Republicans try again to pass debt bill
Demoralised House Republicans are trying for a third straight day today to pass a bill on raising the country's borrowing authority that has almost no chance of surviving the Senate, even as the clock ticks closer to next week's deadline for avoiding a potentially calamitous government default.
House Speaker John Boehner, a Republican, suffered a stinging setback on Thursday when, for a second consecutive day, he had to postpone a vote on his proposal to raise the borrowing cap, known as the debt ceiling, while cutting federal spending by nearly $1 trillion.
The decision added a new level of uncertainty to the debate that has roiled Washington all summer. The divided US government has struggled to head off a default threatened after Tuesday, when the Treasury would be left without the funds needed to pay its bills.
Concerns about a US default continued to reverberate around markets today, with stocks down again. While investors have been jittery for weeks, the inability this week of Republicans to even manage to get their own party to agree on a plan has reinforced those fears with just days to go.
If Republicans fail to pass the vote, then President Barack Obama and Senate Democrats will have extensive leverage to shape a bill to their liking and practically dare the House to reject it and send the nation into default. The dissent among Republicans has mostly been coming from those in the low-tax, small-government tea party faction who do not believe Boehner's bill cuts spending sufficiently.
If, however, Republicans can get Boehner's version through the House, a rapid and complex set of choices will determine whether and how a debt crisis can be averted. House Republicans will be under tremendous pressure to pass something, even if they have to make it so appealing to their right wing that the nation's independents and centrists will not support it.
The biggest sticking point is the House bill's call for congressional votes to raise the debt ceiling, in two stages, before the 2012 elections.
Under the House bill, a $900bn debt-limit hike would come first, coupled with $917bn in spending cuts over 10 years. A second vote, late this year or sometime next year, would allow another $1.6 trillion in borrowing power, provided that Congress and the president have agreed to another round of spending cuts of that amount or more.
Obama has consistently rejected this condition. He says it would hurt the economy and touch off another ferocious political fight over the debt ceiling, which Congress previously raised with little fuss year after year. Global markets and investors would not be reassured by such a drawn-out, uncertain scenario, he says.
If the Republican-led House does pass a bill that the Democrat-majority Senate again rejects, Republicans could argue that the House did its job, while the Senate has done nothing but kill its bills. Democrats say that if Republicans insist that a partisan, House-passed bill is the only vehicle, then public anger will fall on Republicans.
Some analysts believe that even if US lawmakers do come up with a deal in time, ratings agencies could still downgrade US debt - which would push borrowing costs up and make it more difficult for Congress to reduce the amount of money the government owes.
"Even if the debt ceiling deadline is met, the current proposals on the table and lack of bipartisan support for dealing with the deficit issues in a credible and timely fashion, suggest that the risks of a US credit downgrade are quite high," said Robin Bahr, an analyst with Credit Agricole.