House disarray as US debt bills falter

Efforts by the House of Representatives to end the US debt ceiling showdown have collapsed in startling fashion, with the Republican leadership failing to muster enough support for its own plans to avert default.

House Speaker John Boehner’s team unveiled two paths out of the crisis on Tuesday, including a stripped-down Republican bill extending the US debt ceiling until February 7 and funding government for the next two months.

The first effort never got off the ground and a rules committee postponed a key hearing that would allow the second measure to reach the floor, essentially killing it.

“There will be no action, no votes and the Rules Committee will not be in tonight,” the committee’s Republican chairman Pete Sessions told reporters as the party failed to close ranks behind the proposal.

The plan came 15 days into a government shutdown, and little more than 24 hours before the United States hits a deadline when it will start running out of funds to pay its bills.

It leaves very little wiggle room for the House and Senate to fashion an agreement before the Thursday deadline that will not get hung up in procedural steps, which could happen in the Senate if any member objects to a fast-track process for a deal.

Amid rising anxiety on the markets, the financial rating agency Fitch put the United States on warning for a downgrade from its top grade AAA spot.

Aides said the House failure throws the responsibility of crafting a deal to Senate Majority Leader Harry Reid and top Republican Senator Mitch McConnell, who had put earlier negotiations on hold after Boehner surprised many by trying to cobble together a House plan.

“Given tonight’s events, the leaders have decided to work toward a solution that would reopen the government and prevent default,” said McConnell’s communications director Michael Brumas.

The rapid collapse of the House bill – precipitated, some say, by a memo from conservative think tank Heritage Action which threatened to score lawmakers poorly if they voted for the measure – shocked some Republicans.

“Unbelievable day. No House bill on CR (the continuing resolution to fund government) or debt,” Republican Lee Terry said on Twitter, adding it was now “up to McConnell” to stand tough on maintaining federal spending cuts.

Nancy Pelosi, the Democratic minority leader who lost the speaker’s gavel to Boehner in early 2011 after Republicans won back control of the House, took a swipe at her rival over the debacle.

“If @SpeakerBoehner is looking for something to vote on tonight, how about the Senate bill to open govt?” she tweeted.

Boehner’s latest measure stripped out provisions that delayed taxes which help fund President Barack Obama’s health care law.

It also funded government until only December 15, so that Republican lawmakers could take another shot at removing an “Obamacare” provision known as the contraception mandate before it goes into force January 1.

The bill would have also eliminated health insurance subsidies for members of Congress, aides and White House and cabinet officials and stripped the Treasury’s power to take special measures to manage US debt obligations.

“Even if this bill passed tonight, what would it have done?” Republican congressman Peter King, an outspoken critic of Tea Party-backed efforts to dismantle Obamacare through a shutdown and debt ceiling fight.

“After shutting down the government for two and a half weeks, laying off 800,000 people, all the damage we caused, all we would end up doing was taking away health insurance from congressional employees. That’s it?

“That’s what you go to war for? That’s what we shut down the United States government for?” he added.

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$1.1 TRILLION RANSOM DEMAND OR OBAMA WILL CRASH GLOBAL ECONOMY

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President Barack Obama is demanding a $1.1 trillion “ransom”–or else he will not allow the debt ceiling to be raised. That’s the effective offer on the table from the president and Senate Democrats. They have now refused to pass a “clean” short-term debt ceiling hike unless Republicans agree to reverse the “sequester” spending cuts in the 2011 Budget Control Act that were enacted–at Obama’s suggestion–to end the last debt ceiling crisis.

The president, who has invited congressional leaders to conduct talks at the White House Monday afternoon, still continues to insist that he “will not pay a ransom for Congress reopening the government and raising the debt limit.” Yet he and his party are the ones insisting on a “ransom,” now that Republicans appear to be in the mood to compromise after opinion poll results last week showed them losing politically in the showdown.

Sen. Dick Durbin (D-IL) has claimed that the sequester dispute means that Democrats and Republicans are only $70 billion apart in budget negotiations. That is a blatant lie, as the total value of the sequester over ten years is $1.1 trillion. Democrats do not want a reprieve for one year–they want the entire sequester canceled so that they can continue spending on such priorities as the annual cowboy poetry festival in Nevada.

Last week, President Obama asked the press to “imagine if a Democratic Congress threatened to crash the global economy unless a Republican president agreed to gun background checks or immigration reform.” Now the White House and a Democrat-controlled Senate are threatening exactly that–unless Republicans agree to fork over $1.1 trillion, paid for with new “revenues” (i.e. taxes) on the American people. Ransom, indeed.

