Oct. 16 (Bloomberg) -- The bipartisan leaders of the U.S. Senate reached an agreement to end the fiscal impasse and to increase U.S. borrowing authority. The Senate and House plan to vote on it later today, and the White House press secretary said President Barack Obama supports the deal.
The agreement would end the 16-day government shutdown and allow the U.S. to continue borrowing, the day before its authority lapses. House Republicans today signaled that they will let it pass largely with Democratic votes. Senate opponents of the agreement, including Texas Republican Ted Cruz, said they won’t stall a vote.
“The compromise we reached will provide our economy with the stability it desperately needs,” said Senate Majority Leader Harry Reid.
The agreement concludes a four-week fiscal standoff that began with Republicans demanding defunding of Obama’s 2010 health-care law and objecting to raising the debt limit and funding the government without policy conditions. They achieved almost none of those goals in this agreement.
“This is far less than many of us had hoped for, frankly, but it’s far better than what some had sought,” said Mitch McConnell, the Senate minority leader, who said the measure retains Republican-preferred spending levels.
The framework negotiated by Reid and McConnell would fund the government at those Republican-backed levels through Jan. 15, 2014, and suspend the debt limit until Feb. 7, setting up another round of confrontations then.
“This agreement achieves what is necessary,” Jay Carney, the White House press secretary, said.
Representative Kevin Brady, a Texas Republican, said on Bloomberg Television that he thinks House Republicans’ inability to come up with a plan to raise the debt limit meant that House Speaker John Boehner would have to accept whatever Senate leaders agreed upon.
“This party is not uniting behind our core issues,” Brady said. “As a result, I think we are all frustrated with our ability to impact this overall agreement.”
The Senate accord was unveiled a day after Fitch Ratings put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner, according to a statement after markets in New York closed.
U.S. stocks rallied, sending the Standard & Poor’s 500 Index toward a record. The benchmark index rose 1.2 percent to 1,718.25 at 2:02 p.m. in New York after sliding 0.7 percent yesterday.
Rates on Treasury bills maturing in the next six weeks fell amid optimism lawmakers worked to resolve the fiscal impasse. Rates on $120 billion of bills maturing tomorrow dropped to 0.06 percent after rising as high as 0.36 percent yesterday.
One-month rates fell 17 basis points, or 0.17 percentage point, to 0.17 percent at 1:18 p.m. in New York after touching 0.45 percent, the highest since October 2008, according to data compiled by Bloomberg. The benchmark 10-year yield fell three basis points to 2.70 percent, according to Bloomberg Bond Trader data.
The partial shutdown has closed national parks, slowed clinical drug trials and led to the furlough of thousands of federal workers. The Senate proposal would provide back pay for furloughed workers, said a Democratic aide speaking on condition of anonymity to discuss the plan.
The Senate probably will vote before the House, said a House aide speaking on condition of anonymity because the plans aren’t set. House Republicans are scheduled to meet at 3 p.m.
Under the Senate agreement, House Republicans would get almost none of their priorities.
Obama has described those requests for health-law changes as unacceptable ransom demands and insisted that Republicans relent.
Republicans persisted after the partial government shutdown started Oct. 1 and saw their approval ratings drop in polls. Hardliners resisted plans that didn’t make major changes to the Patient Protection and Affordable Care Act.
Republicans “left everything on the table” by pursuing a wrong-headed strategy, South Carolina Senator Lindsey Graham told reporters today.
“We took some bread crumbs and left the entire mill on the table,” he said. “This has been a very bad two weeks for the Republican brand.”
Cruz said he will continue to fight to make “Washington respond to the very real harms that Obamacare is causing.”
Some House Republicans said they wouldn’t vote for the Senate agreement.
“The Senate plan is not what I support,” Representative Jim Jordan of Ohio told reporters today. “My preference is that we address the underlying problem, which is we have a $17 trillion debt and we deal with the deficit problem and we treat people fairly under Obamacare.”
The Senate agreement trades the pressing and already-missed deadlines for new ones over the next four months. The Treasury Department would be allowed to use so-called extraordinary measures to delay default for about another month beyond Feb. 7, said a Senate Democratic aide who spoke on condition of anonymity to discuss the plan.
The accord includes a Republican-backed provision to tighten income-verification requirements for people receiving health-insurance subsidies, said two Senate Democratic aides who spoke on condition of anonymity to discuss the plan. The agreement won’t include a health-law provision backed by Democrats and labor unions that would delay a reinsurance fee on group health plans, the aides said.
Carney said the income-verification provision wasn’t a ransom.
U.S. borrowing authority will lapse at the end of tomorrow, leaving the Treasury Department with only $30 billion in cash and incoming revenues to make promised payments. Without action, the U.S. will begin missing payments between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Boehner tried several times over the past month to construct a debt-limit bill that House Republicans could support, and he hasn’t brought any proposals to a vote. Republicans didn’t have enough support for the measure yesterday, said a leadership aide who spoke on condition of anonymity to discuss vote counting.
Unlike previous stopgap spending measures, the House bill wouldn’t have made big changes to the 2010 health-care law, and it contains no cuts to entitlement programs that Republicans sought to add to a debt-limit increase or spending bill.
Senator Kelly Ayotte, a New Hampshire Republican, questioned some other Republicans’ approach to the health law.
“If they’re saying the defunding issue is going to come up again in three months, then they’ve learned nothing from this,” she said. “If we learned nothing else from this exercise, I hope we learned that we shouldn’t get behind a strategy that cannot succeed.”
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