The Senate announced a last-minute deal on Wednesday to avert a historic lapse in the government's borrowing ability and a potentially damaging debt default — along with reopening the government after a two-week shutdown.
But even if the House and Senate manage to overcome procedural hurdles to seal the deal before Thursday, when the Treasury says it will exhaust its borrowing authority, it will only be a temporary solution that sets up the prospect of another showdown early next year.
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The House is scheduled to consider the deal at 3 p.m.; the Senate, "after dinner," according to CNN.
The Senate deal would:
- Keep the government open until Jan. 15;
- Increase the debt ceiling through Feb. 7;
- Appoint negotiators to hammer out a long-term budget deal;
- Require income verification for those signing up for Obamacare subsidies.
Senate Majority Leader Harry Reid and Republican leader Mitch McConnell announced the agreement on the Senate floor, where it was expected to win swift approval after a main Republican critic of the deal, Sen. Ted Cruz of Texas, said he would not use procedural moves to delay a vote.
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Still, Cruz railed against the deal because it doesn't address Obamacare, President Barack Obama's signature healthcare reform law. Cruz and other Republicans backed by the conservative, small-government tea party movement want to repeal or delay the healthcare law.
"Unfortunately, once again it appears the Washington establishment is refusing to listen to the American people," he said during a brief press conference. "The deal that has been cut provides no relief to millions of Americans who are hurting because of Obamacare. The deal that has been cut provides no relief to the young people coming out of school who cannot find a job because of Obamacare.
"It provides no relief to all the single parents who have been forced into part-time work struggling to feed their kids on 29 hours per week. It provides no relief to all the hard-working families who are facing skyrocketing health insurance premiums, and it provides no relief to all the seniors, while those with disabilities who are right now, getting in the mail, notifications from the health insurance companies that they are losing their health insurance because of Obamacare."
Cruz commended members of the House for having "taken a bold stance listening to the American people." And he criticized the Senate for staying "with the traditional approach of the Washington establishment of maintaining the status quo and doing nothing to respond through sufferings Obamacare is causing millions of Americans."
House Speaker John Boehner of Ohio will face one of the most important decisions of his tenure: whether to allow the Senate agreement to come to the House floor unimpeded, or try to amend it.
For procedural reasons, if the House goes first, the bill could reach Obama's desk faster.
Rep. Kevin Brady, R-Texas, told Bloomberg that Boehner will allow the vote.
"The speaker will bring that agreement to the House floor in a very timely manner," Brady said on Bloomberg Television. He said he thinks the measure would pass.
House leaders haven't decided whether they will vote before the Senate, said a Republican aide who spoke on conditions of anonymity. And a Boehner spokesman told CNN that no decision has been made on a House vote.
But Rep. Charles Dent, a Pennsylvania Republican, said Tuesday night on CNN that a Senate accord will probably be presented for a House vote by Boehner and likely win passage with a majority of Democrats and a minority of Republicans.
And multiple news agencies on Twitter are reporting that Boehner will allow the vote.
Reid, a Nevada Democrat, and McConnell, a Kentucky Republican, temporarily suspended talks yesterday while Boehner tried and failed to marshal House Republicans behind a plan that was significantly scaled down from demands for health-law changes that led to the U.S. government shutdown Oct. 1.
The partial shutdown has closed national parks, slowed clinical drug trials, and led to the furloughs of thousands of federal workers.
Obama urged Congress on Wednesday to move swiftly to approve a deal to reopen the U.S. government and remove the threat of a potentially devastating default.
White House spokesman Jay Carney said Obama was grateful to the leaders of the Senate for working together to find a deal and said the president wanted Congress now to ensure "the government reopens and the threat of default is removed."
Lawmakers are racing against time. While analysts and U.S. officials say the government will still have roughly $30 billion in cash to pay many obligations for at least a few days after Oct. 17, the financial sector may begin to seize up if the deal is not finalized in both chambers.
"Today is definitely not the day to be conducting any serious business as traders across the globe will be hypnotized by their TVs/terminals and anxiously waiting for something to hit the news wires," Jonathan Sudaria, a trader at Capital Spreads in London, wrote in a client note.
Fitch Ratings on Tuesday put the U.S. AAA credit grade on ratings watch negative, citing the government's inability to raise the debt ceiling in a timely manner, according to a statement after the markets in New York closed.
