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January 31, 2015

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Debt crisis: Deal sought in Washington to head off stock plunge


Associated Press

House Speaker John Boehner of Ohio is seen on a television monitor as he makes a statement about the break down of debt ceiling talks with the White House during a news conference Friday, July 22.

Precariously short of time, congressional leaders struggled in urgent, weekend-long talks to avert an unprecedented government default, desperate to show enough progress to head off a plunge in stock prices when Asian markets open ahead of the U.S. workweek.

President Barack Obama met Saturday with Republican and Democratic leaders — but only briefly — the day after House Speaker John Boehner abruptly broke off his own once-promising compromise talks with the White House.

But congressional aides labored to produce at least a framework agreement to raise the nation’s debt limit by Monday, congressional officials said. Even that would allow scarcely enough time for the House and Senate to clear legislation in time for Obama’s signature by the Aug. 2 deadline, a week from Tuesday.

House Speaker John Boehner told rank-and-file Republicans in a conference call hoped to be able to announce a “viable framework for progress” by 4 p.m. EDT on Sunday, before the stock markets open in Japan and elsewhere in Asia, according to two participants. He was meeting Saturday evening with House Democratic leader Nancy Pelosi, Senate Majority leader Harry Reid and Senate Republican leader Mitch McConnell.

Lawmakers fear a big drop in investor confidence in stocks and bonds could start in Asia and sweep toward Europe and the Americas, causing U.S. stock values to plunge on Monday.

Barring action by Aug. 2, the Treasury will run out of the money needed to pay all its bills, triggering a possible default that could seriously damage the domestic economy and send damaging waves across the globe. Obama has warned repeatedly of the possibility of a spike in interest rates that could affect Americans’ mortgages, credit cards and other forms of personal debt.

In talks through the afternoon, congressional aides were looking at an immediate debt limit increase of about $1 trillion, one official said, with slightly higher spending cuts to be locked into place simultaneously. Another $1.4 trillion in additional borrowing authority would be needed to satisfy Obama’s demand that any deal extend into 2013, and it appeared the two sides had not yet agreed how to bridge their differences.

“We seek an extension of the debt ceiling through at least the end of 2012. We will not send a message of uncertainty to the world,” Reid said in a statement issued in late afternoon.

“The bipartisan leadership in Congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending,” McConnell said in a written statement not long after he, Boehner and Democratic leaders met with Obama at the White House.

Obama appeared grim-faced as he convened the meeting around the big table in the White House Cabinet Room. He was flanked by Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev. Vice President Joe Biden, McConnell and Pelosi also attended.

The four congressional leaders planned to meet again, at the Capitol, in the early evening.

The only aides attending the White House meeting were budget director Jack Lew and Treasury Secretary Tim Geithner, who emphasized the concern about Asia.

Afterward, White House press secretary Jay Carney issued a stern statement: “Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit.”

Sixteen blocks away at the Capitol, congressional aides said the White House would not have a presence at the bargaining table with House and Senate leaders.

Under normal procedures, Boehner would need to have legislation on the House floor by Wednesday to allow enough time for a measure to reach Obama’s desk in time to meet the debt-limit deadline.

Negotiators were working against two avowedly non-negotiable demands — Obama’s insistence on a plan that assures no rerun of the current crisis until 2013 at the earliest, and Boehner’s requirement that spending cuts over 10 years must exceed the size of any increase in borrowing authority — without any rise in taxes.

To comply with both edicts, under most estimates, legislation would have to cut more than $2.4 trillion across the next decade, since that is the amount of additional borrowing authority the Treasury is expected to require to pay the nation’s bills.

Also complicating the talks were divisions within each party.

Liberal Democrats are generally opposed to cuts in Medicare and Social Security, while Obama hopes to use the negotiations to appeal to voters who want big cuts in federal deficits.

Tea party-backed Republicans, dozens of whom are in the House, adamantly oppose any higher taxes, while Obama has made more revenue the price of admission to the talks.

It was unclear how much Reid, Pelosi, Boehner and McConnell would rely on the results of earlier talks, those that Vice President Joe Biden held with lawmakers for several weeks in the Capitol and negotiations Obama had with leaders in a group and with Boehner.

