Oct. 8 (Bloomberg) -- In simultaneous challenges to one another, U.S. congressional leaders said the other party must move first to resolve the partial government shutdown and raise the U.S. debt ceiling.
Senate Majority Leader Harry Reid said the Republican-controlled House should vote to end the shutdown and drop demands to change the 2010 Affordable Care Act. House Speaker John Boehner, also speaking in the Capitol this morning, said Reid and President Barack Obama should negotiate.
“The way to resolve this is to sit down and have a conversation to resolve our differences,” Boehner, an Ohio Republican, said after meeting with his party’s caucus.
Obama called the speaker less than an hour later to “reiterate that he won’t negotiate on a government-funding bill or debt-limit increase,” said Brendan Buck, a Boehner spokesman.
The White House, in a statement, urged Boehner to allow a vote on raising the debt limit and repeated that only Congress can authorize more borrowing. Obama is willing to negotiate after Republicans end the shutdown and remove the risk of default, the statement said.
The split-screen sniping -- with Boehner speaking to reporters and Reid speaking on the Senate floor -- came as lawmakers are 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 Oct. 17.
The start of legislative movement is a sign that some members of both parties see concerns about the effects of a prolonged government shutdown and want to avoid default on interest or other government payments.
Investor concern that U.S. lawmakers won’t avert a default has roiled markets. The Standard & Poor’s 500 Index fell 0.6 percent at 11:05 a.m. in New York. The yield on 10-year Treasuries increased one basis point to 2.64 percent.
The difference in rates between one- and three-month bills reached 18.2 basis points, the biggest since March 2008, according to closing-market data.
Senate Democrats are planning a test vote before the end of this week on a measure that would grant Obama authority to raise the $16.7 trillion debt ceiling, probably for a year unless two-thirds of both chambers of Congress disapprove.
That plan emerged as Gene Sperling, the director of Obama’s National Economic Council, opened another route toward at least a temporary resolution. He declined to rule out a short debt-limit extension while reiterating the administration’s preference for a longer-term resolution.
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 to vote to appoint a working group of House members and senators to resolve the multiple impasses, said Representative Matt Salmon, an Arizona Republican.
“What we are going to do is focus all of our attention on wrapping everything into a negotiation, everything,” Salmon said in an interview. “Put everything on the table.”
House Democrats rejected the idea, saying it would recreate the 2011 bipartisan supercommittee that deadlocked.
“We don’t need a supercommittee,” said Representative Xavier Becerra, a California Democrat. “The votes exist right now” to reopen the government.
Yet 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, speaking on condition of 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.
“If we can get a bipartisan debt ceiling bill in the Senate, that’s one more -- what’s the word -- beacon of sanity that the House at some point would have to pay attention to,” Representative Jim Himes, a Connecticut Democrat, said today.
At least four Republican senators wouldn’t rule out that option yesterday while a spokesman for Mark Kirk, an Illinois Republican, said in an e-mail that Kirk would vote for raising the debt ceiling without conditions.
“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.”
Senator Heidi Heitkamp, a North Dakota Democrat, wouldn’t take a position on a clean debt-ceiling increase when asked by reporters yesterday. At least four Senate Republicans -- Murkowski, John McCain of Arizona, Bob Corker of Tennessee and Susan Collins of Maine -- kept open the option of voting for a debt-limit increase without conditions or helping one pass.
None of the proposals being floated has been embraced by both parties and all face long odds.
The chance of a U.S. government default is “reasonably high,” Bruce Ratner, chairman of developer Forest City Ratner Cos., said in an interview on Bloomberg Television. There’s a “small group of people who don’t have an understanding of how serious it is,” he said, adding that “the ramifications are huge.”
In a report today, the International Monetary Fund cut its global economic outlook for this year and next and warned that a U.S. default could “seriously damage” the world economy.
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.
Obama reiterated yesterday that he won’t negotiate with Republicans over the shutdown and the debt-limit increase, which have merged into a single fight that has proven intractable so far. 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.
If it succeeds, the Senate Democrats’ proposal could provide a path out of the debt-ceiling deadlock by giving both parties what they want. Obama would get an increase in the debt ceiling without negotiating policy conditions with Republicans, and Republicans could say they objected to Obama’s attempts to raise the borrowing limit.
For the Senate Democrats’ plan to work, at least some Republicans would have to allow it to happen. Giving Obama the authority would require the support of at least six Republicans on procedural votes.
In the House, Boehner would have to allow a vote on the plan and at least 16 Republicans would have to support it for it to succeed. He has said the House won’t pass a clean debt-limit bill.
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, some time 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 Senate Majority Leader Harry Reid have rejected those measures.
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