a debt-limit increase, a congressional aide said.
Under Boehner’s plan, a first vote this week would provide a down payment on spending reductions toward the $3 trillion goal, with the debt limit raised only a dollar for each dollar of initial spending cuts, a Republican aide said. Another vote on more spending cuts would be held later, before the short-term debt increase was exhausted under the scenario.
Boehner offered the plan to a bipartisan group of congressional leaders at a meeting in his Capitol Hill office last night after withdrawing the day before from negotiations with Obama on a broader deficit-reduction deal.
House Democratic Leader Nancy Pelosi said Democratic lawmakers “will not make working families and the middle class sacrifice without also calling on everyone to contribute their fair share.”
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