Debt Cap Raise Until Nov. 22 Gains Support to Bar Default
The White House endorsed a short debt-limit increase with no policy conditions attached, signaling potential support for House Republicans’ plan for a monthlong reprieve from a default.
The proposal today by House Speaker John Boehner wouldn’t end the 10-day-old partial shutdown of the federal government. The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17.
Jay Carney, the White House press secretary, said today that President Barack Obama would support a short increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension. House Republicans haven’t specified what they plan to tie to the measure and Carney said the White House would need to see a bill before accepting it.
“The president is happy that cooler heads at least seem to be prevailing in the House, that there at least seems to be a recognition that default is not an option,” Carney said.
Boehner’s plan marks the first sign that the parties may be able to resolve the impasse without the catastrophic economic consequences that the Treasury Department said would stem from a default. It wouldn’t end the partisan budget fights that have led to fiscal brinkmanship at least four times since Republicans gained the House majority in January 2011.
House Republicans will discuss the plan with Obama at the White House at 4:35 p.m. today, and the statements from both sides afterward will give an indication about the path ahead.
Boehner and Republican leaders say they want to engage Obama in talks about the budget. Those conversations would start under an unwritten agreement that wouldn’t be part of the debt-limit measure, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee.
Obama has insisted that he will negotiate on broader fiscal and health-care issues only after a debt-limit increase is passed and the shutdown ends.
Representative Tom Cole, an Oklahoma Republican and Boehner ally, said the shutdown could be “settled pretty quickly” after the debt-limit bill passes. He wouldn’t say whether Republicans would insist on changes to the health law.
“It just simply doesn’t make a lot of sense to keep the government shut down when you’re going to pay everybody and you’ve got a serious negotiation going on,” he said.
The Standard & Poor’s (SPX) 500 Index rose 1.6 percent at 2:08 p.m. in New York on optimism among some traders that a deal is closer. Rates on Treasury bills maturing Oct. 17 declined for the first time in six days, falling 10 basis points, or 0.10 percentage point, to 0.39 percent at 2:19 p.m. New York time, according to Bloomberg Bond Trader prices.
The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2.69 percent, after touching 2.72 percent, the highest level since Sept. 23.
The shutdown would pare 0.2 percentage points from U.S. economic growth if it lasts through this week and cost as much as 0.5 points if it continues another two weeks, according to the median estimate in a Bloomberg survey of economists.
“There is only one thing holding us back right now and we all know what that is,” Duncan Niederauer, chief executive officer of NYSE Euronext, said at the Investment Company Institute’s 2013 Capital Markets Conference in New York. “What’s going on in Washington is unfortunate -- if we’re being polite.”
Pushing back the debt-ceiling deadline will allow the debate to refocus on delaying the mandate for individuals to purchase health insurance, said Representative Raul Labrador, an Idaho Republican.
“When they get conflated, then people are going to start caving,” Labrador said about the debt limit and the shutdown. “We want to continue the fight on Obamacare. This is our goal right now.”
Senator Ben Cardin, a Maryland Democrat, said he had “mixed thoughts” about Boehner’s idea, particularly because it’s a short-term increase and because it wouldn’t end the shutdown. He also said it would be preferable to a default.
“I would think that, if this is what the House passes, that it would be difficult for us to develop an alternative strategy,” he said in an interview.
Under the House plan, the Treasury Department wouldn’t be able to use so-called extraordinary measures to further extend borrowing authority, creating a hard deadline, said Representative Tom Reed, a New York Republican. A vote is possible tomorrow or Oct. 12, said Representative Vern Buchanan of Florida.
Many Republicans want to tie the debt-limit increase to party priorities such as cuts in entitlement programs such as Social Security and Medicare. Still to be determined is whether rank-and-file members will agree to the leadership’s proposal.
Republicans have a 232-200 majority and can lose votes from only 15 members before they need to rely on Democrats.
If the U.S. fails to raise the debt limit by Oct. 17, the government will have $30 billion plus incoming revenue to pay its bills. It would start missing scheduled payments, including benefits, salaries and interest, between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Senate Democrats began meeting with Obama at 1:45 p.m. Senate Republicans will go to the White House at 11:15 a.m. tomorrow.
Senate Democrats are taking a “wait and see” approach to Boehner’s latest proposal, said a Senate Democratic aide who spoke on condition of anonymity to discuss strategy. While Democrats are open to a short-term debt-limit increase as a last-minute solution, they prefer their proposal, the aide said.
Whether Senate Democrats could accept Boehner’s proposal would hinge largely on the details of the budget framework it would set up, the aide said, adding that Democrats were concerned that the proposal might dictate that talks occur before the government shutdown ends.
Representative John Larson, a Connecticut Democrat, said his party would be open to Boehner’s idea if it’s the only way the speaker can get something moving.
“It’s hard to comment on a civil war when you’re watching it in front of you and you’re watching them self-destruct,” he said in an interview. “We prefer both to reopen government and to not default on the debt.”
Meanwhile, Senate Democrats will press ahead with their plan, which would push the next debt-limit fight into 2015 and include no policy conditions. A test vote could occur Oct. 12.
Democrats, who control 54 seats in the 100-member Senate, would need the support of at least six Republicans on procedural votes to pass their bill.
The bill from Senate Majority Leader Harry Reid would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use what are called extraordinary measures to stave off default, another increase wouldn’t be needed until sometime in 2015. The previous debt-limit suspension expired on May 18 and the extraordinary measures are lasting five months.
The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs must be tied to a one-year delay in the mandate that individuals who lack health insurance purchase it.
Obama and Senate Democrats refused, and the resulting furloughs and agency shutdowns have slowed mortgage closings, small-business loans and nutrition assistance to poor mothers. Some programs, such as Social Security, continue uninterrupted.
The House has taken a series of bipartisan votes to fund narrow pieces of the government, including the Food and Drug Administration and military death benefits.
Obama and Senate Democrats reject the piecemeal approach, saying Republicans shouldn’t pick and choose politically popular items. The Senate passed the death benefits bill on a voice vote today.
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