No deal yet as US debt deadline looms

The US is still facing a potentially devastating sovereign debt default after senators failed to agree on terms to reopen the federal government and raise the country’s borrowing limit.

Republicans and Democrats – at war over the country’s finances for more than two weeks – tried to shed a positive light on Sunday on a weekend of talks that despite the threat of global economic censure produced no solution.

The Senate convened a rare Sunday session to try and break the budgetary impasse that prompted the government to shut down on October 1, a move that has since damaged domestic confidence and undermined America’s reputation as the world’s leading economic superpower.

If the US debt ceiling is not raised by October 17, the Treasury would run out of money and could begin defaulting on its obligations for the first time in history.

Seeking to avert that scenario, Democratic Senate leader Harry Reid spoke with the top Senate Republican, Mitch McConnell, though nothing concrete was disclosed.

“I’m optimistic about the prospect for a positive conclusion,” Reid said.

Bank of France Governor Christian Noyer on Monday warned of dire consequences if there was no solution.

A default would be “a thunderbolt on the financial markets” that would set off “extremely violent and profound turbulence worldwide”, he told the daily Le Figaro.

In Asia, markets were down in part over the deadlocked talks.

Oil prices also edged lower in Asian trade, with West Texas Intermediate for delivery in November, down 29 US cents at $US101.73 in afternoon trade, and Brent North Sea crude for November down 17 US cents to $US111.11.

And the US dollar slipped in Singapore afternoon trade to Y98.27 from Y98.59 in New York late on Friday. Japanese markets are closed for a public holiday.

“So far, markets have not panicked because both parties have come out to reassure that they are working towards a compromise after every failed vote, keeping alive hopes for a last-minute deal,” Singapore-based DBS Bank said in a note.

US Treasury Secretary Jacob Lew earlier told the International Monetary Fund’s policy steering committee that Washington understood its reputation as a safe harbour was at risk.

Stock markets are already factoring in a possible default if no deal is reached between President Barack Obama, his Democratic Party and rival Republicans by Thursday night.

Polls released since the shutdown show congress’s approval rating at record lows, with Republicans taking most of the blame.

Both parties in recent days indicated a deal must be reached at all cost despite the bitter rancour.

“This is something that’s wreaking havoc around the world and will affect economic growth, and I do hope that over the next week we’ll reach a conclusion and I think we will,” said Republican Senator Bob Corker .

Obama earlier rejected an offer by Republicans in the House of Representatives to lift the debt ceiling for six weeks while negotiations would continue on reopening the government, insisting on a longer-term solution.

Following talks with the top House Democrat, Nancy Pelosi, the president said they were not budging from their position.

Obama and Pelosi “reinforced that there must be a clean debt limit increase that allows us to pay the bills we have incurred and avoid default”, the White House said in a statement.

“The House needs to pass the clean continuing resolution to open up the government and end the shutdown that is hurting middle class families and businesses across the country.”

Senate leader Reid had on Saturday turned down a second compromise proposal, offered by moderate Republican Senator Susan Collins.

It called for lifting the US debt limit for up to a year, reopening the government and repealing a tax on medical devices under Obama’s signature healthcare law.

But Collins said her proposal could still become the basis of a deal, saying she had support from a growing, bipartisan group of senators.

Senator Charles Schumer, a key Democratic power broker, said Reid and McConnell “were not that far apart” on Saturday, when they held their first talks of the crisis.

Democrats, meanwhile, have added a demand of their own – that any deal also involve undoing the across-the-board spending cuts known as the sequester that went into effect earlier this year.

Schumer acknowledged it was a “sticking point”.

Global pressure for a deal in Washington is mounting.

“The standing of the US economy would, again, be at risk,” International Monetary Fund chief Christine Lagarde said, comparing the effects of failing to raise the debt ceiling and reopening the government to the 2008 global financial meltdown.

No progress to end US government shutdown

WITH less than week to go until the federal government faces an historic default, talks between the White House and House of Representatives Republicans broke down Saturday, leaving the fate of a deal in the Senate’s hands.

The future of any compromise shifted largely to two wily, veteran negotiators, Senate Majority Leader Harry Reid, D-Nev., and Republican Leader Mitch McConnell, R-Ky. They, along with senators Lamar Alexander, R-Tenn., and Charles Schumer, D-N.Y., met Saturday local time for the first time to discuss a way forward.

