Debt talks stall, bond firm warns of possible rating downgrade

McClatchy Washington BureauOctober 15, 2013 

— Congressional efforts to raise the nation’s debt limit and reopen the shuttered federal government stalled Tuesday when the House of Representatives delayed a vote on its latest proposal as the threat of possible default loomed larger and a top bond rating agency warned of a possible downgrade for U.S. bonds.

What had appeared to be progress in budget talks stopped as House of Representatives Republicans insisted anew on their own plan, a plan that might again prove unacceptable to Senate Democrats or the White House. Then the House delayed any action.

In a shot from Wall Street at the dysfunction in the capital, the bond rating agency Fitch Ratings said late Tuesday that it would consider downgrading the AAA rating for U.S. government bonds. Fitch said it would look at the question as the debt fight was all but certain to extend into next year even with a short-term settlement now.

Senate leaders from both parties had worked since Saturday to craft a path that would end the stalemate that has gripped Washington and the nation since Oct. 1. They, and apparently the Republicans who control the House, appear to agree on some key points. They have the same spending levels through Jan. 15 and want to increase the debt limit until Feb. 7. The House also would require a budget conference, or negotiation, on a bigger budget compromise by Dec. 15. The Senate has a deadline two days earlier.

They differed on health care. Republicans floated the idea of delaying a 2.3 percent medical device tax that would help pay for the Affordable Care Act. The Senate would end a reinsurance tax paid by unions and other major self-insurers.

The House also was eager to bar contributions for health insurance coverage for members of Congress and top executive branch officials, including President Barack Obama. And they would beef up how the government verifies the incomes of people who qualify for subsidies to help pay for health care coverage.

But the House Republican proposal appeared to be unsatisfactory to some of the party’s conservative and moderate members. Influential outside conservative groups such as FreedomWorks and Heritage Action were urging lawmakers to continue their efforts to derail the Affordable Care Act and to vote no if the plan reached the floor.

“Unfortunately, the proposed deal will do nothing to stop Obamacare’s massive new entitlements from taking root – radically changing the nature of American health care,” Heritage Action said in a statement.

Late Tuesday, the House Rules Committee was forced to postpone a hearing on the measure. By early evening, House Speaker John Boehner’s office pulled the plug on taking the plan to a vote. Rep. Pete Sessions, R-Texas, the Rules Committee chairman, said the delay “allows us to take the night and make sure our members know what they’re voting on.”

“We’re making sure that we know what we’re going to pass,” Sessions added.

The failure to produce a House plan appeared to put a Senate plan being negotiated by Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell back in play.

“Given tonight’s events, the leaders have decided to work toward a solution that would reopen the government and prevent default,” said Michael Brumas, a McConnell spokesman. “They are optimistic an agreement can be reached.”

Following a White House meeting with Obama, House Minority Leader Nancy Pelosi, D-Calif., warned that House Speaker John Boehner, R-Ohio, had better be prepared to pass a plan with only Republican votes if it contains provisions unacceptable to Democrats.

“I believe the impact of not lifting the debt ceiling on top of shutting down (the government) is (so) catastrophic that there will be those in the Republican Party who will see the light,” Pelosi said. “And we stand ready to supply votes. But if they do not, if they go on the path they’re on, they’ll need 100 percent Republican votes.”

Republican leaders spent much of Tuesday huddled privately with each other trying to put final touches on the plan.

The proposal, discussed at a morning caucus of House Republicans, drew criticism from the White House and Reid.

“The president has said repeatedly that members of Congress don’t get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation’s bills,” said White House spokeswoman Amy Brundage. “Unfortunately, the latest proposal from House Republicans does just that, in a partisan attempt to appease a small group of tea party Republicans who forced the government shutdown in the first place.”

White House Press Secretary Jay Carney warned that the parties are “far from a deal at this point.” He said the White House is “pleased with the progress” in the Senate, but he delivered a pointed message to the House.

“Time is of the essence,” he said, noting that the Treasury Department believes it will exhaust its ability to pay debts on Thursday. “So I think that is why you see some very serious-minded efforts being undertaken in the Senate and we would hope that the House would also approach this important deadline with the understanding of just how serious it is.”

As the day wore on, the mood became one of wait and see rather than panic. Boehner tried hard to calm everyone. “Listen, we’re working with our members on a way forward and to make sure that we provide fairness to the American people. . . . I have made clear for months and months that the idea of default is wrong, and we shouldn’t get anywhere close to it,” he told reporters. And, he said, he’s flexible.

“We are talking with our members on both sides of the aisle to try to find a way to move forward today,” the speaker said.

Senate Republicans said they welcomed a plan from the House. “The speaker is really taking leadership on this and trying to pass something more in the ballpark of what could pass,” said Sen. Kelly Ayotte of New Hampshire, one of the center-right Republicans considered a key to any deal.

But, she warned of the House, “They need to get their act together.”

Some Senate Republicans were growing impatient. “We know how it’s going to end,” said Sen. John McCain, R-Ariz. “It’s just a question of when. We’re going to raise the debt limit.”

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