Republicans Said to Insist on Conditions to End Shutdown

Oct. 10 (Bloomberg) -- Senate Majority Leader Harry Reid, a Democrat from Nevada, talks about the outlook for proposed legislation in the House that would raise the U.S. debt limit until Nov. 22. Reid talks with reporters following a meeting between Senate Democratic leaders and President Obama at the White House. (Source: Bloomberg)

House Republicans offered a plan to raise the U.S. debt limit and end a partial government shutdown that would require the president to accept policy conditions attached to a spending measure, said two congressional aides.

Republicans sent a list of policy options to the White House following a meeting yesterday, said the aides, who spoke on condition of anonymity. President Barack Obama has insisted that he won’t accept conditions for ending the shutdown, which is in its 11th day.

“There will be some matters that we’re discussing now that would be added to that, hopefully,” Representative Hal Rogers of Kentucky, chairman of the House Appropriations Committee, said in an interview today. “I hope there’s specific matters but that’s under discussion.”

House Republicans also want Obama to agree to a framework for future negotiations on long-term fiscal and health-care policy. If that happens, the House could vote as soon as today on pushing the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17, according to the aides, who spoke on condition of anonymity to discuss the private offer.

Staff members for Obama and House Speaker John Boehner worked into the night yesterday after Boehner proposed a short-term debt limit increase. That step back from the brink triggered the biggest rise in U.S. stocks in nine months. The developments yesterday were the first sign that the president and congressional Republicans may resolve the fiscal impasse and remove the prospect of default.

Photographer: Win McNamee/Getty Images

Republican senators wait at the Capitol for a shuttle bus ride to the White House for a meeting with President Barack Obama on settling the debt limit and government funding issues, on October 11, 2013 in Washington, DC. Close

Republican senators wait at the Capitol for a shuttle bus ride to the White House for a... Read More

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Photographer: Win McNamee/Getty Images

Republican senators wait at the Capitol for a shuttle bus ride to the White House for a meeting with President Barack Obama on settling the debt limit and government funding issues, on October 11, 2013 in Washington, DC.

‘Good Discussion’

Obama met today with Senate Republicans, who left the White House without talking to reporters. On Twitter, Senator Chuck Grassley of Iowa said it was a “very good discussion” about the shutdown.

“Hope I’m surprised there may be progress,” he said.

Senate Majority Leader Harry Reid said today he is open to hearing Republican proposals, though he doesn’t like the idea of extending U.S. borrowing authority only to Nov. 22. Reid said he would continue advocating a delay of the next debt-limit fight into 2015.

“Using their theory, we would have another one of these periods of bedlam here in Washington right before the most important purchasing season anytime during the year,” Reid said, referring to the holiday shopping season, without saying he would stop a short-term extension.

Financial Markets

The financial markets, which have weathered fiscal brinkmanship at least four times since Republicans gained the House majority in January 2011, so far have taken Washington’s dysfunction in stride. Treasury Secretary Jacob J. Lew warned in testimony to lawmakers yesterday that “uncertainty” over the debt limit is starting to stress financial markets.

The Standard & Poor’s 500 Index increased 0.6 percent to 1,702.86 at 12:22 p.m. in New York, erasing losses since the start of the government’s partial shutdown that began Oct. 1.

Rates on Treasury bills due Oct. 17 fell seven basis points to 0.24 after touching 0.51 percent yesterday, according to Bloomberg Bond Trader prices. The benchmark 10-year Treasury yield fell one basis point to 2.67 percent.

Any prospective deal faces questions, including whether Boehner can make a deal with Obama without losing the support of his hard-line members. They’ve sought to use the debt ceiling and government shutdown to force curbs on Obamacare and federal spending.

Republicans should just concede and allow a vote to end the shutdown without conditions, said Representative Peter King, a New York Republican.

Cut ‘Losses’

“We should cut our losses and get it over with,” King said in an interview today. “It’s madness to keep the government closed any longer. It’s a governmental disaster, it’s a political disaster and it makes no sense.”

Obama began yesterday’s meeting by acknowledging that Republican leaders’ offer to extend the debt limit was a positive step while urging them to stop the shutdown, according to a Democratic official who asked not to be identified discussing the closed-door deliberations.

The Republican lawmakers responded by saying that they needed concessions, the official said. Obama said he would consider what they want so long as they weren’t making demands as a condition for a spending bill that would allow federal agencies to resume operations.

‘Long-Term Problem’

Senator Ron Johnson, a Wisconsin Republican, said at a Bloomberg breakfast today that lawmakers were using the debt ceiling for leverage because “how else can you get those people -- the president, Democrats in the Senate and the House -- to come to the table and start working with you in good faith to solve a long-term problem?”

Under Boehner’s plan, the Treasury Department wouldn’t be able to use so-called extraordinary measures to further extend borrowing authority, creating a hard deadline, said Representative Tom Reed, a New York Republican.

House Minority Leader Nancy Pelosi of California said ending the extraordinary measures “isn’t very smart” because it would limit Treasury’s flexibility.

If the U.S. fails to raise the debt limit by Oct. 17, the government will have $30 billion plus incoming revenue to pay its bills. It would start missing scheduled payments, including benefits, salaries and interest, between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Meanwhile, Senate Democrats are pressing ahead with their preferred plan, which would push the next debt-limit fight into 2015 and include no policy conditions. A test vote could occur tomorrow.

Six Republicans

Democrats, who control 54 seats in the 100-member Senate, would need the support of at least six Republicans on procedural votes to pass their bill.

Reid’s proposal would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use 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.

Senate Republicans also are considering a plan, being developed by Susan Collins of Maine, that would pair provisions to raise the debt ceiling and end the shutdown with a repeal of a medical-device tax included in the Patient Protection and Affordable Care Act.

Democrats, even those who support repealing the medical device tax, have been adamant that they will refuse to do so as part of an agreement to end the shutdown or raise the debt ceiling.

Early Support

A Wall Street Journal/NBC News poll released yesterday found that 53 percent of those surveyed blamed Republicans for the fiscal impasse, compared with 31 percent who blame Obama.

The shutdown would pare 0.2 percentage point from U.S. economic growth if it lasts through this week and as much as 0.5 point if it continues another two weeks, according to the median estimate in a Bloomberg survey of economists.

Republicans are debating what policy conditions they will insist upon. House Republicans are backing away from demanding major changes to the 2010 health-care law.

The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs be tied to a one-year delay in the mandate that individuals lacking health insurance purchase it.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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