House Republican and Senate Democratic leaders are open to a short-term increase in the nation’s debt limit, said congressional aides of both parties who spoke on condition of anonymity to discuss strategy. The steps mark the first movement toward averting a U.S. default.
Republicans haven’t decided how long an extension they would support, whether it would include policy conditions and how to advance it through the House, a House Republican aide said. Republican leaders have been calling party members to talk about ideas and all House Republicans are scheduled to meet at 10 a.m. tomorrow.
Senate Democratic leaders would be open to a short-term increase in the debt ceiling, a Senate Democratic aide said today. Democrats would insist that any subsequent debt-limit increases wouldn’t require agreement by the parties on long-term fiscal and health-care policy.
If Republicans move toward a vote, they’re choosing an option President Barack Obama opened yesterday. He said he would accept a short-term debt limit increase and an agreement to end the partial government shutdown that started Oct. 1 and then enter broader fiscal negotiations with Republicans.
Top House Democrats said after a meeting at the White House with Obama that they would be open to a short-term debt-limit increase if the alternative were default.
“They’re not getting anything for it and we haven’t seen an offer,” said House Minority Leader Nancy Pelosi, a California Democrat. “When we see them offer one, we’ll see what path they think that takes us down.”
The potential fight would be over Obama’s insistence that he wouldn’t agree to tie policy conditions to raising the debt limit. Republicans have been talking about attaching a long list of party priorities, such as cuts in entitlement programs, changes to the 2010 Patient Protection and Affordable Care Act, and approval of TransCanada Corp. (TRP)’s Keystone XL pipeline, to a debt-ceiling increase.
Senate Democrats’ preference is a proposal by Senate Majority Leader Harry Reid to push the next debt-limit fight into 2015, without policy conditions. Reid introduced a bill yesterday, setting up a test vote for later this week.
If the U.S. doesn’t raise the debt limit by Oct. 17, the country’s borrowing authority will lapse. The government will have $30 billion plus income revenue to pay its bills and would miss scheduled payments between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
The movement comes as House Democrats met with Obama at the White House today. A small group of House Republicans are scheduled to meet with the president tomorrow.
“Business leaders are begging us to do the right thing and to do it now,” Reid said on the Senate floor today. “The time for misleading rhetoric is through and the time for responsible leadership is here.”
House Speaker John Boehner yesterday rejected Obama’s idea of passing a debt-ceiling increase now and negotiating later on broader fiscal issues and the health-care law. Boehner labeled that “unconditional surrender” and instead sought immediate talks with Obama.
Advancing a debt-limit bill without major policy conditions through the House could prove difficult and might require Boehner to seek Democratic votes. Republicans control a 232-200 majority in the House.
“If you had a clean debt-ceiling increase without any kind of reforms to control spending that would probably lead to another downgrade in our credit ratings,” Representative Steve Scalise, a Louisiana Republican and head of the Republican Study Committee, told reporters today. The group includes lawmakers who advocate smaller government.
The Standard & Poor’s 500 Index (SPX) climbed 0.1 percent at 4 p.m. in New York.
Rates on Treasury bills due on Oct. 17 rose 20 basis points to 0.478 percent at 5 p.m. in New York. They were negative as recently as Sept. 26. The benchmark 10-year yield rose three basis points, or 0.03 percentage point, to 2.66 percent, according to Bloomberg Bond Trader prices.
“The current political deadlock in the United States is needlessly putting at risk the stability and growth not only of the U.S. but also the world economy,” Angel Gurria, the secretary-general of the Organization for Economic Cooperation and Development, said in a statement today. “We still see the probability of failing to raise the debt ceiling as low, but as the government shutdown drags on, the level of concern is ratcheting up.”
At a White House news conference yesterday, the president again insisted that he wouldn’t negotiate under the risk of default or a government shutdown, comparing Republicans to hostage-takers and extortionists.
Obama wouldn’t answer directly when asked if he would make sure that bondholders are paid first if Congress doesn’t act. He said the government was “exploring all contingencies.”
Giving priority to interest payments would prevent the U.S. from defaulting on its debt while requiring the government to balance its budget immediately, an austerity step that House Republicans would impose over 10 years.
The 11 Republicans on the Senate Finance Committee sent a letter to Obama today saying that the president’s warnings about a potential default are “unproductive and misguided.”
The absence of a debt-limit increase “doesn’t mean there’s a default,” said Senator Tom Coburn, an Oklahoma Republican. “That means the debt limit hasn’t gone up. They’re two different things,” he said. There won’t be a default, he said. “Period.”
Treasury Secretary Jacob J. Lew is scheduled to testify before the Finance panel at 8 a.m. tomorrow in Washington.
The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs must be tied to a one-year delay in the mandate that individuals who lack health insurance purchase it.
Obama and Senate Democrats refused, and the resulting furloughs and agency shutdowns have slowed mortgage closings, small-business loans and nutrition assistance to poor mothers. Some programs, such as Social Security, continue uninterrupted.
In Congress this week, the House so far isn’t planning to vote on a bill that would include a debt-ceiling increase. Boehner outlined proposals last month that would tie party priorities to the debt limit before that idea ran into objections from hard-liners who wanted to focus on changing the health law in the shutdown fight.
That inaction shifts attention to the Senate, where Democrats are trying to pass a bill that would put pressure on Boehner as the Oct. 17 deadline draws closer.
Democrats, who control 54 seats in the 100-member chamber, would need the support of at least six Republicans on procedural votes to pass their bill.
The bill would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use what are 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.
Some Senate Republicans, including Susan Collins of Maine, Saxby Chambliss of Georgia, Lisa Murkowski of Alaska and Lamar Alexander of Tennessee, didn’t rule out backing the Democrats’ plan. They said they must first see details.
One Republican senator -- Mark Kirk of Illinois -- said he would support a “clean” debt-ceiling measure.
The House continued a series of bipartisan votes to fund narrow pieces of the government, including the Food and Drug Administration and military death benefits. The House is now scheduled to be in session on Saturday, Oct. 12.
Obama and Senate Democrats reject the piecemeal approach, saying Republicans shouldn’t get to pick and choose politically popular items.
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