July 30 (Bloomberg) -- Renewed negotiations on raising the U.S. debt ceiling caused Senate Majority Leader Harry Reid tonight to postpone a scheduled vote on his plan to avoid a threatened government default.
“There are negotiations going on at the White House now,” Reid said on the Senate floor, and those involved in the talks wanted more time before a vote was held on whether the Senate moved ahead with his measure.
A planned 1 a.m. vote was pushed forward 12 hours, to 1 p.m. Reid said the Senate would convene at noon tomorrow.
“There are many elements to be finalized and there is still a distance to go before any arrangement can be completed,” Reid said of the talks involving Obama and congressional leaders.
Reid’s plan, which the House symbolically rejected earlier today, would lift the $14.3 trillion debt limit by $2.4 trillion.
Earlier in the day, Senate Republican leader Mitch McConnell had said a deal can be reached in the “near future” to raise the U.S. debt limit, while Reid said negotiators aren’t closer to agreement.
“The answer is no,” said Reid, a Nevada Democrat, after he and House Minority Leader Nancy Pelosi, a California Democrat, met with President Barack Obama at the White House. McConnell, a Kentucky Republican, and House Speaker John Boehner, an Ohio Republican, had separate phone conversations with Obama.
“We are now fully engaged, the speaker and I, with the one person in America out of 307 million people who can sign a bill into law,” McConnell said at a news conference with Boehner after the Senate and House had rejected each other’s plans and three days before a threatened U.S. default.
Pelosi said she and Reid talked with Obama about “what our priorities are.”
Earlier, Senator Kent Conrad said senators of both parties drafted alternative plans for raising the limit fashioned by bipartisan groups of senators.
McConnell said he was “confident and optimistic that we’re going to get an agreement in the very near future and resolve this crisis in the best interests of the American people.”
‘What He Will Sign’
The president “needs to indicate what he will sign,” he said. “We’re in discussions now.” McConnell said he spoke with Obama by telephone today, while a Republican aide said Boehner talked with the president by telephone last night. Boehner of Ohio also voiced confidence an agreement could be reached.
The Treasury Department has said the U.S. will breach its borrowing limit and run out of options for avoiding default if the $14.3 trillion debt ceiling isn’t raised by Aug. 2.
Conrad, a North Dakota Democrat who is chairman of the Senate Budget Committee, said a few bipartisan groups of senators have drafted three alternative plans to supplement a proposal offered by Reid. The Republican-run House today defeated Reid’s plan.
The alternative plans include possible new revenue as part of their formula for cutting the federal deficit, according to Conrad. Republican leaders have said from the start of negotiations that a net increase in tax revenue is unacceptable.
“All three involve the possibility of revenue,” Conrad said. McConnell wasn’t among the Republicans involved in the alternative bipartisan plans, according to Conrad.
McConnell spoke multiple times today with Vice President Joe Biden as part of the search for a deal, said John Ashbrook, a spokesman for McConnell.
House’s Symbolic Vote
The House’s rejection of Reid’s plan to raise the U.S. debt ceiling was symbolic.
“We’re going to get a result,” McConnell told a news conference after the House rejected the Senate’s plan.
“We’re dealing with reasonable, responsible people who want this crisis to end as quickly as possible,” Boehner said at the news conference, “and I’m confident we will.”
Senator Jon Kyl, the chamber’s second-ranking Republican, said lawmakers are making more progress on increasing the debt limit than it may appear, while raising the possibility that any agreement may not be signed into law by Aug. 2.
Lawmakers may instead find a way to assure financial markets that an agreement is on track even if they can’t surmount all the procedural hurdles in Congress needed to get a bill to Obama’s desk in the next three days, said Kyl of Arizona.
‘End of the Rope’
“It would be nice if a bill could be sent to the president by or on the second of August -- that would be the ideal, and we know enough about the procedure here to know we’re about at the end of the rope to make that happen even if there’s an agreement today,” Kyl said.
Alaska Senator Lisa Murkowski, a Republican, said she hadn’t seen any changes to the Reid bill that would win her support.
The House voted 246-173 today against Reid’s proposal to lift the $14.3 trillion debt limit by $2.4 trillion. This mirrored the Senate’s rejection of Boehner’s plan the night before.
