Congress Struggles to Deal as Senate Stops Debt Cap Raise

U.S. lawmakers are struggling to find a path to prevent a U.S. default and end the 12-day government shutdown after the Senate rejected a Democratic plan to push the next debt-limit fight into 2015.

The 53-45 vote fell short of the 60 votes needed to advance the measure as Republicans rejected Senate Majority Leader Harry Reid’s approach. Reid, a Nevada Democrat who has begun talking to Minority Leader Mitch McConnell about the impasse, said after the vote that he wasn’t confident they would reach an agreement.

“I’m just doing my best,” Reid said as he entered a party meeting. “I’m not doing anything the way the Republicans have acted.”

Reid rejected a Senate Republican offer because it ties conditions to raising the debt limit, said a Democratic aide speaking on condition of anonymity to discuss the private meeting.

The Senate vote came just hours after House Speaker John Boehner told fellow Republicans that President Barack Obama rejected his latest fiscal offer. The House has considered no debt-limit legislation and isn’t scheduled to vote again until the evening of Oct. 14.

‘Own’ Path

“It’s been clear to me for a while we can’t wait for the House to save us,” said Richard Durbin of Illinois, the second-ranking Senate Democrat. “We have to find our own bipartisan path forward, and we haven’t done that yet.”

The emerging Senate talks have been focusing on a plan from Republican Susan Collins of Maine and Democrat Joe Manchin of West Virginia, which faces obstacles in both parties and both chambers of Congress.

“For the first time” in the Senate, “people are talking that need to be talking to find a solution,” said Senator Roy Blunt, a Missouri Republican. “Those would include, and until now haven’t included, Senator Reid and Senator McConnell. They are talking for the first time in the last 24 hours and that’s a good thing.”

The Collins plan would delay a tax on medical devices for two years, while making up lost revenue through pension-rule changes, and extend government funding for six months.

It would push the next debt-limit fight to the end of January and give agencies more flexibility to allocate funds, said two Senate aides with knowledge of the proposal who sought anonymity to discuss the private talks.

Budget Talks

The plan would require the Obama administration to verify income levels for enrollment in health-care benefits, and set a mid-January deadline for longer-term budget talks, they said.

The detailed text of Collins’ proposal may be released as soon as today, said a Democratic aide familiar with the plan who spoke on condition of anonymity to discuss the proposal.

“I think elements of my plan will be in the final compromise that brings an end to this impasse,” Collins told reporters as she entered a meeting of fellow Senate Republicans today.

Democrats, including Durbin, said that the debt-limit increase is too short to provide certainty and the funding extension at Republican-preferred levels is too short.

For the past two days, the prospects for a potential deal had focused on talks between Boehner and Obama that would push the lapse of borrowing authority to Nov. 22 from Oct. 17. Republicans also wanted to attach policy conditions to a separate spending bill that would end the government shutdown.

Reid, a Nevada Democrat, said talks between the White House and House Republicans were “done.”

White House

The White House today declined to comment on the budget situation. While communications continue between congressional negotiators and the White House, Obama is not weighing in publicly, leaving congressional leaders to try to come up with a plan. He has no appearances scheduled for the next three days and will likely spend most of the rainy weekend in the White House.

Representative Bill Flores of Texas said the president “is not talking to us.” He said Obama “is trying to talk to the Senate Republicans and trying to split them up so” that Reid “can jam a deal together.”

Republicans in the House oppose several aspects of Collins’ plan. They want a larger dent in the 2010 health care law such as a delay of the mandate for individuals to purchase health insurance.

Six Months

Representative Hal Rogers, chairman of the House Appropriations Committee, rejected the idea of a six-month spending bill.

Obama has insisted that he wouldn’t accept policy conditions attached to a debt-limit increase or a spending bill, though Jay Carney, the White House press secretary, hedged on the spending bill yesterday.

“The president has a number of concerns” about Boehner’s proposal, Carney told reporters yesterday after Boehner and Obama spoke by telephone about the speaker’s offer.

Extending the debt ceiling for a short period while budget talks occur may lead to a replay of the same brinkmanship the U.S. is experiencing now, Carney said.

The emerging Senate plan has no chance in the House, said Representative John Fleming of Louisiana after a party meeting today. He said there was “no reason” for the House to pass a short-term debt-limit increase. The House completed voting today and isn’t scheduled to return until late on Oct. 14.

Without ‘Counter-Offer’

“Every offer we’ve made they just flat turned us down without any counter-offer,” Fleming said. “Our level of expectations for the president has gradually dropped over the years to a point where we don’t expect anything from President Obama.”

White House officials opened the door to talks on ending the government shutdown, even as they held firm on raising the debt ceiling without conditions. When asked yesterday whether the White House was shifting its position, Carney said the administration was “encouraged” by “constructive signs coming from the Republicans.”

The indications of progress bolstered financial markets yesterday. U.S. shares rallied for a second day following the biggest jump since January and gold plunged to a three-month low while the yen weakened and oil slid. The Standard & Poor’s 500 Index rose 0.6 percent to 1,703.20 yesterday in New York after jumping 2.2 percent the previous day.

Treasury Bills

The rate on $93 billion in Treasury bills due Oct. 24 was at 0.26 percent, according to Bloomberg Bond Trader data, after climbing as high as 0.50 percent on Oct. 10. It was zero as recently as Sept. 19. The rate on bills due Nov. 29 was at 0.16 percent, the highest since the security was issued.

The shutdown has led to hundreds of thousands of federal employees being furloughed or receiving partial paychecks. It has also closed federal services such as national parks.

Durbin said he was open to changes in the medical-device tax, though he had concerns about other industries taxed in the law seeking similar treatment.

“I don’t want to pay dearly for short-term relief,” he said. “Open the government first, pay our bills. Then we negotiate.”

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.

Any prospective deal faces questions, including whether Boehner can come to an agreement with Obama and not lose the support of his hardline members. They’ve sought to use the debt ceiling and government shutdown to force curbs on Obamacare and federal spending.

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