Reid Slams House Debt-Cap Plan With Changes to Obamacare

Oct. 15 (Bloomberg) -- Peter Cook updates the latest news on the U.S. government shutdown and debt-ceiling negotiations on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

Senate Majority Leader Harry Reid rejected a House plan to halt the fiscal impasse, as he tried to build support for an emerging bipartisan Senate agreement to end the government shutdown and prevent a U.S. default.

The House proposal, which Republican leaders detailed to their members just hours earlier today, “can’t pass the Senate and won’t pass the Senate,” said Reid, a Nevada Democrat. It is “an extreme piece of legislation and it’s nothing more than a blatant attack on bipartisanship.”

Reid’s comments were an attempt to force House Speaker John Boehner to accept the Senate agreement and rely mostly on Democratic votes in the House to pass it. Reid has said the Senate could come up with its deal as soon as today, and final votes could occur later this week.

The House and Senate plans would both fund the government through Jan. 15, 2014, and suspend the U.S. debt limit until Feb. 7. As the differences narrow between the parties, a House vote as soon as tonight would test whether Republicans are willing to raise borrowing authority and end the shutdown without major changes to the 2010 health-care law.

“Our leadership met with our members today, trying to find a way forward in a bipartisan way,” Boehner said after the meeting. “There are a lot of opinions about what direction to go. There have been no decisions about what exactly we will do.”

Boehner didn’t say that the House would move ahead with the plan Republican aides and lawmakers described this morning.

Reid Comments

Reid said on the Senate floor today that credit-rating companies could downgrade the U.S. as soon as tonight. The main ratings companies have made no statements signaling an imminent downgrade.

Moody’s Investors Service and Standard & Poor’s have stable outlooks on their U.S. ratings. John Piecuch, a spokesman for S&P, reiterated yesterday in an e-mail that the firm’s AA+ ranking already “incorporates the current level of discord” in Washington. Fitch Ratings, which has a negative outlook on the U.S.’s AAA grade, has said that it’s considering the budget impasse in its review of the ranking.

The House proposal goes beyond the Senate with two smaller changes to the health care law. It would delay for two years a medical-device tax and prevent the government from contributing to the health insurance of members of Congress, the president, the vice president and the Cabinet.

Health Law

The plan falls far short of Republican efforts last month to defund or delay major pieces of the 2010 health law. Boehner told Republicans the approach was the chamber’s only possible strategy to respond to the emerging Senate deal that he described as a hand grenade being lobbed at the House, said Representative John Fleming, a Louisiana Republican.

House Democratic Leader Nancy Pelosi of California said she didn’t think Boehner would “have the votes” to pass the Republican proposal.

White House spokeswoman Amy Brundage in a statement today said Obama has repeatedly said that lawmakers “don’t get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation’s bills,” saying that’s what the House Republican proposal does.

There are obstacles, including the disagreements between the Senate and the House. Furthermore, senators opposed to the deal may stall a final vote.

Additionally, some House Republicans may oppose Boehner’s plan because it doesn’t go far enough in changing the health law.

‘Financially Irresponsible’

“Both plans are financially irresponsible,” said Representative Mo Brooks, an Alabama Republican. “Both kick the can down the road. Both force America to deal with a debt crisis where we’re weaker because we incur more debt.”

Given objections from the White House and House Democratic leaders, Boehner may need to find all the votes for the plan in his own party, meaning that he can lose the support of no more than 15 Republicans.

“For the most part we’re on board,” Fleming said, “There are a number of us that want to see more.”

The emerging contours of an agreement would stave off a potential default, open shuttered federal services and change the immediate deadlines in favor of three new ones over the next four months, including a Dec. 13 target date for a budget conference between the House and Senate.

Comprehensive Deal

“There are productive conversations going on with the Republican leader,” Senate Majority Leader Harry Reid said today on the Senate floor, adding that he was “confident” a comprehensive deal could be reached this week to avoid a “catastrophic default.”

