Obama Repeats No-Negotiations Stance as Budget Impasse Continues

October 7, 2013 10:00 AM

(For more on the U.S. government shutdown, see EXT2.)


Oct. 7 (Bloomberg) -- President Barack Obama reiterated that he won’t negotiate with Republicans over the partial government shutdown and the U.S. debt limit as Senate Democrats began preparing for a test vote on a clean debt-ceiling bill.

Many U.S. government services have been shuttered for a week and the country is 10 days away from running out of borrowing authority. Republicans are insisting on changing the 2010 Affordable Care Act, while Obama refuses to engage in discussions about policy riders as a condition for opening the government or raising the debt limit.

"We’re not going to negotiate under the threat of economic catastrophe," Obama said today during a visit to the Federal Emergency Management Agency in Washington.

Senate Democrats could introduce legislation as soon as today that gives Obama the authority to raise the debt ceiling unless two-thirds of Congress disapproves, according to a Senate Democratic aide.

An initial test vote on the proposal, described by the aide on condition of anonymity, could occur as soon as Oct. 11. The method of giving Obama the authority to raise the debt ceiling barring a congressional disapproval was first proposed by Senate Minority Leader Mitch McConnell, a Kentucky Republican, in 2011.


Republican Votes


The Senate Democratic aide said the strategy could make it easier to get Republican votes because no Republican would have to vote directly for a debt-ceiling increase.

"We are not going to pass a clean debt limit," House Speaker John Boehner, an Ohio Republican, said yesterday in an interview on ABC’s "This Week" program. "The votes are not in the House to pass a clean debt limit."

Gene Sperling, director of the president’s National Economic Council, said today that while the administration prefers a long-term increase in the debt ceiling, it wouldn’t rule out a temporary one.

Should Congress fail to pass a debt-ceiling increase that the president can sign, the ensuing default would be an "extraordinarily negative event for our economy" and the world, Sperling said at a breakfast sponsored by Politico.


Stocks Decline


Stocks declined today as concern about the lack of progress toward a resolution hit markets. The Standard & Poor’s 500 Index fell 0.6 percent at 12:38 p.m. in New York.

The 10-year Treasury yield fell three basis points to 2.62 percent at 11:59 a.m. in New York. With default possible in the next few weeks, the difference in rates between one- and three- month bills reached 11.7 basis points, the biggest since September 2008. One-month bill rates climbed to as high as 0.162 percent, while rates on three-month bills touched 0.03 percent.

Using the federal budget and debt ceiling as leverage in a policy debate is "how the founding fathers designed the system," former House Speaker Newt Gingrich told Bloomberg Radio today.

"If you had better leadership you could probably avoid it, but the absence of leadership is pretty pathetic," said Gingrich, who was in charge of the House during a 21-day shutdown, the longest in U.S. history.

Boehner said on ABC he doesn’t intend to let the government default and he has told his members the same thing behind closed doors, even if it involves relying on Democratic votes, according to aides and lawmakers.


Default Dangers


Treasury Secretary Jacob J. Lew, who appeared yesterday on four of the major Sunday television talk shows, said the administration would be willing to negotiate only after the partial shutdown comes to an end and the debt ceiling is increased. He also warned of the dangers of default.

"I’ve talked with John Boehner; I know he doesn’t want to default," Lew said on "Fox News Sunday." "He also didn’t want to shut the government down. And here we are with a government shutdown."

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, sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Unlike past fiscal feuds, this dispute is more about Obama’s Affordable Care Act, his signature health-care law, and less about the amount of spending. The U.S. budget deficit in June was 4.3 percent of gross domestic product, down from 10.1 percent in February 2010 and the narrowest since November 2008, when Obama was elected to his first term, according to data compiled by Bloomberg from the Treasury Department and the Bureau of Economic Analysis.


Debt Drivers


Boehner said Obama needs to start a conversation about the drivers of the country’s debt -- entitlement programs such as Medicare and Social Security -- before he could pass a measure increasing the debt ceiling.

Obama, who negotiated with Boehner over possible changes to entitlement programs during the 2011 fiscal debate, has said he’ll be willing to talk after the shutdown ends and the debt ceiling is increased. Obama included changes to cut the costs that come from Social Security and Medicare in his budget plan, which was released in April.

Senator Charles Schumer of New York, along with fellow Democrats and administration officials, also questioned Boehner’s statement that a clean bill to fund the government wouldn’t have enough votes in the House, underlining a push from Senate Democrats and the White House to pressure Boehner to put that bill up for a vote.


Stopping ‘Games’


Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, a Nevada Democrat, said Boehner is "saying things that fly in the face of the facts or stand at odds with his past actions."

"Today, Speaker Boehner should stop the games and let the House vote on the Senate’s clean CR so that the entire federal government can re-open within twenty-four hours," Jentleson said in a statement, referring to a continuing resolution to authorize government spending.

Democrats should "stow their faux outrage," said Michael Steel, a spokesman for Boehner, in a statement today.

"Act like an adult, and start talking about how we reopen the government, provide fairness for the American people under Obamacare, and deal with the drivers of our debt and deficits," he said.


House Meetings


Boehner has been holding regular closed-door meetings with his members, asking them to stick together as they get close in on the debt-ceiling deadline. The House has passed a series of smaller funding bills for specific parts of the government, including the National Institutes of Health and national parks.

House Republicans have rebuffed calls from Democrats to put a "clean" bill on the floor to fund the government at the level it was at prior to the partial shutdown.

Last month, Boehner, 63, outlined a debt-limit increase strategy that also included lighter regulations, cuts in entitlement programs and approval of TransCanada Corp.’s Keystone XL pipeline.

The outline included means-testing Medicare, reducing the changes to malpractice law and eliminating social services block grants. Also being considered was a proposal to eliminate a requirement that gives regulators authority to seize and dismantle financial firms if their failure could damage the stability of the U.S. financial system.

Representative Paul Ryan, a Wisconsin Republican and his party’s 2012 vice presidential candidate, has also been pressing for a plan that would solve the government spending impasse and raise the debt-limit at the same time while implementing economic growth policies and extracting deeper entitlement cuts as some in the Republican conference complained the leaders’ initial outline did not go far enough.


--With assistance from Kasia Klimasinska, Roxana Tiron, Sara Forden, Julianna Goldman, Michael C. Bender and Phil Mattingly in Washington, Pratish Narayanan in Singapore, Stephen Kirkland in London and Daniel Kruger and Susanne Walker in New York. Editors: Robin Meszoly, Jodi Schneider


To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net; Margaret Talev in Washington at mtalev@bloomberg.net


To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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