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.

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.”