Much to the relief of one and all, the United States on Thursday finally appeared set to head off a catastrophic debt default next week with Republican lawmakers offering a short-term deal that will raise the debt ceiling for six weeks, paving the way for negotiations over spending cuts.
Speaker John Boehner and other top Republicans, who are set to meet President Barack Obama later on Thursday, held consultations with the party’s rank and file and finalised their plan for the temporary extension of the debt limit —with a new deadline of November 22. The deal, however, does not address the other thorny issue of partial Government shutdown, which has entered its 10th day. This matter, tied to Republican demands to delay “Obamacare” by a year, would be the subject of a discussion with the President, the Speaker told reporters.
House of Representatives Speaker John Boehner said Republicans would vote to extend the Government’s ability to borrow money for six weeks, averting a default for now but only if President Barack Obama first agrees to fresh negotiations on spending cuts. He expressed the hope that the discussion with Obama would be a substantive one on reducing the national deficit.
Obama, who has held firm on not holding any formal negotiations until the Republicans passed “clean” bills without riders to prevent the debt default threat and end the shutdown, had indicated to Democratic lawmakers on Wednesday that a six-week increase of the debt limit would be acceptable.
Republican aides said Boehner would indeed be presenting a “clean” bill, free of any other policy conditions, to increase the borrowing limit for six weeks, thereby allowing time for broader negotiations. At his brief news conference, Boehner himself called the proposal a “move half way to what (President Obama) has demanded”. Indications, however, are that the Republicans would continue to push for concessions on Obamacare in order to end the Government shutdown.
“I don’t want to put anything on the table, I don’t want to take anything off the table,” Boehner said when asked what would be the conditions to reopen the Government. A closed-door meeting of the Republican caucus hammered out the deal, not long after Treasury Secretary Jack lew warned lawmakers he would be unable to guarantee payments to any group, including Social Security recipients and US bondholders, unless Congress approved an increase in the debt limit by the October 17 deadline.
Expectation of the debt deal triggered a rally on Wall Street, with the Dow Jones Industrial Average up 169 points in the first 15 minutes of trading after witnessing days of sharp declines. Soon after Boehner’s announcement, it was up by nearly 250 points. Just ahead of the meeting of the Republican caucus, lew testifying before a Senate panel, made it clear that any failure to raise the debt ceiling before next Wednesday would cause an “irrevocable damage” to the US economy and markets.
“It would be chaos,” with some of the repercussions unpredictable since this is “uncharted territory”, he 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,” the Treasury Secretary said, adding: “It is irresponsible and reckless to insist that we experience a forced default to learn how bad it is.”