President Barack Obama and House Republican leaders were moving toward an agreement to extend the nation's borrowing authority as they remained at odds over terms for ending the partial government shutdown.
They met for 90 minutes at the White House yesterday after House Speaker John Boehner of Ohio said he would offer a measure to postpone a potential U.S. default to Nov. 22 from Oct. 17, a step back from the brink that was enough to trigger the biggest rise in U.S. stocks in nine months.
The developments were the first sign that the president and House Republican leaders could resolve the fiscal impasse without negative economic consequences from a default as the halt in government operations moved into its 11th day.
Any prospective deal faces many questions, including whether Boehner can make a deal with Obama without losing the support of his members who are backed by the limited-government Tea Party. They've sought to use the debt ceiling and partial government shutdown to force curbs to Obamacare and federal spending cuts.
Obama didn't accept or reject House Republicans' plan for a short-term increase in the debt limit. The two sides planned further talks among their staff members last night to address the president's insistence that Republicans agree to fund the government before starting broader fiscal talks.
“No specific determination was made,” the White House said in a statement. The two sides talked about “potential paths forward.”
Representative Eric Cantor of Virginia, the House majority leader, called the meeting “constructive” and that, with talks continuing overnight, “hopefully we will have a clearer way, path forward.”
Obama began the meeting by acknowledging that Republican leaders' offer to extend the debt limit was a positive step while urging them to open the government, according to a Democratic official who asked not to be identified discussing the closed-door deliberations.
The Republican lawmakers responded by saying that they needed concessions in order to do so, the official said. Obama said that, while he would consider what they want, nothing would be delivered in exchange for a spending bill that would allow federal agencies to resume operations.
Obama “would like the shutdown stopped,” Representative Hal Rogers, a Kentucky Republican, said after the White House session. “We are trying to find out what it is he would insist upon” in a spending measure to open the government.
Air Cleared
The meeting was “very positive” and “a lot of air was cleared,” another participant, Representative Howard “Buck” McKeon of California, chairman of the Armed Services Committee, said today on MSNBC. “At the end of the day, we're going to get this worked out.”
White House Chief of Staff Denis McDonough and Deputy Chief of Staff Rob Nabors were taking the lead in last night's talks with House Republican aides, the Democratic official said.
As word of possible progress emerged, stock indexes rallied around the world. The MSCI Asia Pacific Index added 0.5 percent to 385.43 at 7:07 a.m. in New York. Royal Mail Group Ltd., Britain's 360-year-old postal service, jumped as much as 38 percent on its trading debut. Standard & Poor's 500 Index futures increased less than 0.1 percent after the gauge rallied the most since Jan. 2 yesterday. Japan's currency dropped for a fourth straight day against the dollar. Oil fell 1.3 percent.
Rates on Treasury bills scheduled to mature on Oct. 17 dropped yesterday for the first time in six days. The benchmark 10-year Treasury yield rose two basis points, or 0.02 percentage point, to 2.68 percent, after touching 2.72 percent, the highest level since Sept. 23.
The financial markets, which have weathered fiscal brinkmanship at least four times since Republicans gained the House majority in January 2011, so far have taken Washington's dysfunction in stride. Treasury Secretary Jacob J. Lew warned in testimony to lawmakers yesterday that “uncertainty” over the debt limit is starting to stress financial markets.
It was unclear whether the talks will lead to a breakthrough, after House Republicans yesterday had planned to bring Boehner's debt-ceiling extension plan to a vote as early as today. Without congressional action, the government will exhaust its borrowing authority Oct. 17.
Jay Carney, the White House press secretary, said yesterday that Obama would support a short increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension.
Extraordinary Measures
Under Boehner's 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.
House Minority Leader Nancy Pelosi of California said ending the extraordinary measures “isn't very smart” because it would limit Treasury's flexibility.
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.
Meanwhile, Senate Democrats are pressing ahead with their preferred plan, which would push the next debt-limit fight into 2015 and include no policy conditions. A test vote could occur tomorrow.
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.
Senate Majority Leader Harry Reid's proposal would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use 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.
Senate Republicans are scheduled to visit the White House at 11:15 a.m. today.
“I hope the Republicans decide what they want and we'll be happy to work with them in any way,” Reid, of Nevada, said at the White House after he and other Senate Democrats met with Obama for almost two hours yesterday. “We'll just wait and see because they cannot decide what they want.”
A Wall Street Journal/NBC News poll released yesterday found that 53 percent of those surveyed blamed Republicans for the fiscal impasse, compared with 31 percent who blame Obama.
Economists' Estimates
The shutdown would pare 0.2 percentage point from U.S. economic growth if it lasts through this week and as much as 0.5 point if it continues another two weeks, according to the median estimate in a Bloomberg survey of economists.
Boehner and Republican leaders say they want to engage Obama in talks about the budget. Those conversations would start under an unwritten agreement that wouldn't be part of the debt-limit measure, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee.
Republicans are debating what policy conditions they would want to attach to a bill that would end the shutdown, said a Republican aide who requested anonymity to discuss strategy. House Republicans are backing away from demanding major changes to the 2010 health-care law, the Patient Protection and Affordable Care Act, the aide said.
The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs be tied to a one-year delay in the health-insurance mandate.
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.
Bloomberg News
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