Reid has been working with Senate Minority Leader Mitch McConnell of Kentucky.

U.S. lawmakers, who have governed from fiscal crisis to fiscal crisis for more than two years, may be setting up more crises in the near future. The agreement would delay the next major deadline -- the Jan. 15 lapse in government funding -- until after the holiday shopping season.

Benchmark Treasury 10-year yields rose four basis points, or 0.04 percentage point, to 2.72 percent at 11:53 a.m. New York time, according to Bloomberg Bond Trader prices. The rate touched 2.74 percent, the highest since Sept. 23.

The Stoxx Europe 600 Index gained 0.8 percent to close in London today at its highest level in almost four weeks. The Standard & Poor’s 500 Index slipped 0.2 percent to 1,706.08 at 12:22 a.m.

Delay Tactics

There is a potential obstacle to a Senate agreement. A single senator would be able to use procedural tactics to push a final vote past the Oct. 17 lapse in borrowing authority.

If the House votes tonight, the Senate would be able to pass its plan no later than Oct. 18, before the government starts missing promised payments. The U.S. will have enough cash and income revenue to avoid missing payments until Oct. 22 at the earliest, according to the Congressional Budget Office.

Texas Republican Senator Ted Cruz, who spoke for more than 21 hours during a budget debate last month, wouldn’t rule out stalling maneuvers, saying he wants to see the details of the plan.

The House Republican alternative would prevent the government from making any employer-side contribution to the health insurance of members of Congress, the president, the vice president and the cabinet.

Obama has insisted that Congress raise the $16.7 trillion U.S. debt limit without add-ons and that stopgap spending bills be free of policy conditions.

Democratic Votes

The emerging Senate agreement again put pressure on Boehner, who has a 232-200 Republican majority. He may have to decide whether to side with hardliners insistent on changes to Obamacare or rely on Democratic votes to pass a bipartisan Senate plan through the House.

Reid and McConnell may release their plan’s details as early as today, after conversations that started over the weekend. Democrats want as long a debt-limit increase as possible and as short a government funding extension at Republican-preferred levels. Republicans want the opposite.

House Democratic leaders are scheduled to meet at the White House with Obama at 3:15 p.m. today.

Possible sticking points to a Senate deal late yesterday included whether Democrats would agree to Republican demands that the Treasury Department be barred from using so-called extraordinary measures to extend the debt-limit deadline after Feb. 7. Such maneuvers pushed forward the deadline for five months this year, though it’s not clear how much time they would buy in 2014.

Obama, McConnell

Obama spoke with McConnell yesterday and said the administration wants flexibility for the Treasury Department’s borrowing, according to a person familiar with the conversation who requested anonymity to describe private discussions.

The House proposal would bar the extraordinary measures and Reid cited that as one of his major objections.

Yesterday’s version of the Senate plan would postpone a reinsurance fee the government is levying on health plans for the first three years of the health-care exchanges -- amounting to $63 a worker next year, said the person familiar with the talks. Labor unions, aligned politically with Democrats, have asked for the delay.

That provision and a provision sought by Senate Republicans on verifying the income of those receiving subsidies may both get dropped, said a person familiar with the Senate talks, speaking on condition of anonymity to discuss the private conversations.

Must-Pass Measure

Democrats could claim that the Senate agreement is a trade of health-law measures favored by each party that just happens to be linked to a debt-ceiling increase and spending bill free of policy conditions. Republicans could say they got health-law changes attached to the must-pass measures.

The Senate agreement also would give federal agencies flexibility to manage the across-the-board spending cuts known as sequestration if they occur in 2014.

The partial government shutdown began Oct. 1 after Republicans insisted on changes to the 2010 Patient Protection and Affordable Care Act. Backed by Cruz, they started with a plan to defund the law and ended up seeking a one-year delay of the requirement for individuals to purchase health insurance.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@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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