Thursday, October 10, 2013

US debt limit breakthrough could be imminent

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Actions louder than words in debt debacle

Proposals on delaying a default may be a step in the right direction- but without all parties on board, it's just more talk in Washington DC.

PT1M52S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2vc5t 620 349 October 11, 2013 - 8:15AM

Washington: The White House endorsed a short debt-limit increase with no policy conditions attached, signalling potential support for House Republicans' plan for a month-long reprieve from a default.

The idea, proposed today by House Speaker John Boehner, wouldn't end the 10-day-old partial shutdown of the federal government. The plan would push the lapse of US borrowing authority to November 22 from October 17.

It's time for leadership. It's time for these negotiations and this conversation to begin. 

Jay Carney, the White House press secretary, said President Barack Obama would support a short-term increase in the US debt limit with no "partisan strings attached", though he prefers a longer extension. House Republicans haven't specified what they plan to tie to the measure and Mr Carney said the White House would need to see a bill before accepting it.

US House Speaker John Boehner pauses between answers to questions during a news conference at the US Capitol in Washington.

US House Speaker John Boehner pauses between answers to questions during a news conference at the US Capitol in Washington. Photo: Reuters

"The President is happy that cooler heads at least seem to be prevailing in the House, that there at least seems to be a recognition that default is not an option," Mr Carney said.

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Mr Boehner's plan marks the first sign that the parties may be able to resolve the impasse without the catastrophic economic consequences that the Treasury Department said would stem from a default. It wouldn't end the partisan budget fights that have led to fiscal brinkmanship at least four times since Republicans took over the House in January 2011.

"It's time for leadership," Mr Boehner, an Ohio Republican, told reporters in the Capitol. "It's time for these negotiations and this conversation to begin."

US House Speaker John Boehner stands with fellow Republican House leaders as he addresses reporters in Washington.

US House Speaker John Boehner stands with fellow Republican House leaders as he addresses reporters in Washington. Photo: Reuters

House Republicans will discuss the plan with Obama at the White House on Friday afternoon. Mr Boehner and other Republican leaders say they want to engage Mr Obama in talks about the budget.

Mr Obama has insisted that he will negotiate on broader fiscal and healthcare issues only after a debt-limit increase is passed and the shutdown ends.

The Standard & Poor's 500 Index rose 1.7 per cent on Thursday afternoon in New York on optimism among some traders that a deal was closer.

Senator Ben Cardin, a Maryland Democrat, said he had "mixed thoughts" about Mr Boehner's idea, particularly because it's a short-term increase and because it wouldn't end the shutdown. He also said it would be preferable to a default.

"I would think that, if this is what the House passes, that it would be difficult for us to develop an alternative strategy," he said in an interview.

Under the House 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. A vote is possible on Friday or Saturday in Washington, said Representative Vern Buchanan of Florida.

Many Republicans want to tie the debt-limit increase to party priorities such as cuts in entitlement programs like social security and Medicare. Still to be determined is whether rank-and-file members will agree to the leadership's proposal.

Republicans have a 232-200 majority and can lose votes from only 15 members before they need to rely on Democrats.

If the US fails to raise the debt limit by October 17, the government will have $US30 billion ($31.7 billion) plus incoming revenue to pay its bills. It would start missing scheduled payments, including benefits, salaries and interest, between October 22 and October 31, according to the Congressional Budget Office.

Senate Democrats are taking a "wait and see" approach to Mr Boehner's latest proposal, said a Senate Democratic aide who spoke on condition of anonymity to discuss strategy. While Democrats are open to a short-term debt limit increase as a last-minute solution, they prefer their proposal, the aide said.

Whether Senate Democrats could accept Mr Boehner's proposal would hinge largely on the details of the budget framework it would set up, the aide said, adding that Democrats were concerned that the proposal might dictate that talks occur before the government shutdown ends.

Representative John Larson, a Connecticut Democrat, said his party would be open to Mr Boehner's idea if it's the only way the speaker can get something moving.

"It's hard to comment on a civil war when you're watching it in front of you and you're watching them self-destruct," he said in an interview. "We prefer both to re-open government and to not default on the debt."

Senator Mike Crapo, an Idaho Republican, said his support for the latest House proposal would hinge on whether it would set up budget talks that would require a floor vote in both chambers in Congress on whatever comes out of it.

"A process just to say 'We'll sit down and talk' is not going to really result in much in my opinion," Mr Crapo said in an interview at the Capitol. "I think it means in six weeks, we'll be back where we are right now."

Meanwhile, Senate Democrats will press ahead with their plan, which would push the next debt-limit fight into 2015 and include no policy conditions. A test vote could occur on October 12.

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.

The bill from Senate Majority Leader Harry Reid would suspend the debt ceiling through to December 31, 2014. Because the Treasury Department can use what are called extraordinary measures to stave off default, another increase wouldn't be needed until some time in 2015. The previous debt-limit suspension expired on May 18 and the extraordinary measures are lasting five months.

The government shutdown started on October 1 after Republicans insisted that further funding for many programs must be tied to a one-year delay in the mandate that individuals who lack health insurance purchase it.

Mr 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.

The House has taken a series of bipartisan votes to fund narrow pieces of the government, including the Food and Drug Administration and military death benefits.

Mr Obama and Senate Democrats reject the piecemeal approach, saying Republicans shouldn't pick and choose politically popular items. The Senate passed the death benefits bill on a voice vote on Thursday.

Bloomberg


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