“The conversations were extremely cordial but very preliminary, of course. Nothing conclusive, but I hope that our talking is some solace to the American people and the world,” said Reid. He added that any deal was “a long ways away.”

Senate Democrats, though, offered a less optimistic take late Saturday after Reid and other Democratic Senate leaders talked strategy at the White House with President Barack Obama for more than an hour. They were joined by Obama’s chief of staff, Denis McDonough, deputy chief of staff Rob Nabors and Office of Management and Budget Director Sylvia Mathews Burwell.

A Senate Democratic leadership aide said the senators and the White House reviewed a number of options, but concluded that “while Democrats remain united, Republicans have yet to coalesce behind a clear negotiating position.” The aide said Obama and the senators agreed that talks between Senate Democrats and Republicans should continue, but said the Democratic position remains the same: “Democrats are willing to negotiate on anything Republicans want to discuss, as soon as we reopen the government and pay our bills.”

The government is expected to reach its debt limit Thursday, and parts of the government have been closed since October 1.

While Reid and McConnell were polite and guardedly hopeful, most of those at the Capitol were glum. The momentum that had been building all week fizzled, and the day was marked by round after round of public finger-pointing and posturing.

US President Barack Obama discussed the need for Congress to reopen government during a meeting with small business owners in the White House on Friday.
The gloom was triggered Friday, when Obama essentially rejected a House Republican debt limit plan. Saturday, angry House Republican leaders gave colleagues a somber assessment of where things stand. They said they were now awaiting the president’s next move and that no further talks were scheduled.

At the same hour, Reid and other senators were meeting, and afterward Reid said, “This should be seen as something very positive, even though we don’t have anything done yet.”

It was not clear where McConnell and Reid, two long-time legislative combatants, could find common ground. Democrats have insisted the government reopen before they negotiate on the budget. Republicans are reluctant to agree to a higher debt limit unless there are significant spending cuts.

Senators believe that the differences have narrowed to the point where disagreements can be broadly listed on a sheet of paper, meaning compromise is possible.

“There is a reason to believe that ultimately we will work it out,” said Senate Assistant Majority Leader Richard Durbin, D-Ill.

Publicly, the sniping has escalated. The Senate took a test vote on moving ahead with a Democratic plan to extend the debt limit through the end of next year. Republicans blocked the maneuver, essentially killing the measure.

House Republicans expressed doubts about Senate Republican ideas. House Democrats mounted a public effort to force a vote on reopening the government, angering Republicans. The White House was largely silent.

“Congress must do its job and raise the debt limit to pay the bills we have incurred and avoid default. It is unfortunate that the common sense, clean debt limit increase proposed by Senate Democrats was refused a yes or no vote today,” said White House Press Secretary Jay Carney.

“Congress needs to move forward with a solution that reopens the government and allows us to pay our bills so we can move on to the business of achieving a broader budget deal that creates jobs, grows the economy and strengthens the middle class.”

But Aussie Treasurer Joe Hockey is confident the United States will sort out its fiscal crisis and end a partial government shutdown but warns the solution may not be pretty.

Mr Hockey is currently in Washington for meetings with the World Bank and International Monetary Fund.

He says the impact of a US debt default would be “catastrophic”.

“I’m absolutely confident, having spoken to a number of congressmen and senators from both sides of the house … there will be a resolution, it might not be pretty … America will not default,” he said this morning.

“We are in for a continuing volatile period.”

Mr Hockey described the tactics of the Tea Party members as extreme.

“The lesson for us is to understand that it should never get to this point,” he said, adding that governments must live within their means.

“America can no longer afford its lifestyle.”

Tony Abbott to miss meeting with Barack Obama

Australian Prime Minister Tony Abbott will miss meeting with Barack Obama next week after the US president pulled out of two key Asian summits.

Mr Obama has cancelled his trip to the back-to-back APEC and East Asia Summit due to the continuing government shutdown that began when Republicans refused to pass the federal budget.

Secretary of State John Kenny will replace him at both events in Bali and Brunei.

The announcement comes as the Prime Minister prepares to travel to Bali on Sunday for the APEC conference following meetings with president Susilo Bambang Yudhoyono in Jakarta earlier this week.

Mr Abbott yesterday flagged a close relationship with Mr Yudhoyono, who he said had accepted him as John Howard’s political son and heir.

“I was able to bask in John Howard’s glory, so to speak,” he said.

Mr Abbott said he had met Mr Yudhoyono several times in Opposition and he was always a gracious man.

He was “even more gracious now” as the pair made a strong commitment to the other to do what it could to fight people smuggling, he said.

