Obama amenable to limited increase

WASHINGTON • The White House signalled Monday it would be open to a short-term hike in the u.S. debt limit as the united States moved a step closer to its first-ever default while a separate impasse, a partial government shutdown, entered its second week.

The shutdown, which centres on a fight over funding for President barack Obama’s new health-care law, has idled hundreds of thousands of workers, closed national parks and museums, and stopped an array of government services.

A default could have far bigger consequences. economists say it could trigger a financial crisis and recession that would echo 2008 — or worse. The 2008 financial crisis plunged the u.S. into the worst recession since the Great depression of the 1930s.

Gene Sperling, one of Mr. Obama’s senior economic advisors, reiterated a vow not to negotiate on the debt because it would sanction the threat of default as a bargaining chip and increase the chance of default in the future.

Senate democrats are drafting legislation to raise the u.S. debt limit without the type of unrelated conditions republicans have said they intend to demand, officials said Monday.

The measure is designed to assure no repetition of the current borrowing squeeze until after the 2014 elections.

depending on the republican response, it could be the middle of next week before a

It could be the middle of next week before a final vote is taken

final vote is taken on the measure, close to the Oct. 17 deadline Treasury Secretary Jacob Lew has set for congress to avert a possible default.

A defiant John boehner, the republican leader of the House of representatives, has insisted Mr. Obama must negotiate on changes to his health-care law and spending cuts if he wants to end the shutdown and avert a default.

He said House republicans have repeatedly asked for negotiations over ending the shutdown and curbing the health-care law, only to be turned down by Mr. Obama and congressional democrats.

“The president’s refusal to negotiate is hurting our economy and putting our country at risk,” Mr. boehner said as Monday’s House debate began.

The uncompromising talk rattled financial markets Monday as stocks slumped. china, which holds uS$1.277-trillion in u.S. Treasury bonds and is the country’s biggest foreign creditor, urged all efforts be made to avoid a default.

Mr. Sperling was pressed on whether he would rule out a two- or three-week extension on increasing the uS$16.7-trillion debt limit.

“There’s no question that the longer the debt limit is extended, the greater economic certainty there will be in our economy which would be better for jobs, growth and investment,” he told a breakfast sponsored by the website Politico.

“That said, it is the responsibility of congress to decide how long and how often they want to vote on doing that.”