U.S. Fiscal Agreement Lacking as Borrowing Lapse LoomsRichard Rubin, Kathleen Hunter and Chris Strohm
The U.S. government entered the final three days before its borrowing authority lapses without any agreement among lawmakers on how to move forward.
Senators are having discussions along two bipartisan paths, seeking an accord. The chamber’s leaders -- Majority Leader Harry Reid and Minority Leader Mitch McConnell -- are talking. So are 12 senators, led by Republican Susan Collins of Maine and Democrat Joe Manchin of West Virginia, who met today.
“We’re making progress,” Collins told reporters after the meeting. “We’re going to continue to meet throughout the day and the conversations have been very constructive.”
Little evidence emerged so far to support that optimism as the government’s partial shutdown entered its 14th day and the markets weighed the time left to avert a U.S. default when the debt ceiling is reached on Oct. 17.
U.S. stocks fell, halting the biggest three-day advance since January.
The Standard & Poor’s 500 Index dropped 0.5 percent to 1,694.78 at 10:52 a.m. in New York while the Stoxx Europe 600 Index reversed earlier declines and was little changed. Japan’s currency appreciated for the first time in five days against the dollar and the cost of insuring against losses on Treasuries increased.
The U.S. cash bond market is shut for Columbus Day. Gold gained 0.9 percent and natural gas jumped to the highest level in almost four months.
The Senate begins meeting at 2 p.m. in Washington with votes unrelated to fiscal issues for 5:30 p.m.
The House meets at noon and Republican leaders are weighing whether to bring up their plans for a short-term debt limit increase, said two aides who spoke on condition of anonymity to discuss strategy.
House Republicans will meet at 9 a.m. tomorrow to discuss the details of that proposal and whether it will include policy conditions, which President Barack Obama says he can’t accept.
“Things are back in the middle of the road on the Senate side,” Senator Bob Corker, a Tennessee Republican, told reporters in Washington. “There’s an opportunity today to bring that to a conclusion and to begin moving something off the Senate floor in a bipartisan way.”
The congressional deadlock over increasing the U.S. debt ceiling from $16.7 trillion is threatening the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said yesterday in Washington.
Time is running short for the Senate to pass an agreement to increase the borrowing authority and for the House to act on it before Oct. 17. The federal government would start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
McConnell, in a statement yesterday, urged Democratic leaders to support a plan, based on one drafted by Collins of Maine, which Democrats rejected Oct. 12.
The original Collins proposal included a stopgap spending bill through March, a debt-limit increase into January and a two-year repeal of an excise tax on medical devices. Collins’s plan sought to give federal agencies more flexibility under the across-the-board cuts known as sequestration.
The plan also would have set a mid-January deadline for longer-term budget talks and made two changes to Obama’s health-care plan and required his administration to verify income levels for enrollment in health insurance.
Democratic leaders want a longer debt-limit increase and a shorter extension of government funding at Republican-preferred levels. They also oppose attaching policy conditions to the spending bill or debt limit increase, calling it a ransom for Congress to do its job.
Six senators working with Collins -- Democrats Manchin, Heidi Heitkamp of North Dakota, Mark Pryor of Arkansas, Amy Klobuchar of Minnesota and Joe Donnelly of Indiana and independent Angus King of Maine -- yesterday said they don’t support the proposal in its current form.
“Productive, bipartisan discussions” have taken place, “but there is no agreement,” the senators said in a statement.
Obama, in a phone call with House Minority Leader Nancy Pelosi of California, “reinforced that there must be a clean debt limit increase” -- and a stopgap spending measure also free of policy add-ons -- before budget negotiations can begin, according to a White House statement.
The Senate negotiations include discussions of easing the spending caps imposed by sequestration. Richard Durbin of Illinois, the second-ranking Democrat in the Senate, said there is a $70 billion spending gap between Democrats and Republicans.
Democrats don’t want to lock in lower spending levels for most of the 2014 fiscal year, which began Oct. 1. They have been willing to accept the lower numbers through Nov. 15.
Disagreement over spending is the big sticking point, said Jim Manley, a former aide to Reid. Manley, in a telephone interview, said he’s watching “to see if Senator McConnell demands some sort of fig leaf from Senator Reid to protect the speaker or whether he’s prepared to throw him overboard to get this all behind him.”
Representative Tim Huelskamp, a Kansas Republican, played down the importance of the deadline and said the White House “is trying to scare the markets.”
“Oct. 17 is a date that won’t have a major impact unless the White House can create concern about that,” Huelskamp said yesterday on CBS’s “Face the Nation.”
A Senate deal probably would face the prospect of a hostile reception from House Republicans still seeking to curtail Obamacare and opposed to easing spending caps.
Republican strategist Ron Bonjean yesterday described the latest efforts to find a way out of the impasse as “a Rubik’s Cube from hell,” adding that even if the Senate passes a plan, it would be “still pretty much a jump ball in the House.”
“They may simply reject it without offering a Plan B,” Bonjean, a one-time aide to former Republican Speaker Dennis Hastert, said in a telephone interview.