House, Senate Republicans offer competing plans on debt-limit, government shutdown
By Paul Kane, Zachary A. Goldfarb and Lori Montgomery,
House and Senate Republicans offered competing plans Thursday to resolve Washington’s debt-limit and government shutdown crises, as President Obama held the latest in a series of meetings aimed at persuading them to accept at least short-term solutions with no partisan strings attached.
The White House described President Obama’s conversation Thursday afternoon with House Republican leaders as a “good meeting,” but said no deal was reached to reopen the government.
“After a discussion about potential paths forward, no specific determination was made,” the White House said in a statement to reporters. “The President looks forward to making continued progress with members on both sides of the aisle.”
Obama’s meeting with about 20 House Republicans, including Speaker John Boehner (Ohio), lasted about 90 minutes. Obama was accompanied by Vice President Biden, Treasury Secretary Jack Lew, White House chief of staff Denis McDonough and deputy chief of staff Rob Nabors. The White House statement said the administration officials “listened to the Republicans present their proposal,” adding that Obama’s goal remains to both raise the debt ceiling and reopen the government.
House Republican leaders initially offered a six-week increase in the federal debt ceiling in exchange for negotiations with President Obama on longer-term “pressing problems,” but they stopped short of agreeing to end a government shutdown now in its 10th day.
Later in the day, Senate Republicans put forward a plan that would reopen the government and raise the federal debt limit for as long as three months.
Returning to the Capitol after meeting with Obama at the White House, members of a 20-strong House Republican delegation described the session as a good first step.
The White House denied a news report that Obama had rejected the House GOP’s proposal outright, saying that “no specific determination was made” after Obama, Vice President Biden and top officials listened to the presentation.
House Majority Leader Eric Cantor (R-Va.) said the gathering was “a very useful meeting” and indicated that conversations would continue into the evening.
“It was clarifying, I think, for both sides as to where we are,” he said.
“We put an offer on the table,” Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, told reporters. Obama “didn’t say yes; he didn’t say no,” Ryan said. “We’re continuing to negotiate this evening.”
Earlier, in a news briefing following a closed-door meeting of House Republicans to present a plan to raise the debt limit temporarily, House Speaker John A. Boehner (R-Ohio) said, “What we want to do is offer the president today the ability to move a temporary increase in the debt ceiling.” He described the offer as a “good-faith effort on our part to move halfway to what he’s demanded in order to have these conversations begin.”
Obama is “happy” that House Republicans agree a federal debt default is not an option, but he would prefer a longer extension of the debt limit, White House spokesman Jay Carney said after the plan was disclosed.
Boehner did not immediately tell reporters specifics of the plan. But the speaker made clear that House Republicans were not agreeing to Obama’s demand that they pass legislation to fund the government without partisan riders, thereby ending the first government shutdown in 17 years.
In any case, Boehner’s proposal fell flat in the Senate, where members of both parties were clamoring to end the shutdown.
Senate Majority Leader Harry M. Reid (D-Nev.), speaking to reporters after a White House meeting between Obama and Senate Democrats, said the shutdown must end and the debt ceiling must be raised ahead of negotiations with the Republicans, who he complained keep changing their demands.
“This is a situation where they do not know what they want,” Reid said. His message to the GOP: “Open the government. Pay our bills. We’ll negotiate with you about anything.” Reid also said that Senate Democrats would “look at anything [House Republicans] send us,” but when asked about negotiating with them before reopening the government, he replied: “Not going to happen.”
Senate Minority Leader Mitch McConnell (R-Ky.), meanwhile, was consulting fellow Republican senators to develop a proposal, advanced by Sen. Susan Collins (R-Maine), to end the shutdown and raise the federal debt limit for as long as three months.
The package sparked the first bipartisan negotiations since the standoff began in early September. But Collins’s proposal called for Democratic concessions including repeal of a tax on medical devices needed to fund Obama’s health-care initiative, and it would maintain deep budget cuts known sequestration through at least March.
The House GOP plan would suspend the debt limit until Nov. 22, the Friday before Thanksgiving, while also forbidding Treasury Secretary Jack Lew from using “extraordinary measures” that his department has used in recent years to extend his borrowing authority for weeks after the ceiling is reached, according to a senior GOP aide who was in the room. This creates a hard “X date,” as financial analysts call the issue, leaving no wiggle room beyond that day.