“I have to say that I think I’m lucky because John Howard and President Yudhoyono had a very strong relationship and I think the president decided that I was kind of John Howard’s political son and heir and therefore I was okay,” he told Triple M.

Following Bali, Mr Abbott will travel to Brunei for the East Asia Summit.

But before both forums, Mr Abbott will host Prince Harry at Kirribilli House on Saturday as the British royal visits Australia for the International Fleet Review in Sydney.

“I have no doubt that as a British army officer Prince Harry will be the very soul of good behaviour,” he said, following suggestions his two daughters may attract the eligible bachelor’s eye.

“He’ll be an officer and a gentleman.”

US health insurance program rolls out

Millions of Americans will be able to shop for the first time on the insurance marketplaces that are at the heart of President Barack Obama’s health care reforms.

They are entering a world that is supposed to simplify the mysteries of health coverage but could end up making it even more confusing, at least initially.

Whether consumers will be pleased with the experience, the premiums and the out-of-pocket costs of the plans offered to them will finally start to become clear.

Tuesday’s rollout comes after months of build-up in which the marketplaces, also known as exchanges, have been both praised and vilified.

Illustrating the heated political disagreements over the law, the opening of the exchanges comes the same day as the shutdown of the federal government, led by congressional Republicans who want to block the health insurance reforms from taking effect.

The shutdown will have no immediate effect on the insurance marketplaces that are the backbone of the law, because they operate with money that isn’t subject to the annual budget wrangling in Washington.

The marketplaces opening in all 50 states represent a turning point in the US approach to health care, the biggest expansion in coverage in nearly 50 years.

The Obama administration hopes to sign up seven million people during the first year and has a goal of eventually signing up at least half of the nearly 50 million uninsured Americans.

But if people become frustrated with predicted glitches in the computer-based enrolment process and turn away from the program, the prospects for Obama’s signature domestic policy achievement could dim.

“The promise of the law is that no one will go bankrupt because of medical bills,” said Neera Tanden, president of the Center for American Progress, which helped work for passage of the law. “It won’t happen in the first day or the first year. But when the law is fully operational, it will provide an economic benefit to roughly 30 million Americans.”

Tanden cautioned against rushing to judge the marketplace’s success on its first-day performance.

 

US government shuts down

117475-obamaUS government agencies were ordered to close for the first time in more than 17 years after Congress stalemated over Republican efforts to block President Barack Obama’s health care law.

US government agencies were ordered to close for the first time in more than 17 years after Congress stalemated over Republican efforts to block President Barack Obama’s health care law.

More than 800,000 federal workers were to spend Tuesday, the first day of the new fiscal year, on unpaid leave as agency managers executed contingency plans for the costly process of closing down operations indefinitely.

The official word to shut down came from the White House just before midnight Monday. Hours earlier, the Senate, by a 54-46 party-line vote, killed a House measure that would have funded government agencies for six weeks but delayed key parts of Obamacare for a year.

Shutdown: What happens now?

It was the second such vote that the Senate took during a day in which the two chambers exchanged volleys of legislation with little expectation that any of it would become law.

The one exception to the legislative futility was a bill to ensure that military service members would be paid during the shutdown. Obama signed it into law late Monday night.

The House’s final legislative effort passed 228-201, mostly along party lines. It would have delayed for one year the requirement in the health care law that individuals have insurance or pay a fine and would have reduced benefits for members of Congress and some of their staff members.

Late at night, Republican leaders moved to set up a House-Senate committee that could seek a compromise in coming days. Democratic leaders asserted that they would not negotiate under duress and insisted that the House first pass a measure temporarily providing funds for government agencies.

Visa panic: Will this affect your travel?

“You know, with a bully you cannot let them slap you around,” Senate Majority Leader Harry Reid, D-Nev., said after the Senate’s initial vote. “They slap you around today, they slap you five or six times. Tomorrow it will be seven or eight times. We are not going to be bullied.”

Obama warned that a shutdown would harm the nation’s economy and vowed that the health care law, his signature domestic policy achievement, would move forward.

Indeed, among the ironies of the standoff is that a shutdown will have no effect on the law the Republicans tried to block. The money to implement the law does not depend on the annual spending bills stuck in the congressional logjam. A major element of Obamacare, online marketplaces that consumers without insurance can use to buy coverage, will open to the public Tuesday.

“That funding is already in place. You can’t shut it down,” Obama said during a short appearance earlier in the White House briefing room.

