Oct. 16 (Bloomberg) -- The bipartisan leaders of the U.S. Senate reached an agreement to end the fiscal impasse, said three Democratic aides speaking on condition of anonymity.
The agreement would end the 16-day-old government shutdown and extend U.S. borrowing authority, which lapses tomorrow. House Republicans today signaled that they will allow it to pass.
The biggest remaining question is how quickly the agreement could become law. The first votes could be held as soon as today.
The framework negotiated by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7, setting up another round of confrontations.
On the Senate floor at noon in Washington, Reid said he would say more when McConnell comes to the floor after meeting with members of his party.
Representative Kevin Brady, a Texas Republican, said on Bloomberg Television that he thinks House Republicans’ inability to come up with their own plan to raise the debt limit meant that House Speaker John Boehner would have to accept whatever Senate leaders come up with.
“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.”
House leaders haven’t decided whether to vote before the Senate does, said Michael Steel, a spokesman for Boehner. For procedural reasons, if the House votes first, the bill could reach President Barack Obama’s desk more quickly.
The Senate accord is being announced on day after a ratings company yesterday placed the U.S.’s AAA credit rating on a negative watch.
In the Senate, Texas Republican Ted Cruz, who has led a campaign against Obama’s signature health-care law, has left open the possibility of delaying the debt-ceiling measure. If any of the 100 senators chooses to delay it, a vote could be pushed to as late as next week, raising the prospect of a missed payment on the debt or delayed payments to benefit recipients, contractors or federal workers.
Reid, a Nevada Democrat, and McConnell, a Kentucky Republican, temporarily suspended talks yesterday while Boehner tried and failed to marshal House Republicans behind a plan that was significantly scaled-down from demands for health-law changes that led to the U.S. government shutdown on Oct. 1.
The partial shutdown has closed national parks, slowed clinical drug trials and led to the furlough of thousands of federal workers.
Fitch Ratings yesterday 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.
The Standard & Poor’s 500 Index rose 1.4 percent to 1,721.01 at 12:12 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 are working to resolve the fiscal impasse. Rates on $120 billion of bills maturing tomorrow rose as high as 0.36 percent yesterday before dropping to 0.13 percent.
One-month rates fell seven basis points, or 0.07 percentage point, to 0.27 percent at 10:14 a.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 rose two basis points to 2.75 percent, according to Bloomberg Bond Trader data.
Under the emerging Senate agreement, House Republicans would get almost none of their priorities. They tried to defund or delay the health-care law, settling last month on trying to delay the requirement that individuals purchase health insurance.
Obama has described those requests 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. Others, such as Representative Peter King of New York, stuck with Boehner while complaining about the strategy.
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.”
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 Senate accord could include a Republican-backed provision to tighten income verification requirements for people receiving health-insurance subsidies. That provision is linked to a proposal backed by Democrats and labor unions that would delay a reinsurance fee on group health plans.
Both of those health-care provisions will either be in the agreement or be out of the agreement.
Senate passage of a bill could be delayed into late next week if a single senator objects, the aide said. Then that bill would have to go to the House. Procedurally, the Senate would have been able to act by Oct. 18 if the House had passed a bill last night.
Cruz, who led a Republican bid to defund Obamacare, spoke for more than 21 hours in a budget debate last month. As he entered a party meeting today, he didn’t answer questions about what he would do.
U.S. borrowing authority will lapse tomorrow, leaving the Treasury Department with only $30 billion in cash and incoming revenues to make promised payments. Unless Congress acts, 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 votes 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.
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