Obama Rejects Latest Offer, Boehner Tells Republicans

House Speaker John Boehner told fellow Republicans today that President Barack Obama rejected his latest fiscal offer, shifting the focus for a potential agreement to the Senate.

The U.S. is in the 12th day of a partial government shutdown and the country’s borrowing authority will lapse Oct. 17 if Congress doesn’t act. The latest moves make the legislative path forward uncertain, because no plans appear to have enough support yet to move through either chamber of Congress.

Senate Majority Leader Harry Reid, a Nevada Democrat, said talks between the White House and House Republicans were “done” and that he expected Republicans to block an attempt today to allow a Senate vote on pushing the next debt-ceiling debate into 2015.

“What a sad day for America,” he said on the Senate floor today. “Each hour that goes by we are closer to a calamity for our country.” Senate Democrats plan to meet in private after today’s vote, according to a Senate Democratic aide.

Reid said he was glad that stock markets wouldn’t be open Oct. 14 because of the lack of progress in Congress. U.S. stock markets will be open, though, on Oct. 14, the federal holiday of Columbus Day.

The White House today declined to comment on the budget situation.

‘President Rejected’

“The president rejected our deal,” Representative Raul Labrador of Idaho told reporters after leaving Republicans’ closed-door meeting in Washington.

The speaker also told members that talks are continuing with the White House, according to another person in the room who sought anonymity to discuss the private meeting.

Still, 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.”

House Republican leaders’ plan would have extended U.S. borrowing authority to Nov. 22 from Oct. 17. They wanted to attach policy conditions to a separate spending bill to end the government shutdown and begin broader talks on fiscal and health care policy.

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.

Obama’s Concerns

“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.

Senate Republicans are focusing on a plan from Senator Susan Collins of Maine that 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 because the talks are fluid.

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.

Collins, Manchin

The detailed text of Collins’ proposal, which she is working on with Democrat Joe Manchin of West Virginia, could 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.

That 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 is voting today on unrelated matters and isn’t scheduled to return until late on Oct. 14.

Turned Down

“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 whether the White House was shifting its position, Carney said the administration was “encouraged” by “constructive signs coming from the Republicans.”

House Democrats said today they will try to use a procedural move known as a discharge petition to force a vote on a bill to end the shutdown without policy conditions. The action is a long shot; it would require Republicans who support it to break with Boehner in ways they haven’t on other procedural matters.

“We know the votes are there,” Maryland Representative Chris Van Hollen, the top Democrat on the Budget Committee, told reporters today. “Let’s vote to open the government now.”

Financial Markets

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.

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 medical device tax is potentially attractive to lawmakers in both parties. It has drawn opposition from Democrats who represent states with device makers, including Massachusetts and Minnesota.

Medical-Device Tax

Republicans could say they made a change to Obamacare, because the medical-device tax was passed as part of the 2010 law. Obama could say he didn’t negotiate on the principles of the health-care law, because eliminating the tax wouldn’t end the individual mandate or other main components of the Patient Protection and Affordable Care Act.

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.

Republicans, who have called for defunding or delaying Obamacare, have reduced their demands over the past few weeks. The House “has demonstrated an incredible amount of flexibility,” Representative Peter Roskam of Illinois said on Bloomberg Television’s “Capitol Gains” airing this weekend. He is the House Republicans’ chief deputy whip.

‘Hollow Victory’

A deal built around repealing the medical-device tax would be a “hollow victory” and further divide Republicans, said Representative Tim Huelskamp of Kansas, one of the House Republicans still pushing to dismantle the health-care law.

“It would still fund 98 percent of Obamacare,” Huelskamp said of the latest Republican proposal. “That won’t be sufficient for conservatives and will be seen as capitulating to the left.”

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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