No Tax Increases
Reid said his plan aims to attract bipartisan support because it includes no tax increases and would cut spending by the same amount as the debt-limit boost. As the Senate prepared for a vote scheduled for early tomorrow on moving forward with the plan, McConnell said Republicans would thwart the effort.
Republicans said the Democrats’ plan is unacceptable in part because it doesn’t ensure long-term deficit reduction, including cuts to entitlement programs. They also said it relies on a budget “gimmick” by counting as deficit reduction plans to bring troops home from Iraq and Afghanistan, while the Congressional Budget Office has counted the drawdown in its scoring of the financial impact of the plan.
“We need to come up with a compromise,” said House Rules Committee Chairman David Dreier, a California Republican. The Reid bill “is not the plan that can gain broad support in the House and Senate.”
House Republican leaders brought up the Reid plan under a procedure that requires a two-thirds vote for passage, unlike the chamber’s simple-majority handling of its own bill. No Republicans voted for Reid’s plan, and 11 Democrats voted against it.
“This process has become a joke,” said Representative Jim McGovern, a Massachusetts Democrat.
“It’s time for us to end this theater of the absurd,” said Pelosi of California before the House’s vote. “It’s time to get real.”
The Senate is debating Reid’s proposal before a scheduled 1 a.m. vote tomorrow, even as talks continue on a bipartisan debt deal that can pass both chambers before the Aug. 2 deadline. A Senate vote on Reid’s plan could be held about 7 a.m. on Aug. 1 if he wins the procedural vote. McConnell has said he has more than the 40 votes needed to thwart the procedural vote.
The Senate yesterday rejected the debt-limit legislation that the Republican-led House had passed hours earlier with no Democratic support. That measure would have required congressional approval of a constitutional amendment to balance the budget and forced another debt-limit vote by lawmakers in about six months to continue the nation’s borrowing authority beyond early 2012.
Reid, who offered modifications to an initial Democratic plan that he said were designed to attract Republican support, accused Republican leaders of rebuffing his efforts to negotiate.
Holding America ‘Hostage’
“Republicans have in effect taken America by hostage,” demanding policy changes they would never get in legislation,” he said.
Financial markets were restrained in reacting to the Washington impasse yesterday.
Treasuries rallied, sending yields on 10-year notes to the lowest level since November. The yield on 10-year Treasury notes declined 15 basis points to 2.79 percent in New York.
Stocks fell as economic growth trailed forecasts. The Standard & Poor’s 500 Index slipped 0.7 percent and tumbled 3.9 percent this week for its worst slide in a year.
Christine Lagarde, the new chief of the International Monetary Fund, said confidence in Treasuries is “slightly eroded” as politicians continue to squabble over the debt limit. “There was a positive bias toward the United States of America, toward Treasury bills,” Lagarde said in an interview on CNN’s “Fareed Zakaria GPS” to be broadcast tomorrow.
“The current crisis is probably chipping into that very positive bias,” she said, according to a CNN transcript.
The modifications Reid proposed in his plan yesterday bring it closer to one McConnell proposed earlier this month.
Borrowing authority would be provided in two separate $1.2 trillion installments, one immediately and one in several months as the nation again nears its borrowing limit.
All but the first $416 billion could be blocked through a joint resolution of Congress, though opponents would have to muster supermajorities in both chambers to override a veto.
The new plan would yield debt savings of $2.2 trillion -- about the same as the total borrowing authority extended -- and call on a 12-member bipartisan congressional committee to draft legislation to lower the deficit to 3 percent or less of gross domestic product.
Democrats control the Senate with 53 votes, and would need the support of at least seven Republicans to push Reid’s proposal closer to passage in the vote early tomorrow morning. McConnell said Democrats are short of the supermajority they need because 43 Republicans have signed a letter opposing it.
Obama said with Democrats and Republicans in “rough agreement” on plans to raise the nation’s debt limit within days of a threatened default, the time for compromise is “now.” The president and the Republicans used their weekly addresses on the Internet and radio to continue the debate.
The House-passed plan was “unacceptable” and would mean another debt-ceiling extension in less than a year, Obama said today. “There are plenty of ways out of this mess,” he said, noting the parties aren’t that far apart on spending or how to tackle entitlements and the tax code. “But there is very little time.”
The Treasury is preparing contingency plans to pay the government’s obligations should Congress fail to raise the borrowing limit in time. White House press secretary Jay Carney said Treasury officials may reveal the plans this weekend.
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