Accord hopes shift to Senate
Still no plan to stave off debt default
WASHINGTON — Lawmakers said Saturday that they still lack a clear plan on preventing a U.S. default and ending the 13-day partial government shutdown, even as bipartisan Senate leaders began preliminary discussions.
On Saturday, Senate Republicans blocked the Democrats’ plan to extend the debt ceiling through 2014. Talks between House Republicans and Pre s i - dent Barack Obama faltered. And Senate Democrats rejected a proposal from Republican Sen. Susan Collins of Maine that had gained some momentum in recent days.
Even so, Democra t - ic senators warned of potential stock market declines Monday if Congress can’t reach an agreement on the debt ceiling.
Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell entered into talks that were expected to continue throughout the weekend. Reid described them as “very preliminary.”
“I hope that our talking gives some solace to the American people and to the world,” Reid told reporters Saturday in the Capitol. STATES WARN GRAND CANYON, TAKING PAY
“We’re trying to figure out a way to go forward.”
With four days left until U.S. borrowing authority lapses Thursday, lawmakers in both parties and both chambers have said they weren’t sure what proposal could get enough votes to pass. After Thursday, the U.S. will have $30 billion plus incoming revenue and will start missing debt payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Obama met with Senate Democratic leaders Saturday at the White House after accusing Republicans of practicing the politics of extortion. “Manufacturing crises to extract massive concessions isn’t how our democracy works, and we have to stop it,” Obama said in his weekly radio and Internet address.
Earlier in the day, conservatives left their meeting in the Capitol in a sour mood, many of them saying that they were angry that Obama still refused to meet them halfway.
Rep. John Carter of Texas described Obama as “acting like a royal president.”
“He’s still ‘my way or the highway,’” Carter said.
Lawmakers in both parties said they were monitoring the financial markets for what reaction the political uncertainty will have when the markets reopen Monday.
“This is playing with fire,” said Sen. Charles Schumer, a New York Democrat. “We don’t know when the markets will react to this.”
“I worry on Monday when the American markets open” whether “the stock market will go down” and interest rates will rise if the impasse continues, Schumer said.
The Standard & Poor’s 500 index rallied Friday after House Speaker John Boehner offered a debt-limit increase through Nov. 22 without policy conditions attached. The index increased 0.6 percent to 1,703.20 at 4 p.m. in New York.
Rates on Treasury bills maturing through the end of the year rose, while rates on securities due in October fell from highs reached earlier in the week. Yields on benchmark Treasury 10-year notes rose 4 basis points on the week to 2.69 percent, accord- ing to Bloomberg Bond Trader prices.
U.S. stock markets are open Monday, the federal Columbus Day holiday. Bond markets are closed.
U.S. lawmakers shouldn’t risk a default on the nation’s debt because the effects would be devastating and the consequences aren’t knowable in advance, the heads of JPMorgan Chase & Co. and Deutsche Bank AG said Saturday.
“The United States cannot default and, in my opinion, will not default,” JPMorgan Chief Executive Officer Jamie Dimon said at a financial industry conference in Washington. “It would ripple through the global economy in a way you couldn’t possibly understand.”
At a Washington meeting of an association of five national economies — Brazil, Russia, India, China and South Africa, known as BRICS nations — China said the developing nations are concerned that the impasse among U.S. lawmakers on raising the nation’s debt limit and capital market volatility may slow the global economy.
Also Saturday, another group of world finance officials pledged to deal with new risks to the global recovery while also calling on the U.S. to avoid what they said is the biggest threat of all — a market-rattling default on U.S. debt.
The International Monetary Fund’s policy committee said the United States needs to take “urgent action” to address the budget impasse.
At a concluding news conference, World Bank President Jim Yong Kim stressed the urgency for Washington policymakers to reach agreement on raising the debt ceiling before Thursday’s deadline.
Kim said if the debt ceiling is not raised, the economic fallout could include increased interest rates, slower global economic growth and falling business confidence. Such an outcome, he said, would have a “disastrous impact” on poor nations.
Russian Finance Minister Anton Siluanov, whose country currently holds the rotating chairmanship of the G-20, told reporters that the group had not discussed any emergency plans to deal with the potentially catastrophic impact on the global economy of a U.S. debt default.
“We trust the U.S. authorities will find a way out of this complex situation,” Siluanov said. Other finance leaders attending the meeting said they saw the risk of default as remote.
