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

Beloved Lion Killing Sparks Virtual, Real Life Outrage

Twitter, as usual, was epicenter for anger directed at Palmer, with some questioning his manhood, calling for him to be released into the wild More

Video Booming London Property Market a Haven for Dirty Money

Billions of dollars from proceeds of crime, especially from Russia, being laundered through London property market, according to anti-corruption activists More

Video Scouts' Decision on Gays Meets Acceptance in Founder's Hometown

One former Scout leader thinks organization will move past political, social debate, get back to its primary focus of turning boys into good citizens More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs