News / USA

    US Congress Enters Crucial Week in Battles Over Budget, Debt Limit

    FILE - The US flag flies next to the Capitol in Washington, as Congress and the Obama Administration continue work to open the government and raise the debt ceiling.
    FILE - The US flag flies next to the Capitol in Washington, as Congress and the Obama Administration continue work to open the government and raise the debt ceiling.
    Reuters
    As the U.S. government moved into the second week of a shutdown on Monday with no end in sight, a deadlocked U.S. Congress also confronted an Oct. 17 deadline to increase the nation's borrowing power or risk default.
     
    Republican House of Representatives Speaker John Boehner vowed not to raise the U.S. debt ceiling without a “serious conversation” about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a U.S. default.
     
    The last big confrontation over the debt ceiling, in August 2011, ended with an 11th-hour agreement under pressure from  shaken markets and warnings of an economic catastrophe if there was a default.
     
    A similar last-minute resolution remained a distinct possibility this time as well.
     
    In comments on Sunday television political talk shows, neither Republicans nor Democrats offered any sign of impending agreement on either the shutdown or the debt ceiling, and both blamed the other side for the impasse.
     
    “I'm willing to sit down and have a conversation with the president,” said Boehner, speaking on ABC's “This Week.”  But, he added, U.S. President Barack Obama's “refusal to negotiate is putting our country at risk.”
     
    On CNN's “State of the Union” program, Treasury Secretary Jack Lew said: “Congress is playing with fire,” adding that Obama would not negotiate until “Congress does its job” by reopening the government and raising the debt ceiling.
     
    Equities investors were unnerved by the apparent hardening of stances over the weekend, with European shares falling to a four-month low on Monday. U.S. stock futures pointed to lower open on Wall Street, with S&P 500 futures futures down nearly 1 percent.
     
    China, the biggest holder of U.S. Treasuries, urged Washington to take decisive steps to avoid a crisis and ensure the safety of Chinese investments.
     
    “The United States is totally clear about China's concerns about the fiscal cliff,”  Vice Finance Minister Zhu Guangyao said in the Chinese government's first public comment on the Oct. 17 deadline.
     
    “We hope the United States fully understands the lessons of history,” Zhu told reporters in Beijing, referring to the downgrade of the U.S. credit rating by Standard & Poor's in 2011.
     
    China held $1.277 trillion of U.S. Treasuries as of last July, according to U.S. Treasury data released month.
     
    “Who should be worrying most of a possible U.S. default?” asked Deutsche Bank analysts.
     
    “Looking at the top holders of U.S. Treasuries, recipients of U.S. social security should be most concerned, followed by the Fed and then China.”
     
    “In theory, the first group can pressure congress and end up with other funds to fill the gap left by Treasury losses. Meanwhile the Fed has a money printing press to cover any losses, so that leaves the Chinese with a dilemma.”
     
    In early trading Monday, the price of U.S. Treasury notes , a benchmark of the bond markets, rose about 0.2 percent after closing lower on Friday.
     
    The dollar index, which measures the greenback's value against a basket of widely traded currencies, fell 0.2 percent.

    Shutdown, debt celing issues merged
     
    The two issues of the Federal government shutdown and the debt ceiling started out separately in the House but have been merged by the pressure of time.
     
    Conservative Republicans in the House have resisted funding the government for the current fiscal year until they extract concessions from Obama that would delay or defund his signature healthcare law, which launched Oct. 1.
     
    Many of the conservatives want a similar condition placed on raising the debt ceiling, but in his list of debt-ceiling demands Sunday, Boehner did not mention the Affordable Care Act, commonly known as Obamacare.
     
    “It's time to talk about the spending problem,” said Boehner, including measures to rein in costs of entitlement programs such as the Social Security retirement system and Medicare, the government-run health insurance program for seniors.
     
