US Senate leaders are poised to reach an agreement as early as today to bring a halt to the fiscal standoff, and now must race the clock to sell the plan to lawmakers before US borrowing authority runs out this week.
The emerging deal would stave off a potential default, end the 15-day-old government shutdown and change the immediate deadlines in favour of three new ones over the next four months.
It’s far from complete as the senate may delay passing the plan and House Republicans may seek to block or change it. Lawmakers would be required to hold budget talks by December 13th, fund the government through January 15th, 2014, and extend the nation’s borrowing authority until February 7th, 2014, according to a source.
"We've made tremendous progress," Senate majority leader Harry Reid said yesterday on the Senate floor with his Republican counterpart, Mitch McConnell. "We are not there yet."
An agreement would forestall the immediate crisis. It would end the shutdown that has closed many federal services and prevent a possible US default that the treasury department said may be catastrophic. US lawmakers, who have governed from fiscal crisis to fiscal crisis for more than two years, may be setting up more crises in the near future.
The agreement would delay the next major deadline - the January 15th lapse in government funding - until after the holiday shopping season.
Potential Obstacles
There are two potential obstacles to an agreement. First, a single senator would be able able to use procedural tactics to push a final vote past the October 17th lapse in borrowing authority.
Texas Republican senator Ted Cruz, who spoke for more than 21 hours during a budget debate last month, wouldn't rule out stalling maneuvers, saying he wants to see the details of the plan.
Also, House Republicans, who have demanded major changes to president Barack Obama's signature health-care law, may resist any proposal that contains few of their priorities. "Sounds like everything the president asked for," Representative Blake Farenthold, a Texas Republican aligned with Tea Party movement, said yesterday when asked about the Senate framework.
Mr Obama has insisted that Congress raise the $16.7 trillion US debt limit without add-ons and that stopgap spending bills be free of policy conditions.
Boehner Options
A Senate agreement would again put pressure on House speaker John Boehner, who has a 232-200 Republican majority. He may have to decide whether to side with hardliners insistent on changes to Obamacare or rely on Democratic votes to pass a bipartisan Senate plan through the House.
House Republicans also may consider making changes and sending the plan back to the Senate. Reid and McConnell may release the plan’s details as early as today. Any one senator could push a final vote until at least October 18th, after the debt ceiling is breached though before the US runs out of cash and begins missing payments between October 22nd and October 31st.
House Republicans will meet today at 9am in the Capitol and may consider debt-limit legislation on the floor. Senators will meet in party caucuses. "We've not made any decision," House majority leader Eric Cantor, a Virginia Republican, said yesterday.
“We are going to meet with our members in the morning to determine the best path forward.”
Sticking Points
US stocks rose yesterday amid signs of a potential agreement. The Standard and Poor's 500 Index advanced 0.4 per cent to 1,710.14 in New York, reversing an earlier drop of as much as 0.7 per cent. The benchmark gauge is at its highest level since September 19. The MSCI Asia Pacific Index today added 0.5 per cent by 11.06am in Tokyo as stocks from Japan to Australia jumped.
US cash bond markets were closed for yesterday’s Columbus Day holiday. Mr Reid and McConnell, veteran Senate deal makers, are brokering the agreement, reached during conversations that started over the weekend.
Democrats want as long a debt-limit increase as possible and as short a government funding extension at Republican-preferred levels. Republicans want the opposite. Possible sticking points late yesterday included whether Democrats would agree to Republican demands that the Treasury department be barred from using so-called extraordinary measures to extend the debt-limit deadline after February 7th.
‘Very Unwise’
Such maneuvers pushed forward the deadline for five months this year, though it's not clear how much time they would buy in 2014. "It is very unwise," Senate finance committee chairman Max Baucus, a Montana Democrat, said of the Republican demand.
The accord being worked out wouldn’t include repealing or delaying an excise tax on medical devices, said the person familiar with the talks and a Senate Democratic aide who requested anonymity.
Republicans had sought that change, joined by some Democrats who represent states such as Minnesota with concentrations of device makers. The plan would postpone a reinsurance fee the government is levying on health plans for the first three years of the health- care exchanges - amounting to $63 a worker next year, said the person familiar with the talks.
Trade unions, aligned politically with Democrats, have asked for the delay. Agency Flexibility Democrats could claim that the agreement is a trade of health-law measures favored by each party that just happens to be linked to a debt-ceiling increase and spending bill free of policy conditions.
Republicans could say they got health-law changes attached to the must-pass measures. The agreement also would give federal agencies flexibility to manage the across-the-board spending cuts known as sequestration if they occur in 2014.
Bloomberg