House Majority Leader Eric Cantor predicted Republicans would pass a debt-limit increase plan today as some freshman lawmakers pledged support for the measure in the face of unified Democratic opposition in the Senate.
Cantor, a Virginia Republican, said it’s now up to Senate Majority Leader Harry Reid “whether he wants to deliver and stave off what the White House is saying could be disaster.”
House approval of the measure, which all 51 Senate Democrats and two independents oppose, will force negotiations among leaders on both sides in an attempt to avert a potential U.S. default less than a week before an Aug. 2 deadline.
Freshman House Republicans who had wanted deeper spending cuts rallied behind the measure, saying it was the best deal possible.
“Was this as big as we wanted to go? Heck no,” said Wisconsin Republican Sean Duffy. “We think it’s a bill that will stave off a default and also work for the American people.”
House Speaker John Boehner of Ohio gained support among fellow Republicans for his plan after reworking it to cut $915 billion over 10 years, $65 billion more than his original approach. All Senate Democrats and two independents signed a letter yesterday pledging to oppose the measure.
Representative Tom Cole, an Oklahoma Republican, said he detected “movement” among lawmakers who previously had concerns. “I like the way it looks.”
The House is expected to vote today around 6 p.m. on the Boehner plan.
As congressional leaders continue to wrangle, Obama administration officials will brief the public no earlier than after financial markets close tomorrow on priorities for paying the nation’s bills if the debt limit isn’t raised, a Democratic official said.
A Treasury official said in an e-mail earlier today the department would provide more information on how the government would operate in the absence of borrowing authority.
Bankers including Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein and JPMorgan Chase & Co. chief Jamie Dimon called on President Barack Obama and Congress to raise the federal debt limit to steer the U.S. government away from the threat of default.
U.S. stocks gained today after three days of losses. The S&P 500 climbed 0.3 percent to 1,308.76 at 10:30 a.m. in New York. The Dow Jones Industrial Average rose 22.52 points, or 0.2 percent, to 12,325.07.
Treasuries rose, pushing 10-year note yields toward a one- week low, on concern the clash in Washington is damaging the economy.
Yields on 10-year notes dropped three basis points, or 0.03 percentage point, to 2.95 percent at 10:10 a.m. in New York, according to Bloomberg Bond Trader prices. They touched 2.93 percent, the lowest level since July 21. The 3.125 percent securities maturing in May 2021 rose 1/4, or $2.50 per $1,000 face amount, to 101 15/32.
Reid said today, “Five days remain until a few extremist Republicans drive our economy off a cliff because they are too radical and inexperienced to compromise.”
Reid and his Republican counterpart, Minority Leader Mitch McConnell of Kentucky, maintained a private dialogue on developing a path to a debt-limit increase in the Senate, where bipartisan support is needed to gain the 60 votes necessary to ensure a vote on controversial legislation.
There is already overlap between Boehner’s plan and one that Reid offered on July 25. Reid dropped Democrats’ insistence on tax increases. His and Boehner’s proposals take as their starting points a cut of close to $1 trillion in discretionary spending cuts over 10 years, and both establish bipartisan committees to recommend future savings, with the results guaranteed a congressional vote.
The two sides are divided over a Republican demand for a second debt-limit vote tied to another $1.8 trillion in budget cuts that likely would come early next year, just as 2012 election campaigns are gearing up. Democrats would extend the debt ceiling until 2013 while making $2.2 trillion in total spending cuts, including $1 trillion from winding down the Iraq and Afghanistan wars, a savings Republicans criticized as a gimmick.
Typically, “a lot of it will happen in private meetings where efforts will be made to reach an agreement and a consensus and then bring it to the floor and sell it to the members,” Durbin said.
Republicans are under pressure from fiscally conservative advocacy groups who say Boehner’s plan would do too little to control federal spending. Several organizations, including the Club for Growth, Heritage Action and the Tea Party-affiliated FreedomWorks, oppose the plan and are pressuring lawmakers to do the same.
David Plouffe, Obama’s senior adviser, said on MSNBC today that the House and Senate will have to reconcile major elements of their competing plans because the Boehner measure “will be dead on arrival” in the Senate.
A U.S. default would be “devastating” to consumers who would be affected by higher interest rates, said Michael Duke, president and chief executive officer of Wal-Mart Stores Inc.
“A default and the ripple effect would be impactful,” Duke told the Senate Finance Committee. He said both the reality and the perception of a default would hurt the U.S. economy.
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