The partial government shutdown has led to furloughs of hundreds of thousands of federal employees and partial paychecks for others. It has closed federal operations such as national parks, though some services and benefits, including Social Security checks, continue.
Boehner told fellow Republicans on Saturday that Obama had rejected his latest fiscal offer. The House hasn’t considered legislation to raise the debt limit and isn’t scheduled to vote again until Monday evening.
House Republicans have insisted that changes to the 2010 Patient Protection and Affordable Care Act be included in any bill to end the government shutdown. Obama has insisted that such conditions are unacceptable.
“At this point, they have dealt themselves out of this process,” Richard Durbin of Illinois, the second-ranking Democrat in the Senate, said of House members.
The Reid-McConnell talks, between two veteran deal-makers, represent the most likely hope for an agreement, said Sen. Bob Corker, a Tennessee Republican.
“It’s very evident that the White House is not going to be involved in negotiations, or at least at this point they’re not,” he said. “The centerpiece is Reid and McConnell, so I think all of us want to support those efforts.”
Democrats prefer raising the $16.7 trillion debt limit for as long as possible and with no policy conditions attached. Republicans blocked Reid’s plan to push the next debt-limit fight into 2015.
The 53-45 vote Saturday fell short of the 60 votes needed to advance the measure.
Reid then rejected a proposal from Collins and Democrat Joe Manchin of West Virginia. That plan would push the next debt-limit fight to the end of January, extend government funding for six months to March and give federal agencies more flexibility under the across-the-board cuts known as sequestration. The plan also would have set a mid-January deadline for longer-term budget talks.
The proposal would make two changes to the president’s health-care plan. One would delay a tax on medical devices for two years and make up lost revenue through pension-rule changes. The other would require the Obama administration to verify income levels for enrollment in health benefits.
Democrats, including Durbin, said the debt-limit increase is too short a time to provide certainty and the funding extension at Republican-preferred levels is too long.
For the past few days, the prospects for a deal had focused on talks between Boehner and Obama that would push the lapse of borrowing authority to Nov. 22. Republicans also wanted to attach policy conditions to a separate spending bill that would end the government shutdown.
Reid, a Nevada Democrat, said talks between the White House and House Republicans were “done.”
A White House official described the Collins proposal as constructive. Still, the administration shares the concerns of Senate Democrats, who object to the spending levels set by the plan and some of the changes it would make to the health-care law, said the official, who spoke on condition of anonymity.
Obama has insisted that he wouldn’t accept policy conditions attached to a debt-limit increase or a spending bill, though Jay Carney, the White House press secretary, hedged on the spending bill Friday.
“The president has a number of concerns” about Boehner’s proposal, Carney told reporters Friday after Boehner and Obama spoke by telephone about the speaker’s offer.
Extending the debt ceiling for a short period while budget talks occur may lead to a replay of the same brinkmanship the U.S. is experiencing now, Carney said.
Rep. John Fleming, a Louisiana Republican, said, “Every offer we’ve made, they just flat turned us down without any counteroffer.” He said, “Our level of expectations for the president has gradually dropped over the years to a point where we don’t expect anything from President Obama.”
Any prospective deal faces questions, including whether Boehner will allow a vote on a proposal that most Republicans would likely vote against.
House Majority Leader Eric Cantor of Virginia said, “I am looking for our Republican colleagues to stay strong with House Republicans to resolve this standoff so that we can get back to the nation’s business.”
Also Saturday, officials said the Statue of Liberty would reopen today after New York agreed to pick up the $61,600 daily tab for running the site. South Dakota and corporate donors did the same for Mount Rushmore, beginning Monday at a cost of $15,200 a day.
The White House, drawing attention to the effects of the partial shutdown on government research, noted that four of five Nobel Prize-winning scientists working for the federal government have been furloughed. It said two-thirds of the employees at the Centers for Disease Control and Prevention have had to stay home. Information for this article was contributed by Kathleen Hunter, Roxana Tiron, Richard Rubin, Chris Strohm, Julianna Goldman, Caitlin Webber, James Rowley, Terry Atlas, Julie Bykowicz, Lisa Lerer, Jesse Hamilton and Daniel Kruger of Bloomberg News; by Jeremy W. Peters and Ashley Parker of The NewYorkTimes; and by Alan Fram, David Espo, Jim Kuhnhenn, Marjorie Olster, Martin Crutsinger and staff members of The Associated Press.