Judging from accounts provided by officials in both parties, Obama had previously agreed to significant changes in benefit programs, including raising the raise of eligibility for Medicare from 65 to 67 for future recipients, and also slowing the projected rise in Social Security cost of living benefits. His concessions triggered a revolt earlier in the week by Senate Democrats, who feared he was giving away too much without getting enough additional government revenue in return.

For his part, Boehner had been ready to agree to an overhaul of the tax code that would result in a net increase of revenue to the government of $800 billion over a decade.

There also had been a general agreement to cut $1 trillion or more from hundreds of government programs ranging from the Park Service to foreign aid and agriculture, and to chalk up another $1 trillion in savings by assuming the end of the wars in Iraq and Afghanistan.

There was another possible element of a deal on the shelf — legislation that McConnell and Reid have developed that would let Obama raise the debt limit by $2.4 trillion in three installments over the next year or so without prior approval by Congress. Instead, he would be required to recommend spending cuts assured of coming to a vote in Congress.

Additionally, that proposal envisions establishment of a special congressional committee to recommend cuts in benefit programs such as Medicare and Social Security and possibly draft a tax reform bill as well.

Boehner did not speak with reporters as he entered or departed the White House, instead arranging a telephone conference call so he could update the members of his rank and file.

In a brief statement after the meeting, he said, “As I said last night, over this weekend Congress will forge a responsible path forward. House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States.”

It was his decision Friday night to break off his talks with the White House that triggered an extraordinary evening in which divided government briefly appeared to be irretrievably gridlocked.

The speaker said Obama wanted higher taxes and not enough spending cuts, adding, “It’s the president who walked away from his agreement.”

But speaking to reporters at the White House, Obama said he had offered an “extraordinarily fair deal” that totaled $2.6 trillion in spending cuts and $1.2 trillion in additional revenue. “I’ve been left at the altar now a couple of times,” he said wryly, adding that Boehner had declined to return his phone calls.

Associated Press writers Charles Babington and Larry Margasak contributed to this report.

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  1. Excerpt from 1983 letter to GOP Senate leaders from President Ronald Reagan

    This country now possesses the strongest credit in the world. The full consequences of a default or even the serious prospect of default by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the cost, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.

    I want to thank you for your immediate attention to this urgent problem and for your assistance in passing an extension of the debt ceiling.

    Ronald Reagan

  2. dipstick: "you think reality has finally dawned on the republican party?"

    Nope. The Republicans, in the majority of Congress, are technically empowered to get the debt ceiling raised. It has been raised multiple times in the past under both Republican and Democratic leadership. But no. It's different now. Because the debt must be paid RIGHT NOW, not over a period of years. Playing political one-up-manship games are in vogue now. Speaker Boehner simply cannot get everyone together, and he fears losing his job. They don't know how to govern this country; and it is proven by this whole debacle where they choose inactivity instead of sitting down at a table and negotiating. They would rather act like children and fall on the floor, scream, beat their fists and feet on the floor, exhorting they want this, that, their way, THEY WANT THEIR WAY!

    During the resulting negotiations, the ONLY ones who have walked away from the bargaining table MULTIPLE times were Republicans. Not one Democrat has stepped away from the table and refused to negotiate.

    Republicans are better suited leaving Congress and go to the pool at the mall outside the Washington Monument to conduct protests. That's all they are good for now. Playing in front of cameras/microphones and making sound bytes. They do that more than work. They sure aren't acting like politicians. They don't know how to act.

    dipstick: "what happens when you go to sell your stocks and nobody answers until its too late?"

    It's already too late. The wheels were set into motion last Monday. Because Wall Street don't deal with hopes. They warned the Republicans what would occur. So, since they have been ignored, they have reacted. They are now betting on America's ever so slow financial failure; culminating with being declared a "deadbeat nation," one that won't willingly pay debts. On Wall Street, they worship money. They aren't patriotic. Money takes precedence over patriotism.

    Anyways, I urge President Obama just to steamroll over everyone and enact the powers of the Constitution. Before it's too late.