    Harry Reid, leader of the Democratic-led Senate, is expected to decide soon on whether to try to open formal debate on a “clean” bill, without extraneous issues attached, to raise the U.S. Treasury's borrowing authority.
     
    Passage of such a measure would require at least six of the Senate's 46 Republicans to join its 54 Democrats in order to overcome potential procedural hurdles that opponents of Obamacare could erect.
     
    According to one Senate Democratic aide, the debt limit hike might be coupled with a new initiative to reform the U.S. tax code and achieve long-term savings in Social Security and Medicare, whose expenses have soared along with the population of retirees.
     
    Republican lawmakers have floated other ideas, such as a very short debt limit increase, which would create time for more negotiations at the expense of further market uncertainty, and repeal of a medical device tax.
     
    The tax is expected to generate some $30 billion over 10 years to help pay for healthcare insurance subsidies under Obamacare.
     
    Some Democrats favor repealing the tax, but they insist that replacement revenues be found and repeal be considered only after the government reopens and the debt limit is raised.

    Major problems in house
     
    Agreement in the Senate would send the snarl of issues back into the House, where the Republican caucus has adopted a hard line on both Obamacare and the debt ceiling.
     
    There may be enough votes in the House to pass a clean bill, according to some analysts. That would require almost all of the House's 200 Democrats and about 20 of its 232 Republicans to vote in favor. But taking such a vote would require Speaker Boehner to violate his policy against bringing a vote on any legislation favored by less than a majority of House Republicans.
     
    In any case, neither side is moving toward accommodation, and the stakes rise with the passage of time.
     
    For any deal to work, negotiators probably would have to choreograph a multipronged approach that allows all sides to declare victory, even if it is one that sets up another battle in mid-November or December.
     
    While the shutdown itself is unlikely to cause major disruption in the markets, a fight over the debt ceiling could. From July 31 thru Aug 2 during the debt-limit standoff in 2011, the S&P 500 index lost 3 percent, and the deadlock led to a downgrade of the U.S. credit rating to AA-plus from AAA by S&P.
     
    The outlooks from Moody's and S&P, the only agency so far to have lowered its rating on U.S. debt, are both at “stable,” but Fitch Ratings has indicated a negative outlook for the U.S. debt rating.
     
    All three agencies have said the U.S. debt profile has improved substantially over the past two years, with gross domestic product growth, while slow, proving to be persistently positive and the budget deficit trending lower.
     
    Fitch said in a note last week that the U.S. rating is at risk in the current showdown over the debt ceiling because failure to raise it sufficiently in advance of the deadline, raises questions about the full faith and credit of the United States to honor its obligations.
     
    Political gridlock remains the greatest risk to the U.S. outlook, Fitch said in the note on Oct. 1, the first day of the partial government shutdown.
     
    “This 'faith' is a key underpinning of the U.S. dollar's global reserve currency status and reason why the US 'AAA' rating can tolerate a substantially higher level of public debt than other 'AAA' sovereigns,” Fitch said.
     
    Investors have so far been relatively sanguine about the approaching debt ceiling deadline, but market measures of anxiety, such as the Chicago Board Options Exchange's Volatility Index, have begun trending up since the shutdown began last Tuesday. The VIX rose 18 percent last week and briefly hit its highest level since June.

    You May Like

    US Leaders Who Served in Vietnam War Look Back and Ahead

    In New York Times opinion piece, Secretary of State John Kerry, Senator John McCain and former Senator Bob Kerrey say as US strengthens relations with Vietnam, it is important to remember lessons learned from war

    Who Are US Allies in Fight Against Islamic State?

    There is little but opportunism keeping coalition together analysts warn — SDFs Arab militias are not united even among themselves, frequently squabble and don’t share Kurds' vision for post-Assad Syria

    Learning Foreign Language Helps US Soldiers Bridge Culture Gap

    Effective interaction with local populations part of everyday curriculum at Monterey, California, Defense Language Institute

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora