House Republican leaders proposed a short-term increase in the debt ceiling that would continue the government shutdown and reduce the prospects for a U.S. default while extending the partisan fiscal fight.
House Speaker John Boehner’s plan would push off the lapse in U.S. borrowing authority through Nov. 22, said Michael Steel, his spokesman. Republicans want to engage President Barack Obama in negotiations over ending the shutdown, which began Oct. 1 after Republicans insisted on changes to the 2010 health-care law.
"It’s time for leadership," Boehner, an Ohio Republican, told reporters in the Capitol today. "It’s time for these negotiations and this conversation to begin."
The plan, which House Republicans will discuss with Obama at the White House at 4:35 p.m. today, marks the first sign that the parties may be able to resolve the impasse without the catastrophic economic consequences that the Treasury Department said would stem from a default.
Obama has insisted that he will negotiate on broader fiscal and health-care issues only after a debt-limit increase is passed and the shutdown ends.
The Standard & Poor’s 500 Index rose 1.7 percent at 12:11 p.m. in New York on optimism among some traders that a deal is closer. Rates on Treasury bills due Oct. 17 dropped for the first time in six days, declining 20 basis points to 0.28 percent at 11:06 a.m. New York time, according to Bloomberg Bond Trader prices.
The benchmark 10-year yield rose four basis points, or 0.04 percentage point, to 2.70 percent, after touching 2.72 percent, the highest level since Sept. 23.
Representative Dennis Ross, a Florida Republican, called the plan an "olive branch" designed to elicit a counteroffer from Obama.
"We’re not going to default," he said. "Now help us reopen the government and give us something to consider in that regard," Ross said. "Hopefully he will."
Under the plan, the Treasury Department wouldn’t be able to use so-called extraordinary measures to further extend borrowing authority, creating a hard deadline, said Representative Tom Reed, a New York Republican.
A vote is possible tomorrow or Oct. 12, said Representative Vern Buchanan of Florida.
White House officials refused to say whether Obama would sign a stand-alone extension of the debt ceiling, without ruling it out.
"I’m not going to answer every single hypothetical," Jason Furman, chairman of the Council of Economic Advisers, said today.
Many Republicans want to tie the debt-limit increase to party priorities such as cuts in entitlement programs such as Social Security and Medicare. Yet to be determined is whether rank-and-file members will agree to the leadership’s proposal.
Republicans have a 232-200 majority and can lose votes from only 15 members before they need to rely on Democrats.
Representative Steve King, an Iowa Republican, said a promise to look at entitlement programs means nothing.
"Their mood and their attitude is to get unified," King said of party leaders. "They’re not unified on a direction but they know they’re unified on the idea of getting unified."
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.
U.S. Treasury Secretary Jacob J. Lew warned Congress today that "uncertainty" over the debt limit is starting to stress financial markets.
"Trying to time a debt-limit increase to the last minute could be very dangerous," Lew told the Senate Finance Committee. "If Congress does not act and the U.S. suddenly cannot pay its bills, the repercussions would be serious."
Senate Democrats will meet with Obama at 1:45 p.m. Senate Republicans will go to the White House at 11:15 a.m. tomorrow.
Obama and other Democrats have insisted that they won’t negotiate on policy conditions attached to the debt limit. By making that their hard-line position and warning of the consequences of default, they opened the door to a shorter-term debt-limit increase.
Representative John Larson, a Connecticut Democrat, said his party would be open to Boehner’s idea if it’s the only way the speaker can get something moving.
"It’s hard to comment on a civil war when you’re watching it in front of you and you’re watching them self destruct," he said in an interview. "We prefer both to reopen government and to not default on the debt."
Meanwhile, Senate Democrats will press ahead with their preferred plan, which would push the next debt-limit fight into 2015 and include no policy conditions.
Senate Majority Leader Harry Reid is confident he can muster the needed 60 votes to advance the bill in an initial Oct. 12 test vote, said a Senate Democratic aide.
Reid must gain support from at least six Republicans. One way to do that would be to promise votes on Republican-backed amendments that Democrats could defeat, the aide said. A second vote with a 60-vote threshold would be required.
The shutdown and debt-limit debate have hurt Republicans’ standing with voters, according to a Gallup poll released yesterday. It found that 28 percent of Americans view the party favorably, down 10 percentage points since September and at the lowest point since Gallup began asking the question in 1992.
Senate leaders would be open to a short-term increase in U.S. borrowing authority, a Senate Democratic aide said yesterday. Democrats would insist that any subsequent debt-limit increases wouldn’t require agreement by the parties on long-term fiscal and health-care policy.
Democrats, who control 54 seats in the 100-member Senate, would need the support of at least six Republicans on procedural votes to pass their bill.
The bill from Reid would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use what are called extraordinary measures to stave off default, another increase wouldn’t be needed until sometime in 2015. The previous debt-limit suspension expired on May 18 and the extraordinary measures are lasting five months.
The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs must be tied to a one-year delay in the mandate that individuals who lack health insurance purchase it.
Obama and Senate Democrats refused, and the resulting furloughs and agency shutdowns have slowed mortgage closings, small-business loans and nutrition assistance to poor mothers. Some programs, such as Social Security, continue uninterrupted.
Many federal workers will receive a partial paycheck tomorrow that includes compensation for the final days of September.
The House has taken a series of bipartisan votes to fund narrow pieces of the government, including the Food and Drug Administration and military death benefits. The House is now scheduled to be in session on Saturday, Oct. 12.
Obama and Senate Democrats reject the piecemeal approach, saying Republicans shouldn’t pick and choose politically popular items.
--With assistance from Michelle Jamrisko, Kathleen Hunter, Kasia Klimasinska, Mike Dorning, Phil Mattingly and Michael C. Bender in Washington and Susanne Walker in New York. Editors: Jodi Schneider, Robin Meszoly
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