    NOT ONE SINGLE AMERICAN would slight him for doing that. That would be the noble thing to do. It would show he is doing what we elected him to do. And it would clearly demonstrate he does not want America to fail. Especially when it doesn't have to.

    The Republicans in Congress OWN this whole debacle if it continues to go south quickly. They manufactured this crisis, continuing on with it until they got painted into a corner. In the process, they have decided to inadvertently hold all of America hostage. And by all of America, I mean the poor, the middle class, the rich and the filthy rich. They have succeeded in alienating themselves from everyone except for Fox News and Rush Limbaugh and any other right wing nutballs there are out there who can't see the forest for the trees.

  3. "If the treasury is unable to make Social Security payments, it could be three months before they can begin to issue them again. I don't think the bank that has my mortgage or utility companies will be in any way accommodating just because the stock market crashes and full faith and credit of the United States of America no longer exists"

    A bunch of my friends and I were just talking about this!! Let's not forget the cable company and for those who rent - the landlord. A LOT of seniors live, and sparingly at that, on their meager social security checks. It would be a disaster.

    PS Susan - you forgot the credit card companies!! Yeah, you can miss a payment or two, but be prepared to PAY, and PAY GOOD, when things get settled.

  4. If you make a void, something must come in its place. The tea party want to take away money from the American fabric. They want to cut away. OK, what do you put in its place? I agree the welfare system needs to be restructured from a give-a-fish to teach-to-fish. So, if the tea party wants to destroy welfare as we know it, what do you put in its place? You cannot just rip the fabric and not replace it with a new fabric. The tea party wants no fabric to have homelessness and starvation. That brings kaos, dissentagration, and war. Right now, its being replaced by the prison system. While everything else goes down, the prison system gets more money. Is this what the tea party wants? Are they that cruel? A void is always filled. How do you want to fill it?

  5. The tea party wants to take away Social Security, Medicare, and Medicaid. OK, it cost too much. There purposal is to give it to the insurance companies and trust them to do the right thing. For years, they have been takeing money then throwing them off the rolls to make a profit. We are suppose to trust them? This is again ripping the fabric of America and nothing in its place. This is starvation, homelessness, and death which the tea party wants because there are too many of us on this planet to take care of(so they say).
    I agree it is too expensive. If the tea party wants its distruction, its a void. What do you want to put in its place?

  6. The tea party has been destroying women's rights to get an abortion and heath care so is to stay alive. OK, you don't want abortion and neither do I but what do you put in its place? Without planning, especially the pill and other counterseptives, women do not have the operatunities to become whom they desire. It is shown now by white women desireing not to have or not to have so many children. We get overpopulation, starvation, nondevelopement, and disfunction if we do not have the control we need. Absentance and placing the fear of God does not work. I know. So, what other ways do you want it because submission to your will for the entire country to follow will not work. So, what do you want to put in its place?

  7. Right now in DC, 4000 airport jobs are being held up because the tea party wants to crush unions. Unions have been the middle class fabric of this nation. I am not a fan of unions and they serve a purpose to help keep that fabric of the "white picket fence" life together. I agree that they do go too far sometimes. But; ripping the fabric that supports so much of the middle class will leave poverty, hunger, homelessness, and despare. It's a void and something must be put in its place. What is it that can replace unions? Otherwise this country is in a ressession thanks to you, the tea party.

  8. President Obama wants the debt ceiling so that this country does not go into ressession. The tea party headed by Grover Norquest says that its ok to put a tax on the middle class & the poor by letting the country default on paying its bills. But; not raising taxes on billionaires or closing loopholes on companies that have made profits and paid little or nothing to our country for years. So, interest will go up(a tax on us) and ressession will come and we will be with no jobs or direction(no way to pay for it). Again a void. So, what do you put in its place? The tea party says the big boys will bring jobs back, but they have had tax cuts for years and have not shown that we can trust them to do what the tea party says. They think on a world mindset and not on an American mindset. So, cutting taxes and not raising the debt ceiling to give king Norquest his ego does not work. What do you put in its place?