U.S. Senate leaders are rushing to lock up an agreement to end the fiscal impasse, stepping in after House Republicans’ last-minute plan to avert a U.S. government default collapsed.
The emerging Senate accord may be announced as early as this morning, though passage in the Republican-led House is far from assured and one ratings company yesterday placed the U.S.’s AAA credit rating on a negative watch. House leaders have made no decision about whether to vote on the Senate bill, according to a House Republican aide speaking on condition of anonymity.
The framework being negotiated by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell presents the clearest path to ending the 16-day-old government shutdown and extending U.S. borrowing authority, which lapses tomorrow. It would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7.
“Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach,” Adam Jentleson, Reid’s spokesman, said in a statement last night. Don Stewart, McConnell’s spokesman, today said the leaders are “still working” on a deal.
In the Senate, Texas Republican Ted Cruz, who has led a campaign against President Barack Obama’s signature health-care law, has left open the possibility of delaying the debt-ceiling measure. If any of the 100 senators chooses to delay it, a vote could be pushed to as late as next week, raising the prospect of a missed payment on the debt.
In the House, Representative John Boehner of Ohio is facing one of the most important decisions of his tenure as speaker: whether to allow a Senate agreement to come to the House floor unimpeded, or try to amend it. House Democrats say they could pass a Senate deal with a handful of Republicans, if Boehner would allow a vote.
Rob Nabors, deputy White House chief of staff, was at the Capitol last night for meetings, according to an administration official who requested anonymity to discuss private talks.
A Senate accord on government funding and the debt ceiling will probably be presented for a House vote by Boehner and likely win passage with a majority of Democrats and minority of Republicans, Representative Charles Dent, a Pennsylvania Republican, said last night in an interview on CNN.
Reid, a Nevada Democrat, and McConnell, a Kentucky Republican, temporarily suspended talks yesterday while Boehner tried and failed to marshal House Republicans behind a plan that was significantly scaled-down from demands for health-law changes that led to the U.S. government shutdown on Oct. 1.
The partial shutdown has closed national parks, slowed clinical drug trials and led to the furlough of thousands of federal workers.
Fitch Ratings yesterday put the U.S. AAA credit grade on ratings watch negative, citing the government’s inability to raise the debt ceiling in a timely manner, according to a statement after markets in New York closed.
U.S. one-month bill rates rose to the highest level since 2008 as investors prepared to bid for $68 billion of short-term debt today after three- and six-month auctions yesterday drew the weakest demand in four years.
Rates on bills maturing on Oct. 24 climbed to the highest since they were issued in April on concern the Treasury Department will have to delay repaying some of its maturing securities as lawmakers battle over raising the federal borrowing limit. According to data compiled by Bloomberg, one- month rates were 0.40% at 8:52 a.m. in New York, the highest since October 2008. The benchmark 10-year yield was little changed at 2.73%, according to Bloomberg Bond Trader data.
Standard & Poor’s 500 Index futures expiring in December rose 0.5% to 1,701.20 at 8:31 a.m. in New York. The benchmark gauge slid 0.7% yesterday after rallying 3.3% over the previous four days. Contracts on the Dow Jones Industrial Average gained 65 points, or 0.6%, to 15,181.
“If the market truly believed the U.S. will default on its obligations, we would see a more dramatic reaction from equity and bond markets,” Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London, said by phone today. “The great expectation is the deal will be done. If the deal is not done, however minuscule that chance that may be, it would have a devastating impact on sentiment.”
Interviewed today on “CBS This Morning,” John Chambers, a managing director of sovereign ratings at Standard & Poor’s, said he estimated that every week of the shutdown would cut 0.3% of U.S. gross domestic product from the fourth-quarter output.
“If we go past the point where the government can’t borrow any more, one of two things could happen,” he said -- cutting spending other than debt service, which “would certainly put the U.S. economy in a recession,” or not paying interest or debt service, “which would probably be an event that would be much worse” than the collapse of Lehman Brothers in 2008.