U.S. one-month bill rates rose to the highest level since 2008 as investors prepared to bid for $68 billion of short-term debt Wednesday after three- and six-month auctions Tuesday drew the weakest demand in four years.
Rates on bills maturing on Oct. 24 climbed to the highest since they were issued in April on concern the Treasury Department will have to delay repaying some of its maturing securities as lawmakers battle over raising the federal borrowing limit. One-month rates were 0.37 percent at 10:14 a.m. London time, according to data compiled by Bloomberg — the most since October 2008. The benchmark 10-year yield was little changed at 2.73 percent, according to Bloomberg Bond Trader data.
Standard & Poor’s 500 Index futures expiring in December rose 0.4 percent to 1,699.5 at 10:27 a.m. Wednesday in London. The benchmark gauge slid 0.7 percent Tuesday after rallying 3.3 percent over the previous four days. Contracts on the Dow Jones Industrial Average gained 64 points, or 0.4 percent, to 15,159.
"If the market truly believed the U.S. will default on its obligations, we would see a more dramatic reaction from equity and bond markets," Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London, said by phone Wednesday. "The great expectation is the deal will be done. If the deal is not done, however minuscule that chance that may be, it would have a devastating impact on sentiment."
Under the Senate agreement, House Republicans would get almost none of their priorities. They tried to defund or delay the healthcare law, settling last month on trying to delay the requirement that individuals purchase health insurance.
Obama has described those requests as unacceptable ransom demands and insisted that Republicans relent.
Republicans persisted after the partial government shutdown started two weeks ago, and saw their approval ratings drop in polls. Hardliners resisted plans that didn't make major changes to the Affordable Care Act. Others, such as Rep. Peter King of New York, stuck with Boehner while complaining about the strategy.
"And the long teachable moment ends: Stove is hot," Rep. Tim Griffin, an Arkansas Republican, said on Twitter last night after Boehner scrapped the latest plan.
The emerging Senate agreement trades the pressing and already-missed deadlines for new ones over the next four months. The Treasury Department would be allowed to use so-called extraordinary measures to delay default for about another month beyond Feb. 7, said a Senate Democratic aide who spoke on condition of anonymity to discuss the plan.
The Senate agreement may include a Republican-backed provision to tighten income verification requirements for people receiving health-insurance subsidies. That provision is linked to a proposal backed by Democrats and labor unions that would delay a reinsurance fee on group health plans.
Both of those healthcare provisions will either be in the agreement or be out of the agreement.
Senate passage of a bill could be delayed into late next week if a single senator objects, the aide said. Then that bill would have to go to the House. Procedurally, the Senate would have been able to act by Oct. 18 if the House had passed a bill Tuesday night.
Cruz, who led a Republican bid to defund Obamacare, spoke for more than 21 hours in a budget debate last month. On Oct. 14, he wouldn't rule out stalling maneuvers, saying he wants to see the plan's details. He made no public comments yesterday.
Unless Congress acts, the United States will be operating only on about $30 billion of cash reserves and incoming revenue starting tomorrow. It will begin missing promised payments between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Boehner has tried several times over the past month to construct a debt-limit bill that House Republicans could support, and he hasn't brought any proposals to a vote. Republicans didn't have enough votes for the measure yesterday, said a leadership aide who spoke on condition of anonymity to discuss vote counting.
"We're going to be prepared tomorrow to make some decisions," Rep. Pete Sessions, a Texas Republican, told reporters in the Capitol last night.
Unlike previous stopgap spending measures, the House bill wouldn't have made big changes to the 2010 healthcare law, and it contains no cuts to entitlement programs that Republicans sought to add to a debt-limit increase or spending bill.
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Sen. Lindsey Graham, a South Carolina Republican who is close to Boehner and spoke to him earlier yesterday, said he was concerned that the speaker could become a "victim" of a failed Republican strategy to use a government shutdown as leverage to try to force changes to the healthcare law.
Graham also said he is "getting to the point of disgust" with Democrats, including Reid, for refusing to help Republicans extricate themselves from an impossible negotiating position.
"Instead of trying to help us find a way out of a bad spot — we won't be the last political party to overplay our hand, it may happen one day on the Democratic watch," he said.
"And if it did, would Republicans, for the good of the country, kind of give a little?" Graham said, adding that Republicans went "too far" and "screwed up."
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