Republicans Revise Debt-Cap Plan While U.S. Senate Waits

The House will vote as soon as tonight on a bill that would prevent U.S. borrowing authority from lapsing Oct. 17 and end a 15-day government shutdown, following through on a maneuver that put Senate talks on hold.

The proposal was introduced as Senate Republican and Democratic leaders closed in on an agreement and the House Rules Committee scheduled a 5:40 p.m. meeting to set up a vote. The revised House plan would extend government funding through Dec. 15, rather than Jan. 15, 2014, in the Senate plan.

The U.S. AAA credit grade was placed on ratings watch negative by Fitch Ratings, which cited the government’s inability to raise the debt ceiling in a timely manner, according to a statement after markets closed in New York.

“We just need to wait and see what the House does,” said Adam Jentleson, a spokesman for Majority Leader Harry Reid. “We expect them to fail and then the Senate deal will re-emerge.” Talks between Reid and Republican Leader Mitch McConnell were put on hold after the House plan was unveiled.

The Republican plan would bar government subsidies of health insurance for congressional staff members, along with lawmakers and high-ranking administration officials. A two-year delay in the medical-device tax was dropped.

The bill has none of the spending cuts and limits on regulations that Republicans members had sought. It includes no major changes to the 2010 health care law -- the demand that prompted the shutdown.

Stocks Fall

U.S. stocks dropped after Senate leaders suspended their talks. The Standard & Poor’s 500 Index fell 0.7 percent to 1,698.07 and the Dow Jones Industrial Average declined 0.9 percent to 15,168.01 at 4:03 p.m. in New York.

Benchmark Treasury 10-year yields rose four basis points, or 0.04 percentage point, to 2.73 percent at 3:41 p.m. New York time, according to Bloomberg Bond Trader prices. The rate touched 2.74 percent, the highest since Sept. 23.

The revised House proposal would suspend the debt limit through Feb. 7, 2014, and eliminate so-called extraordinary measures, creating a hard deadline, said an aide who spoke on condition of anonymity to discuss the plan.

“The House will vote tonight to reopen the government and avoid default,” said Michael Steel, a spokesman for House Speaker John Boehner. “House Republican Leaders will bring a plan to the floor which will end the Obamacare subsidies for elected officials and staff in Washington, D.C., and pressure Senate Democrats to accept more sensible dates” for reopening the government and suspending the debt ceiling.

Senate Plans

The Senate could amend a House-passed bill and insert its own language or move its own bill if the House efforts collapse.

Senate Democrats leaving a party meeting today blamed Boehner for undercutting talks between Reid and McConnell.

“No balanced, bipartisan, reasonable, outcome in the Senate is safe from the House Republicans,” said first-term Senator Chris Coons, a Delaware Democrat. “This is a reckless, stunning reversal.”

Reid and McConnell had been closing in on an agreement earlier today. Reid had already rejected the House bill in an attempt to pressure Boehner to fold by showing that a Republican House proposal won’t succeed even if Boehner can get his party behind it.

As the differences narrow between the parties, a House vote would test whether Republicans are willing to raise borrowing authority and end the shutdown without major changes to the 2010 health-care law.

‘Bipartisan Path’

Nancy Pelosi, the House Democratic leader, said there’s a “bipartisan path” to preventing the lapse in borrowing authority. She urged Boehner to allow a vote on the Senate deal.

“Perhaps the speaker just needs to humor his troops so they can sow their oats,” the California Democrat said on Bloomberg Television. “They’ve hijacked the Republican name. Republicans are not for jeopardizing our full faith and credit.”

Senator Charles Schumer, a New York Democrat, said he hoped Boehner’s plan would “collapse relatively soon” so the Senate proposal can proceed as the primary path.

“My sense is they have control of this issue on the House side for the next move and the Senate will wait and see what the House sends,” said Senator Roy Blunt, a Missouri Republican.

Health Law

The House plan falls far short of Republican efforts last month to defund or delay major pieces of the 2010 health law. Boehner told Republicans the approach was the chamber’s only possible strategy to respond to the emerging Senate deal that he described as a hand grenade being lobbed at the House, said Representative John Fleming, a Louisiana Republican.

White House spokeswoman Amy Brundage in a statement today said President Barack Obama has repeatedly said that lawmakers “don’t get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation’s bills,” saying that’s what the House Republican proposal does.

There are obstacles, including the disagreements between the Senate and the House. Furthermore, senators opposed to the deal may stall a final vote.

Also, some House Republicans may oppose Boehner’s plan because it doesn’t go far enough in changing the health law.

“Both plans are financially irresponsible,” said Representative Mo Brooks, an Alabama Republican. “Both kick the can down the road. Both force America to deal with a debt crisis where we’re weaker because we incur more debt.”

Republican Votes

Given objections from the White House and House Democratic leaders, Boehner may need to find all the votes for the plan in his own party, meaning that he can lose the support of no more than 15 Republicans.

“For the most part we’re on board,” Fleming said, “There are a number of us that want to see more.”

The emerging contours of an agreement in the Senate would stave off a potential default, open shuttered federal services and change the immediate deadlines in favor of three new ones over the next four months, including a Dec. 13 target date for a budget conference between the House and Senate.

There is a potential obstacle to turning a Senate agreement into law quickly. A single senator would be able to use procedural tactics to push a final vote past the Oct. 17 lapse in borrowing authority.

After the House vote, the Senate would be able to pass its plan no later than Oct. 18, before the government starts missing promised payments. The U.S. will have enough cash and income revenue to avoid missing payments until Oct. 22 at the earliest, according to the Congressional Budget Office.

Ted Cruz

Texas Republican Senator Ted Cruz, who spoke for more than 21 hours during a budget debate last month, wouldn’t rule out stalling maneuvers, saying he wants to see the details of the plan.

The House Republican alternative would prevent the government from making any employer-side contributions to the health insurance of members of Congress, the president, the vice president and the cabinet. The changes late today expanded that to include congressional staff members.

Obama has insisted that Congress raise the $16.7 trillion U.S. debt limit without add-ons and that stopgap spending bills be free of policy conditions.

Possible sticking points to a Senate deal late yesterday included whether Democrats would agree to Republican demands that the Treasury Department be barred from using extraordinary measures to extend the debt-limit deadline after Feb. 7. Such maneuvers pushed forward the deadline for five months this year, though it’s not clear how much time they would buy in 2014.

Treasury Flexibility

Obama spoke with McConnell yesterday and said the administration wants flexibility for the Treasury Department’s borrowing, according to a person familiar with the conversation who requested anonymity to describe private discussions.

The House proposal would bar the extraordinary measures and Reid cited that as one of his major objections.

Yesterday’s version of the Senate plan would postpone a reinsurance fee the government is levying on health plans for the first three years of the health-care exchanges -- amounting to $63 a worker next year, said the person familiar with the talks. Labor unions, aligned politically with Democrats, have asked for the delay.

The Senate agreement also would give federal agencies flexibility to manage the across-the-board spending cuts known as sequestration if they occur in 2014.

The partial government shutdown began Oct. 1 after Republicans insisted on changes to the 2010 Patient Protection and Affordable Care Act. Backed by Cruz, they started with a plan to defund the law and ended up seeking a one-year delay of the requirement for individuals to purchase health insurance.

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