Under the Senate agreement, House Republicans would get almost none of their priorities. They tried to defund or delay the health-care law, settling last month on trying to delay the requirement that individuals purchase health insurance.
Obama has described those requests as unacceptable ransom demands and insisted that Republicans relent.
Republicans persisted after the partial government shutdown started Oct. 1 and saw their approval ratings drop in polls. Hardliners resisted plans that didn’t make major changes to the Patient Protection and Affordable Care Act. Others, such as Representative Peter King of New York, stuck with Boehner while complaining about the strategy.
“And the long teachable moment ends: stove is hot,” Representative Tim Griffin, an Arkansas Republican, said on Twitter last night after Boehner scrapped the latest plan.
The emerging Senate agreement trades the pressing and already-missed deadlines for new ones over the next four months. The Treasury Department would be allowed to use so-called extraordinary measures to delay default for about another month beyond Feb. 7, said a Senate Democratic aide who spoke on condition of anonymity to discuss the plan.
The Senate agreement may include a Republican-backed provision to tighten income verification requirements for people receiving health-insurance subsidies. That provision is linked to a proposal backed by Democrats and labor unions that would delay a reinsurance fee on group health plans.
Both of those health-care provisions will either be in the agreement or be out of the agreement.
Senate passage of a bill could be delayed into late next week if a single senator objects, the aide said. Then that bill would have to go to the House. Procedurally, the Senate would have been able to act by Oct. 18 if the House had passed a bill last night.
Cruz, who led a Republican bid to defund Obamacare, spoke for more than 21 hours in a budget debate last month. On Oct. 14, he wouldn’t rule out stalling maneuvers, saying he wants to see the plan’s details. He made no public comments yesterday.
Unless Congress acts, the U.S. will be operating only on about $30 billion of cash reserves and incoming revenue starting tomorrow. It will begin missing promised payments between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Boehner has tried several times over the past month to construct a debt-limit bill that House Republicans could support, and he hasn’t brought any proposals to a vote. Republicans didn’t have enough votes for the measure yesterday, said a leadership aide who spoke on condition of anonymity to discuss vote counting.
“We’re going to be prepared tomorrow to make some decisions,” Representative Pete Sessions, a Texas Republican, told reporters in the Capitol last night.
Unlike previous stopgap spending measures, the House bill wouldn’t have made big changes to the 2010 health-care law, and it contains no cuts to entitlement programs that Republicans sought to add to a debt-limit increase or spending bill.
House Republicans have a 232-200 majority and would have needed all but 15 members to support a plan. Democratic Leader Nancy Pelosi of California said the proposal is a path to default and urged Boehner to support a bipartisan agreement emerging in the Senate.
“We’re at the 11th hour here,” said Senator Charles Schumer, a New York Democrat. “The train to avoid default was smoothly heading down the tracks and picking up speed, and all of a sudden at the last minute, Speaker Boehner decides to throw a log on those tracks. Enough already.”
The House plan would have kept the government open through Dec. 15 and suspended the debt limit until Feb. 7, 2014. It would have prevented the government from making an employer contribution toward the health insurance premiums of members of Congress and their staffs, the president, the vice president and high-ranking administration officials -- all of whom would be required to purchase insurance on the state exchanges being set up under the law.
Senator Lindsey Graham, a South Carolina Republican who is close to Boehner and spoke to him earlier yesterday, said he was concerned that the speaker could become a “victim” of a failed Republican strategy to use a government shutdown as leverage to try to force changes to the health-care law.
Graham also said he is “getting to the point of disgust” with Democrats, including Reid, for refusing to help Republicans extricate themselves from an impossible negotiating position.
“Instead of trying to help us find a way out of a bad spot -- we won’t be the last political party to overplay our hand, it may happen one day on the Democratic watch,” he said. “And if it did, would Republicans, for the good of the country, kind of give a little?” Graham said, adding that Republicans went “too far” and “screwed up.”