Americas

Friday 1 August 2014

US shutdown: Republicans offer olive branch to extend debt limit

Published 10/10/2013|20:54

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With few options open to tourists due to the federal government shutdown, a couple brave relentless rain to see the White House in Washington today
With few options open to tourists due to the federal government shutdown, a couple brave relentless rain to see the White House in Washington today
House Speaker John Boehner of Ohio listens during a news conference on Capitol Hill in Washington today after a closed-door GOP meeting to announce that House Republicans will advance legislation to temporarily extend the government's ability to borrow money to meet its financial obligations.
House Speaker John Boehner of Ohio listens during a news conference on Capitol Hill in Washington today after a closed-door GOP meeting to announce that House Republicans will advance legislation to temporarily extend the government's ability to borrow money to meet its financial obligations.

REPUBLICANS are ready to offer the government a temporary debt limit extension, the leader of the US House of Representatives says.

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Speaker John Boehner said the measure would advance if President Barack Obama agrees to negotiate over reopening the government and to "start to deal with America's pressing problems".

The White House said Mr Boehner's proposal for a short-term deal to increase the nation's borrowing limit is an "encouraging sign".

Spokesman Jay Carney said Mr Obama prefers a longer agreement to lift the debt ceiling and wants Republicans to pass a spending bill to reopen the federal government. But he did not specifically say the president would reject a proposal, like Mr Boehner's, that does not also open the government.

Mr Obama, a Democrat, has said consistently that Republicans must reopen the government and prevent the threat of a first-ever government default before he will negotiate over the budget and other conditions Republicans have sought.

Mr Boehner also said he would appoint House negotiators to try to sort out differences between vastly different House- and Senate-passed budget blueprints.

He said: "It's time for leadership. It's time for these negotiations and this conversation to begin."

Republicans said the extension would last until November 22.

Though the proposal could avert an unprecedented federal default that the Obama administration has warned could occur as early as October 17, it would not necessarily bring a quick end to the separate partial federal shutdown. Mr Obama has insisted that Congress reopen the government without condition.

A White House official said Mr Obama would be willing to negotiate over the budget "once Republicans in Congress act to remove the threat of default and end this harmful government shutdown."

Mr Boehner and other Republicans who control the House were travelling to the White House later today to discuss their budget battle with Mr Obama.

Under Mr Boehner's offer, the House would also appoint negotiators to bargain with the Democratic-led Senate over a budget compromise. Those talks have been on hold for months, and the two chambers have deep differences over taxes and cuts in benefit programmes.

International Monetary Fund chief Christine Lagarde warned a news conference that US failure to raise its debt ceiling because of a political impasse would do serious damage to both the American and global economies. Some Republicans have downplayed the harm a default would cause.

The US government risks its first ever-default next Thursday if Congress doesn't approve a bill increasing the government's borrowing authority - required so Treasury can borrow more money to pay the government's bills in full and on time.

Separately, a shutdown of the federal government entered its tenth day, as Congress has failed to pass a bill to temporarily fund it. Both measures are normally routine, but have become entangled in Republican demands for delaying or altering Mr Obama's health care overhaul and reducing government spending.

Mr Obama has said he would sign a short-term debt limit extension, but not if it contained other language that he opposes, and wants Congress to send him a bill unconditionally ending the partial government shutdown as well.

The impasse over increasing the debt limit already has sent the stock market south, spiked the interest rate for one-month Treasury bills and prompted Fidelity Investments, the largest US manager of money market mutual funds, to sell federal debt that comes due around the time the nation could hit its borrowing limit. Financial markets began rebounding today on news of a possible breakthrough.

At Congress, Treasury Secretary Jacob Lew warned the Senate Finance Committee that failure to renew the government's ability to borrow money "could be deeply damaging" to financial markets and threaten Americans' jobs and savings. It would also leave the government unsure of when it could make payments ranging from food aid to reimbursements to doctors, he said.

"The United States should not be put in a position of making such perilous choices for our economy and our citizens," the secretary said. "There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets."

Mr Lew confronted Republicans who said the bigger problem was the soaring costs of benefit programs like Social Security pensions and Medicare health entitlements and the long-term budget deficits the US faces. Many expressed doubt about Mr Lew's description of the consequences of default.

The senior Republican on the panel, Senator Orrin Hatch, accused the Obama administration of "an apparent effort to whip up uncertainty in the markets."

Mr Lew rejected Republican suggestions that in the event federal borrowing authority expires, the government could use the dwindling cash it has to make payments to debt holders and other high priority needs. He said federal payment systems are not designed to prioritise and said he didn't believe such an approach was technically possible.

He also fended off attempts by Republican senators to learn how long a debt limit extension the president would like to see.

"Our view is this economy would benefit from more certainty and less brinksmanship. So the longer the period of time is, the better for the economy," said Mr Lew, who also repeated Mr Obama's willingness to accept a short-term extension for now.

Democratic Finance Committee Chairman Max Baucus said Republican demands to curb Obama's health care law as the price for ending the shutdown "is not up for debate" and would not happen.

Mr Obama told House Democratic loyalists earlier that he still would prefer a long-term increase in the nation's $16.7 trillion borrowing cap but that he's willing to sign a short-term increase to "give Boehner some time to deal with the tea party wing of his party," said Democratic Rep Peter Welch, referring to the conservative anti-tax group.

The standoff in Washington is weighing down each side's poll numbers, but Republicans are taking the worst drubbing. A Gallup poll put the approval rating for the Republican Party at a record-low 28pc. Polls have consistently said the Republicans deserve the greater share of blame for the shutdown.

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