The House Republicans essentially are offering a “clean” debt-limit increase in exchange for negotiations over reopening the government, aides said. The government shutdown would not end until Obama agreed to “structural reforms” to the tax code and federal health programs.
The Republican plan for a six-week increase in the debt limit, without conservative strings attached, was aimed chiefly at calming jittery financial markets, according to senior GOP advisers.
Financial markets soared earlier Thursday on the first sign of optimistic news out of Washington in almost a month, with the Dow Jones industrial average up 169 points in the first 15 minutes of trading. The rally continued when Boehner confirmed the plan at an 11 a.m. press briefing, and by 1:30 p.m. the Dow was up more than 225 points.
The plan was presented to the House GOP caucus Thursday morning after Lew warned lawmakers that he would be unable to guarantee payments to any group — whether Social Security recipients or U.S. bondholders — unless Congress raises the federal debt ceiling.
If the GOP plan goes over well with rank-and-file Republicans, Boehner could put the legislation on the floor for a vote late Thursday, aides said.
House Majority Leader Eric Cantor (R-Va.) described the plan at the news briefing as “a temporary extension of the debt ceiling in exchange for a real commitment by the president and the Senate majority leader to sit down and talk about the pressing problems” facing the country. Rep. Kevin McCarty (R-Calif.), the House majority whip, characterized these problems as “drivers” of increasing federal debt.
Obama has indicated he could support a short-term debt-limit hike, but he has also demanded that Republicans allow the government to reopen before he would negotiate with the GOP.
If the Republicans want to negotiate, they should “reopen the government, extend the debt ceiling,” Obama said last week. “If they can’t do it for a long time, do it for the period of time in which these negotiations are taking place.”
Carney, the White House spokesman, told reporters Thursday afternoon: “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.” However, Obama “believes it would be far better . . . to raise the debt ceiling for an extended period of time,” as Senate Democrats are proposing.
“It would be far better for the economy if we stopped this episodic brinksmanship and . . . mothballed the nuclear weapon here, which is the threat of default, for a longer duration,” Carney said. “But it is certainly at least an encouraging sign that . . . they are not listening to the debt-limit and default deniers.” If Republicans now recognize that default cannot be permitted, he added, “why keep the nuclear weapon in your back pocket?”
The first reactions from Republican House members appeared generally positive. But several insisted they would back the measure only with a commitment from the president to open negotiations over the next debt-ceiling hike.
“All we’re doing is saying, if the president hasn’t come towards us, we’ll just move the deadline out and offer it again,” said Rep. John Fleming (R-La.). “We haven’t changed our position. We’ve just changed the timeline.”
Fleming rejected the idea that the proposal represents a concession from Republicans. “Not really, if we get a concession from the president, to sit down and negotiate. If he doesn’t agree to that, I won’t agree to the debt ceiling.”
Meanwhile, several of the House’s most conservative members withheld comment about the proposal. “I’m not very enthusiastic,” Rep. Steve King (R-Iowa) said without elaborating.
Rep. Steve Scalise (R-La.), chairman of the Republican Study Committee, was noncommittal when asked about the plan and said his support depends on what happens in the meeting with the president Thursday.
“Some of this involves a conversation with the president,” Scalise said. “There’s nothing unilateral that can be done. It’s going to involve having the president finally put some things on the table of his own.”
Heritage Action for America, a conservative advocacy group influential with tea party Republicans, said Thursday that while it remains committed to fighting Obama’s health-care law and opposes “clean debt ceiling increases,” it wants to give House GOP leaders “the flexibility they need to refocus the debate on Obamacare.” Therefore, the group said, it will not include votes in favor of the proposal in its rankings of lawmakers’ conservatism.
The plan would meet Obama’s demand for an increase in Treasury’s borrowing authority without any legislative attachments. But it would set the stage for tough negotiations, possibly lasting until Thanksgiving, over bigger fiscal matters, since the tentative plan calls for only a six-week increase of the debt limit.
Advisers cautioned that Boehner’s often unruly caucus, which has repeatedly rejected leadership initiatives in the past, needs to sign off on the plan before it can advance.
