U.S. House Speaker John Boehner insisted on immediate negotiations with Barack Obama, rejecting the president’s stance that he’ll talk only after the partial government shutdown ends and the risk of default is pushed back.
Obama told White House reporters today that he could accept a temporary reprieve while he negotiates with Republican leaders over fiscal and health policy. Yet only after Congress ends the shutdown and raises the debt limit would he accept a list of topics for discussions with lawmakers, Obama said.
“What the president said today was if there’s unconditional surrender by Republicans, he’ll sit down,” Boehner told reporters at the Capitol after Obama’s news conference. “That’s not the way our government works.”
The dueling press conferences came as lawmakers began taking the first tentative steps toward resolving the standoff. Both sides are exploring actions that will be needed to end the week-old shutdown and raise the debt limit before U.S. borrowing authority lapses on Oct. 17. Republicans have sought spending cuts and changes in Obama’s health-care law.
“We won’t agree on everything,” Obama said. “The parties are pretty divided on a whole bunch of big issues right now.”
Obama didn’t answer directly when asked whether he planned to make sure bondholders get paid first if Congress doesn’t act. He said there would be consequences for the economy and the creditworthiness of the U.S. if the government missed other payments such as those to Social Security beneficiaries.
If an individual doesn’t make required payments, the president said, “You’re just a deadbeat and you can anticipate that will hurt your credit.”
Senate Democrats introduced a bill today that would suspend the debt ceiling through Dec. 31, 2014.
Because the Treasury Department can use so-called extraordinary measures to stave off default, another increase wouldn’t be needed until sometime in 2015. The previous debt-limit suspension expired on May 18 and the extraordinary measures are lasting five months.
They are planning a test vote before the end of this week.
To succeed, they’ll need support from at least six Republicans on procedural votes. They’ve gotten backing from one Republican, while several others haven’t ruled out the possibility of supporting the measure.
“I am optimistic, even though that is against my nature, that Republicans will not hold the full faith and credit of the United States hostage,” said Senate Majority Leader Harry Reid, a Nevada Democrat.
There are signals that concern is building as the stalemate drags on. The benchmark Standard & Poor’s 500 Index (SPX) is down 4.1 percent since reaching a record on Sept. 18. The index today fell 1.2 percent to 1,655.45 at 4 p.m. in New York.
The Treasury sold $30 billion of one-month bills today at a rate of 0.35 percent, the highest since 2008 and more than double the rate on comparable one-month securities yesterday. The difference in rates between one- and three-month bills reached 28.9 basis points, the biggest since March 2008, according to closing-market data.
Separately, officials in China and Japan, America’s largest foreign creditors with combined holdings of more than $2.4 trillion in Treasuries, sought to raise pressure on the U.S. to resolve the impasse on the debt ceiling. A shift in asset allocation by China, Japan or other major holders of Treasuries could push up U.S. interest rates and cause swings in global currency markets.
Even as the probability of a U.S. government default is “very, very small,” volatility in the markets will increase in coming days, Mohamed El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., said in an interview on Bloomberg Television’s “Bloomberg Surveillance” with Tom Keene.
It is also affecting consumers. Gallup’s Economic Confidence Index dropped 12 points last week, the second-largest decrease after mid-September 2008 following the collapse of Lehman Brothers Holdings Inc.
House Republicans, who had previously discussed pairing a debt-limit increase with a list of party priorities, haven’t released legislation or set a time line for action. Instead, they’re planning a vote to appoint a working group of House members and senators to settle the multiple disputes.
“The American people are watching an unwillingness by one side to negotiate and compromise,” Representative Tom McClintock, a California Republican, told reporters in Washington today. “They are watching utterly vindictive actions by the administration to intensify the pain of the shutdown, and I think they are watching the collapse of the administration’s signature program, Obamacare.”
House Democrats rejected the idea, saying it would recreate the 2011 bipartisan supercommittee that was deadlocked.
“We don’t need a supercommittee,” said Representative Xavier Becerra, a California Democrat. “The votes exist right now” to reopen the government.
Still to be determined is whether House Republicans will consider a vote to raise the debt-ceiling this week or wait for the Senate to act, said two Republican congressional aides, who asked for anonymity to discuss party strategy.
If all Senate Democrats along with six Republicans vote for giving Obama authority, they could send a debt-limit increase without policy conditions to the Republican-controlled House early next week. That would put pressure on Boehner, who opposes a clean debt-limit bill.
“We’ve got a situation where you have a calendar running, you have people who are frustrated and upset, and so let’s figure it out,” Senator Lisa Murkowski, an Alaska Republican, said in an interview at the Capitol yesterday. “We shouldn’t be dismissing anything.”
Among Senate Democrats, Heidi Heitkamp of North Dakota wouldn’t take a position on a clean debt-ceiling increase when asked by reporters yesterday, and Joe Manchin of West Virginia didn’t commit his support, either.
Republican Senator Mark Kirk of Illinois will support a clean debt-limit increase. About a half-dozen other senators -- including Republicans Murkowski, John McCain of Arizona and Susan Collins of Maine -- kept open the option of voting for a debt-ceiling increase without conditions or helping one pass.
None of the proposals being floated has been embraced by both parties and all face long odds.
Bruce Josten, chief lobbyist at the U.S. Chamber of Commerce, said in a statement that the spending bill and the debt-limit increase are “must-pass” bills.
“The debt ceiling specifically must pass on a timely basis to avoid inflicting substantial and enduring damage on the U.S. economy,” he said.
The partial shutdown, which began Oct. 1, has shuttered government services such as Head Start preschool programs and national parks, and furloughed federal employees. Other functions, such as mail delivery and Social Security benefits, are continuing.
Republicans are insisting on changing the 2010 Affordable Care Act, while Obama refuses to engage in discussions about tying policy conditions to opening the government or raising the debt limit.
The U.S. will run out of borrowing authority on Oct. 17 and will have about $30 billion in cash after that. The country would be unable to pay all of its bills, including benefits, salaries and interest, sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
The House has been passing separate funding bills for parts of the government, including the National Institutes of Health and national parks. Obama and Reid have rejected those measures.
“Wherever Republicans are feeling political pressure, they put a bill forward,” Obama said at the news conference. “We don’t get to pick and choose based on which party likes what.”
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