U.S. lawmakers began taking the first tentative steps toward a path to raising the government’s debt limit even as the rhetoric between President Barack Obama and Republican leaders grew more divisive.
Senate Democrats are planning a test vote before the end of this week on a measure that would grant Obama authority to raise the $16.7 trillion debt ceiling, probably for a year unless two-thirds of both chambers of Congress disapprove.
That plan emerged as Gene Sperling, the director of Obama’s National Economic Council, opened another route toward at least a temporary resolution. He declined to rule out a short debt-limit extension while reiterating the administration’s preference for a longer-term resolution.
If all Senate Democrats along with six Republicans vote for giving Obama authority, they could send a debt-limit increase without policy conditions to the Republican-controlled House with only a few days to spare before U.S. borrowing authority lapses Oct. 17. That would put pressure on House Speaker John Boehner, who opposes a clean debt-limit bill.
At least four Republican senators wouldn’t rule out that option yesterday while a spokesman for Mark Kirk, an Illinois Republican, said in an e-mail that Kirk would vote for raising the debt ceiling without conditions.
“We’ve got a situation where you have a calendar running, you have people who are frustrated and upset, and so let’s figure it out,” Senator Lisa Murkowski, an Alaska Republican, said in an interview at the Capitol yesterday. “We shouldn’t be dismissing anything.”
What Is This Ceiling They're Trying to Raise?
Senator Heidi Heitkamp, a North Dakota Democrat, wouldn’t take a position on a clean debt-ceiling increase when asked by reporters yesterday. At least four Senate Republicans -- Murkowski, John McCain of Arizona, Bob Corker of Tennessee and Susan Collins of Maine -- kept open the option of voting for a debt-limit increase without conditions or helping one pass.
“This is a very serious situation,” said Senator Mary Landrieu, a Louisiana Democrat who said she would be “happy” to support a clean debt-ceiling increase. “I’m not optimistic but I remain hopeful.”
House Republicans, who had previously discussed pairing a debt-limit increase with a list of party priorities, haven’t released legislation or set a time line for action.
It’s unclear whether House Republicans will consider a debt-ceiling package this week or wait for the Senate to act, said two Republican congressional aides speaking on condition of anonymity to discuss party strategy.
None of the proposals being floated has been embraced by both parties and all face long odds.
“Republicans aren’t just going to buy off on that kind of a thing,” Utah Senator Orrin Hatch said of the Democrats’ proposal. “I don’t think that’s going to pass.”
The start of legislative movement was a sign that some in both parties see concerns about the effects of a prolonged government shutdown -- now in its second week -- and want to avoid default on interest or other government payments.
Investor concern that U.S. lawmakers won’t avert a default has roiled markets. The Standard & Poor’s 500 Index (SPX) increased less than 0.1 percent after falling 0.9 percent yesterday in New York to 1,676.12, the lowest level in almost a month.
The 10-year (USGG10YR) Treasury yield rose one basis point to 2.64 percent. With default possible in the next few weeks, the difference in rates between one- and three-month bills reached 13.7 basis points, the biggest since September 2008. The bill maturing Oct. 24 climbed to as high as 0.18 percent yesterday, while rates on three-month bills touched 0.03 percent.
“We are playing Russian roulette” with the global financial system, Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., the world’s largest fixed-income manager, said today on Bloomberg Television. The fiscal standoff will have a “huge impact” on the International Monetary Fund meetings in Washington Oct. 11-13, he said.
Signaling that Republicans are losing political ground during the standoff, an ABC News/Washington Post poll showed 70 percent disapprove of Republicans’ handling of the budget impasse, up 7 percentage points from a week ago. Fifty-one percent disliked Obama’s approach, little changed from earlier.
“For too long, we’ve let D.C. define our brand and we’re going to stop doing that,” Republican Bobby Jindal, governor of Louisiana, said on MSNBC today, adding that governors are making tough choices. “There’s a lot of general frustration at the dysfunction you see” in Washington, he said.
The partial shutdown, which began Oct. 1, has shuttered government services such as Head Start preschool programs and national parks and furloughed federal employees. Other functions, such as mail delivery and Social Security benefits, are continuing.
Obama reiterated yesterday that he won’t negotiate with Republicans over the shutdown and the debt-limit increase, which have merged into a single fight that has proven intractable so far. Republicans are insisting on changing the 2010 Affordable Care Act, while Obama refuses to engage in discussions about tying policy conditions to opening the government or raising the debt limit.
“We’re not going to negotiate under the threat of economic catastrophe,” Obama said during a visit to the Federal Emergency Management Agency in Washington.
The House unanimously passed a bill Oct. 5 that would provide back pay to furloughed workers. The Senate hasn’t acted on it, and Republican Senator John Cornyn of Texas said the measure should be open for amendments.
“It’s really premature to be dealing with that until we solve the underlying problem,” of the government shutdown, Cornyn, the number-two Republican in the Senate, told reporters.
If it succeeds, the Senate Democrats’ proposal could provide a path out of the debt-ceiling deadlock by giving both parties what they want. Obama would get an increase in the nation’s $16.7 trillion debt ceiling without negotiating with Republicans, and Republicans could say they objected to Obama’s attempts to raise the borrowing limit.
For the Senate Democrats’ plan to work, at least some Republicans would have to agree. Giving Obama the authority would require the support of at least six Republicans on procedural votes. Senator Richard Durbin of Illinois said Democrats haven’t started talking to Republicans about the plan.
“We hope they understand the economic crisis we would be avoiding if we can pass it,” Durbin said. “We haven’t quite reached the point yet where we have any commitments.”
McCain said he wants to see “what the dynamics are” around a debt-ceiling vote.
“I want it done,” he said.
In the House, Boehner would have to allow a vote on the plan and at least 16 Republicans would have to support it for it to succeed.
He has said the House won’t pass a clean debt-limit bill. Boehner said yesterday that the public expects leaders to negotiate.
“The president’s refusal to negotiate is hurting our economy and putting our country at risk,” he said.
The U.S. will run out of borrowing authority on Oct. 17 and will have about $30 billion in cash after that. The country would be unable to pay all of its bills, including benefits, salaries and interest, some time between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
The U.S. should prevent a default and ensure the security of China’s investment in Treasuries, Chinese Deputy Finance Minister Zhu Guangyao said at a briefing arranged by the Chinese Foreign Ministry, Xinhua reported. China was the biggest overseas holder of U.S. debt at the end of July with $1.28 trillion, according to Treasury Department data.
The House has been passing separate funding bills for parts of the government, including the National Institutes of Health and national parks. Obama and Senate Majority Leader Harry Reid have rejected those measures.
Senator Rob Portman, an Ohio Republican, is meeting with Democrats and Republicans to gain support for a plan that would open the government through Sept. 30, 2014, without delaying major parts of the health law, said a person familiar with Portman’s plan who spoke on condition of anonymity.
The plan would call for $600 billion in spending cuts over the next decade, a process for significant, revenue-neutral tax code changes and an income-verification requirement for health-insurance subsidies.
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