Reacting to the GOP proposal, a White House official said: “It is better for economic certainty for Congress to take the threat of default off the table for as long as possible, which is why we support the Senate Democrats’ efforts to raise the debt limit for a year with no extraneous political strings attached.”
Obama also wants House Republicans to allow a vote on the “clean” government funding bill that has been passed by the Senate, the official said. “Once Republicans in Congress act to remove the threat of default and end this harmful government shutdown, the president will be willing to negotiate on a broader budget agreement,” the official added. “While we are willing to look at any proposal Congress puts forward to end these manufactured crises, we will not allow a faction of the Republicans in the House to hold the economy hostage to its extraneous and extreme political demands. Congress needs to pass a clean debt-limit increase and a funding bill to reopen the government.”
Financial experts much prefer a longer-term extension of the debt ceiling, but even a brief extension would ease some of the turmoil that has been brewing on Wall Street. By the time markets closed Monday afternoon, the Dow had dropped 900 points in 14 trading days, losing almost 6 percent of its value.
Just three weeks ago, Boehner’s leadership team presented a plan to lift the debt ceiling accompanied by a one-year delay of Obama’s health-care law and a litany of other conservative domestic policy demands.
With Washington in gridlock and a key deadline in the debt-limit debate just one week away, Lew told the Senate Finance Committee Thursday morning that he would do all he can to minimize the pain of breaching the $16.7 trillion debt limit. But Lew also told the senators that in an unprecedented situation in which he would be relying entirely on the erratic flow of incoming revenue, the economy would suffer and there would not even be certainty that the government could make all interest and principal payments.
“No credible economist or business leader thinks that defaulting is good for job creation or economic growth,” Lew said. “If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans.”
Rep. Jim Jordan (R-Ohio), a key conservative with ties to leadership and more junior tea party-backed colleagues, said Thursday morning that he and his colleagues “potentially” could support the new GOP debt-ceiling plan.
“We think there needs to be some movement in dealing with the overall problem,” he said. “It’d be nice to get some dollar-to-dollar cuts there.”
Asked whether he could support a short-term increase without related cuts, Jordan said he expected that question would be the primary topic of conversation among House Republicans on Thursday.
Amid growing anxiety about a debt default, Republicans in the House and the Senate floated ideas Wednesday for raising the debt limit — if only for a short time — in hopes of forcing Obama to the negotiating table.
One of the most significant ideas was brewing in the House, Ryan briefed conservatives on a plan to raise the debt limit for six weeks, which would give party leaders time to negotiate a broad agreement to overhaul the tax code and trim federal health-care and retirement spending.
The plan, which Ryan sketched in a Wall Street Journal opinion piece Wednesday, was short on details. And it called for spending cuts of roughly $200 billion to cover the cost of raising the debt limit even in the near term — although senior GOP advisers said late Wednesday that they were also considering an increase with no strings attached.
Lew’s appearance is the first public confrontation between a senior administration official and Republicans since the fiscal showdown began last month. The meeting comes as some lawmakers on Capitol Hill are questioning whether the administration has been too alarmist about the threat of going past an Oct. 17 deadline to raise the debt ceiling. Republicans have cited reports by credit-rating firms saying that the United States would not technically default unless it fails to make interest payments on its debt — which they regard as unlikely.
Echoing points made by Republican presidents and officials in prior administrations, Lew is tried to counter that argument by highlighting the broad risks of leaving the government with no borrowing authority.
“Certain members of the House and Senate believe that it is possible to protect our economy by simply paying only the interest on our debts, while stopping or delaying payments on a number of our other legal commitments,” Lew said. “The United States should not be put in a position of making such perilous choices for our economy and our citizens. There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets.”
For example, officials say, Lew pointed out that the Treasury routinely refinances about $100 billion in debt every week, paying back principal and taking on new debt. He noted that should investors back away from Treasury debt, it could make refinancing difficult and throw the country’s financial markets into even greater chaos.
Lew said the administration will face a series of difficult decisions even if Treasury can avoid what the credit-rating firms consider a default. In a scenario where federal spending will far exceed revenue, he said, the administration would have only imperfect options in deciding whom to pay. Officials say Lew will try to push Republicans to decide whom they wouldn’t pay — Social Security recipients or veterans.