“This is a law that passed both houses of Congress, a law that bears my signature, a law that the Supreme Court upheld as constitutional, a law that voters chose not to repeal last November,” he said, referring to his re-election.

“I’m always willing to work with anyone of either party to make sure the Affordable Care Act works better,” he added. “But one faction of one party in one house of Congress in one branch of government doesn’t get to shut down the entire government just to refight the results of an election.”

Republicans, for their part, insisted that blame for the stalemate fell on Democrats. The president and his party, they said, had put preserving Obamacare ahead of keeping government agencies running.

“Americans didn’t want Obamacare forced on them, and they don’t want a shutdown forced on them either,” Republican National Committee Chairman Reince Priebus said in a statement. “Once again, Democrats are unwilling to listen.”

Obama spoke with the four leaders of the House and Senate on Monday evening, including a 10-minute conversation with House Speaker John A. Boehner, R-Ohio, but neither side indicated progress toward a deal.

Late in the evening, after the Senate’s second set of votes, Sen. Lisa Murkowski, R-Alaska, one of the few remaining GOP moderates, urged colleagues to compromise. “There are real lives, real families, laying awake wondering what the rest of the week is going to mean to them,” she said. “It’s not just about the next election.”

But on both sides, many more lawmakers were looking beyond Monday’s midnight deadline and focusing on which party would bear the brunt of public anger if a standoff disrupts government services.

The stalemate happened because Congress failed to pass any of the annual laws, known as appropriations, that provide money for government agencies. Federal law says agencies cannot spend money without an appropriation except when necessary to protect life or property, or in cases of programs that have permanent sources of funds.

Widespread disruption of services probably will not occur for a while. Many basic government functions do not depend on annual spending bills. Social Security cheques will go out as always, for example, as will payments under Medicare. Mail delivery will be unaffected. Courts, which have reserve funds that can last for some time, will still hear cases.

But as other government functions close, economists say, a prolonged shutdown will slow growth. A two-week standoff would shave about three-tenths of a percentage point off the current growth rate, projections indicate. Although not huge, that punch would sting in an economy expanding at less than 2 percent per year. A longer standoff would cut growth more.

The last time the government closed, during the Clinton administration, two shutdowns took place. One lasted five days; the other, affecting only part of the government, ran three weeks.

Who gets the political blame for a shutdown will have a big impact on how the standoff ends.

Nearly all Democratic strategists and many Republican ones think Democrats hold the upper hand in the current fight, indicating that Republicans would eventually have to yield. Polls so far have indicated that Americans are somewhat more likely to blame congressional Republicans than Obama for the stalemate, although the advantage Democrats have is much smaller than the one they enjoyed in the Clinton-era standoff.

A Washington Post-ABC News poll released Monday showed majorities of the public disapproving of the way all the major actors in the budget drama have handled their roles, but giving congressional Republicans the worst reviews. Obama got the approval of 41 percent and the disapproval of 50 percent. Congressional Republicans got just 26 percent approval and 63 percent disapproval; congressional Democrats, 34 percent approval and 56 percent disapproval.

Some conservative Republicans argue that Obamacare’s unpopularity ultimately will give them an advantage. Although polls show the health law is unpopular, the same surveys show the public does not support shutting down the government to block it.

In a CNN/ORC poll also released Monday, for example, Americans said, 60 percent to 34 percent, that it was “more important” for Congress to pass “a budget agreement that would avoid a government shutdown” than to approve legislation “preventing major provisions in the new health care law from taking effect.”

As several polls have shown, Democrats remain largely united behind Obama, but significant numbers of Republicans disapprove of their party’s leaders. That has proved true in Congress as well. Relatively conservative Democrats, such as Sen. Joe Manchin III of West Virginia and Mark Pryor of Arkansas, have consistently voted with Reid during the current standoff. By contrast, divisions on the Republican side have been open and bitter and continued to plague the party Monday.

In closed-door meetings, some of the most conservative members objected to the leadership’s plans on the grounds that the latest House proposal would delay only part of Obamacare – the requirement that individuals buy health insurance – rather than the entire law.

On the other side, a group of Republicans, mostly from Northeastern and Midwestern states, said they believed the GOP should drop its efforts to block Obamacare and simply approve a measure to keep government agencies open. The group failed to round up enough support to block the Republican leadership’s plans on Monday, but it could become a factor if the standoff drags on.

The party’s current strategy is “a dead end,” said Rep. Peter T. King, R-N.Y. “We’re going to shut the government down, and, when all is said and done, we’re going to get blamed for it.

“We have too many people who live in their own echo chamber.”

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