Daley Says Chamber Support of Boehner Plan ‘Political Statement’

White House Chief of Staff Bill Daley dismissed the U.S. Chamber of Commerce’s backing of a House Republican plan to raise the debt limit in two stages as a “political statement” by the nation’s biggest business lobby.

Daley said he was surprised the group wrote lawmakers yesterday urging them to support the measure proposed by House Speaker John Boehner, an Ohio Republican, because Chamber President Tom Donohue didn’t tell him about it during a conversation earlier in the day.

“He said he was sending a letter to the Hill to basically encourage them to come to an agreement, and didn’t indicate to me that he was supportive of a deal that wasn’t going to pass the Senate,” Daley said yesterday in a Bloomberg Television interview. “I guess it’s a political statement by the chamber.”

The chamber’s move adds to the tensions between the lobbying group and the White House, even after a series of overtures the administration has made this year to improve relations with it and the business community. Included in that effort was President Barack Obama’s decision to appoint Daley, a former JPMorgan Chase & Co. (JPM) executive, as chief of staff and having him serve as a liaison to business.

A spokeswoman for the Washington-based chamber refused to comment on private conversations between Daley and Donohue.

‘Viable’ Legislation

“Our priority is ensuring the debt ceiling is increased,” the spokeswoman, Blair Latoff, said. “At this time, there isn’t another viable piece of legislation out there. Supporting Speaker Boehner’s proposal does not preclude us from supporting others. However, we need a solution fast and Congress needs to act immediately.”

Obama and lawmakers are struggling to come up with a deal that raises the country’s debt limit and tackles future spending ahead of an Aug. 2 deadline to avoid a potential default.

While expressing confidence that Congress ultimately will act, Daley suggested the administration may soon reveal its contingency plans should no deal be reached on the debt limit and the government’s obligations exceed its available funds. In that case, the government would have to choose which bills to pay and which to leave unpaid.

“We will follow what has been the plan that every other administration, Democrat or Republican, has prepared,” Daley, 62, said. “The Treasury secretary will speak to that at some point as we get closer to the day and lay out exactly what that process will be.”

Administration Opposition

Daley reiterated the Obama administration’s opposition to the Boehner proposal. Earlier yesterday the White House Office of Management and Budget said Obama’s advisers would urge the president to veto the measure should it reach the president’s desk.

Daley said there was little chance of that. “The fact is, that bill is not going to pass,” he said.

Boehner’s proposal is intended to make $1.2 trillion in spending cuts in the first phase and up to $1.8 trillion in a second step. The debt limit would be raised in two stages as well, raising the potential for another standoff next year as both parties are gearing up for the 2012 elections.

“With the difficult economy, the worst thing we can have, once again, is another one of these crises,” Daley said.

CBO Estimate

Late yesterday, the nonpartisan Congressional Budget Office estimated the Boehner plan would save less than advertised. special congressional committee. The agency said the first phase would save about $850 billion and that it couldn’t score the second because it couldn’t predict if lawmakers would follow through with the cuts.

Obama has endorsed a competing proposal offered by Senate Majority Leader Harry Reid which would cut spending by $2.7 trillion and would provide the debt-limit increase Obama seeks to get through the election season.

Daley said he expects Reid will win enough support to get Senate passage. He also said Obama won’t seek to use his executive authority to unilaterally the raise debt ceiling, saying that is “not a realistic answer.”

The former banking executive said a rise in U.S. Treasuries is a “good sign” that markets aren’t overreacting to the political impasse over raising the federal debt ceiling. “Maybe certain investors have more faith in our political system than some people in this town,” he said.

Treasuries rose, sending the 10-year yield down five basis points to 2.96 percent, as speculation lawmakers will reach agreement to lift the debt limit boosted investor demand at today’s auction of $35 billion in two-year notes.

Securities Yield

The securities, which will be issued a day before the limit is reached, drew a yield of 0.417 percent, compared with the average forecast of 0.414 percent in a Bloomberg News survey of seven of the Federal Reserve’s primary dealers.

Still, the dollar depreciated against all 16 major peers at 4 p.m. in New York, stocks fell and the cost of insuring U.S. debt rose to a 17-month high.

The Standard & Poor’s 500 Index lost 0.4 percent to 1,331.94 and the Stoxx Europe 600 Index closed down 0.4 percent. Credit-default swaps on U.S. debt increased two basis point to 58 basis points.

Daley said businesses haven’t “stepped forward as loudly as they should have” to call for a balanced approach to deficit reduction, even as the deficit increased under earlier administrations.

“You’ve had a silence from the business community to the political establishment over the last number of years that’s been unfortunate,” Daley said.

To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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