“We are relying on investors from all over the world to continue to hold U.S. bonds . . .,” Lew said. “If U.S. bondholders decided that they wanted to be repaid rather than continuing to roll-over their Treasury investments, we could unexpectedly dissipate our entire cash balance.”
A Treasury official said Wednesday night that Obama would have to make the final decision in such a scenario.
Lew confronted a Senate Finance Committee stocked with Republicans who have been skeptical about the administration’s claims that breaching the debt limit would be catastrophic.
Among the committee’s members is Sen. Patrick J. Toomey (R-Pa.), who has championed the notion that the Treasury Department could avoid chaos in financial markets by continuing to make interest payments to investors.
The senior Republican on the panel, Sen. Orrin G. Hatch (Utah), has also expressed doubts about the risk of a debt-ceiling breach. But on Wednesday, Hatch acknowledged that blowing the Oct. 17 deadline would “scare the hell out of people.” And while Treasury might be able to pay interest on the debt, Hatch said, “the real question is whether it’s going to tank the stock market.”
Obama, when he meets Thursday with House GOP leaders, is planning to emphasize his refusal to “pay ransom” to avoid default and reopen the government. Ryan, nonetheless, held out hope that the “meeting at the White House will allow us to work together and find common ground.”
Thursday’s meeting is the second in a series the White House announced Wednesday aimed at breaking the impasse, reopening the government and raising the $16.7 trillion debt limit. Obama met first with House Democrats late Wednesday and plans to meet with each party in the Senate in the coming days, starting with a meeting with the Senate Democratic caucus Thursday.
Obama invited the entire 233-member GOP House conference to join him at the White House, but Republicans decided to send only an 18-member group comprising top leaders and key committee chairmen, including Ryan, Appropriations Chairman Harold Rogers (Ky.) and Ways and Means Chairman Dave Camp (Mich.).
“Nine days into a government shutdown and a week away from breaching the debt ceiling, a meeting is only worthwhile if it is focused on finding a solution,” Brendan Buck, a spokesman for Boehner, said in a statement. “That’s why the House Republican Conference will instead be represented by a smaller group of negotiators.”
The White House said Obama is “disappointed” by Boehner’s decision to limit Republican attendance and emphasized that Obama will not be negotiating.
“The president thought it was important to talk directly with the members who forced this economic crisis on the country about how the shutdown and a failure to pay the country’s bills could devastate the economy,” White House press secretary Jay Carney said in a statement.
Obama “will talk to anyone anytime . . . but will not pay the Republicans ransom for doing their job,” Carney said. “If the Republicans want to have a real discussion, they should open the government and take the threat of default off the table.”
Republicans on Capitol Hill, meanwhile, circulated a memo from one of the nation’s leading credit-rating agencies that seemed to play down the threat of default. In the memo, Moody’s Investors Service said the Treasury Department is likely to continue paying interest on the government’s debt even if Congress refuses to lift the limit on borrowing, preserving the nation’s sterling AAA credit rating.
“We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” said the Oct. 7 memo. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.”
The memo offered a starkly different view of the consequences of breaching the debt limit than is held by the White House, many policymakers and other financial analysts. Over the weekend, economists at Goldman Sachs said the economy would take a devastating hit even if Treasury kept making payments on the debt, because the pullback in federal spending would amount to roughly $175 billion, or 4.2 percentage points of gross domestic product.
Mohamed El-Erian, the chief executive of PIMCO, the world’s largest bond company, agreed that the administration could take steps to contain the worst damage. But, he said, there would still be severe consequences.
“It would avoid a series of major and cascading disruptions to the functioning of a financial market that is at the heart of the core of the global financial system,” he said. “Having said that, equities and other risk assets would still likely sell off hard.”
Rep. Chris Van Hollen (D-Md.) noted that Moody’s analysis is geared toward the well-being of its own investors, not average Americans. “When they say their clients will be okay, they’re not talking about people on Society Security, Medicare or our troops in the field. Moody’s doesn’t give a damn about any of those people.”
William Branigin, Rosalind S. Helderman and Scott Wilson contributed to this report.