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US: A Possible Move to Increase Its Borrowing Limit

The United States could be taking the first steps toward increasing its borrowing authority so it does not default on its financial obligations.

The White House said Thursday that U.S. President Barack Obama is encouraged by an offer from Republican lawmakers in the House of Representatives for a six-week increase in the cap on the $16.7 trillion borrowing authority the U.S. expects to reach in a week. At that point, the U.S. says it would run short of money to pay all its bills.

White House spokesman Jay Carney said the offer from House Republicans -- some of the Democratic president's staunchest political opponents -- appears to be a recognition that the U.S. must not default.



"The president is happy that cooler heads at least seem to be prevailing in the House, that there at least seems to be a recognition that default is not an option."



Carney said Mr. Obama would likely agree to a short-term debt ceiling deal as long as other conditions are not attached to it.

But Washington's other contentious financial and political problem -- the now 10-day-old partial government shutdown -- remains unsettled.

Speaker John Boehner, leader of the Republican-controlled House, asked his colleagues to support the increase in the country's debt ceiling through November 22, so the country can borrow enough money to pay all its bills until then, on the condition that Mr. Obama negotiate government spending issues before Republicans would agree to end the shutdown.

Boehner said he would offer the president ideas for ending the shutdown at a White House meeting later Thursday, but offered no details.

The debt extension, if it happens, possibly would give Republicans a chance to negotiate spending cuts with Mr. Obama, who has called for reopening the government and an increase in the borrowing limit without conditions.

Treasury Secretary Jack Lew told a Senate panel that it would be a "grave mistake" to fail to increase the borrowing limit. By next Thursday, he said the Treasury would only have about $30 billion on hand and some incoming revenue, but not enough to pay all its bills.

He said the government should not have to make "perilous choices" whether it uses its available cash to pay government bond holders, pension and health benefits owed to older Americans, aid to military veterans or businesses that provide services to the government.



"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."



But Lew declined to say how much of an increase Mr. Obama wants in the debt ceiling, other than to say it should cover borrowing needs for a longer, rather than shorter period of time.

The debate over increasing the U.S. debt limit comes in the midst of the government shutdown because of a stalemate between Mr. Obama and his Republican opponents in Congress over government spending priorities and the implementation of widespread health care reforms that are his signature legislative achievement.

Senator Max Baucus, the Democratic chairman of the Senate Finance Committee, said that while the government shutdown "has been disruptive, a default would be a financial heart attack."

Republican Orrin Hatch criticized Mr. Obama for not negotiating over government spending issues while asking for an increase in the country's debt limit without conditions.

Hatch noted that in 2006, then-Senator Obama called a proposed increase in the debt ceiling at the time a "failure of leadership," when Republican President George W. Bush was in office. Hatch said the borrowing limit has since been increased seven times during Mr. Obama's term in the White House, from $11.3 trillion to the current $16.7 trillion.



The standoff over the government shutdown between Republicans and Mr. Obama is chiefly over the president's health care law that by January will require most Americans to buy health insurance or pay a fine, a mandatory provision that Republicans staunchly oppose.

Republicans had originally sought to either end spending for the law or delay it in exchange for halting the shutdown and raising the debt ceiling, and Boehner has called on Mr. Obama to hold negotiations before letting the House vote.

But the president says he will not negotiate until Congress reopens the government and boosts the borrowing authority without attaching any conditions. The partial shutdown has halted numerous government services, including death benefits to the families of U.S. service members killed in combat. The public backlash prompted the House to vote unanimously Wednesday to restore the benefits. The measure now goes to the Senate.

The Pentagon has reached an agreement with a private charity to pay the benefits until funding is restored.

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