House Speaker John Boehner plans to take his proposal to raise the U.S. debt-ceiling to a vote in the chamber about 6 p.m., Republican leaders announced.
The vote is scheduled to occur between 5:45 p.m. and 6:15 p.m. in Washington, according to a plan put out by the leaders.
President Barack Obama today said Republicans and Democrats are in “rough agreement” on their plans to raise the nation’s debt limit with just four days before a threatened U.S. default and the time for compromise is “now.” Still, the Senate and House stood at odds, with Senate leaders planning to kill the House plan and Obama threatening a veto.
House Majority Leader Eric Cantor, a Virginia Republican, said his party has the votes to pass Boehner’s plan today. Senate Majority Leader Harry Reid, a Nevada Democrat, said he will move to a vote on his competing measure and held out hope for a deal with Republican leaders.
The stakes rose as the Aug. 2 deadline set by the Treasury Department for action on the debt limit approached.
“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills — we do — but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said at the White House.
The Treasury Department is preparing contingency plans for paying the government’s obligations should Congress fail to raise the borrowing limit by Aug. 2. White House press secretary Jay Carney said Treasury officials may reveal those plans as soon as this weekend as the deadline approaches.
Short-Term Extension
Carney reiterated that Obama would accept a short-term debt ceiling extension of a few days only if needed to finish work on legislation lifting the limit for a longer period.
Treasuries rallied, pushing 10-year note yields to a two- week low. Yields on 10-year notes tumbled 10 basis points, or 0.1 percentage point, to 2.84 percent, the lowest since July 12, at 1:21 p.m. in New York, according to Bloomberg Bond Trader prices.
Rates on six-month bills due Aug. 4 climbed to 0.3 percent, the highest since they were issued in February.
House Republican leaders revised their bill after failing to win enough support for a vote last night. It would allow a debt-limit increase now and require Congress to work out a second debt-limit increase agreement within months. That bill is headed for a Senate roadblock and threatened Obama veto.
Clock ‘Running’
In the Senate, Reid said today he asked Republican leader Mitch McConnell of Kentucky to meet with him and “negotiate in good faith knowing the clock is running down.”
Reid said he will start action in the Senate by the end of the day on his rival bill.
“This is likely our last chance to save this nation from a default,” said Reid, after speaking with Treasury Secretary Timothy Geithner about the impact of inaction. “Secretary Geithner says it’s already started,” Reid said. “The international community is extremely worried.”
U.S. stocks pared losses. The Standard & Poor’s 500 Index fell to 1,299.79, or 0.1 percent, at 2:07 p.m. in New York after tumbling as much as 1.4 percent. The Dow Jones Industrial Average fell 36.17 points, or 0.3 percent, to 12,203.94 after slumping as much as 157 points.
Boehner was forced to scrap action on his measure late last night after face-to-face meetings with recalcitrant Republicans failed to yield the votes to push it through the House.
Balanced Budget Amendment
Republican leaders revised it today to allow the second debt-limit increase only if a balanced-budget constitutional amendment is passed by Congress and sent to the states, said House Rules Committee Chairman David Dreier, a California Republican.
Representative Mo Brooks, an Alabama Republican, said the decision to include the balanced-budget amendment turned 10 to 20 Republican votes in favor of the measure, he said.
Senate Democrats, working to break the impasse, were trying to devise a strict enforcement mechanism to guarantee future deficit savings, according to Democratic officials.
Behind the scenes, officials said, talks on a potential deal centered on how to force future deficit-cutting by Congress, by setting up consequences — such as automatic spending cuts or tax increases, or some combination of the two – – if the savings aren’t achieved.
Enforcement Mechanism
“If we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I’ll support that, too, if it’s done in a smart and balanced way,” Obama said.
Senator Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee, said he has been in preliminary talks with Republicans on a trigger mechanism that could enforce the future deficit reduction. He said it would involve both automatic spending cuts and tax increases if the debt savings were not achieved, declining to provide more detail.
He said Republicans’ revamped plan, which conditions the borrowing boost on passage of a balanced budget amendment, is “absolutely detached from any reality” and “has no chance” in the Senate.
Senator Dianne Feinstein of California said her fellow Democrats, particularly Reid, are determined to pursue a bipartisan compromise.
“We don’t want to replicate the House,” she said as she left a closed-door caucus meeting today. “We’d like to work together on something that would work for all of us.”
Debt-Ceiling Increase
Boehner’s original measure would provide an immediate $900 billion debt-ceiling increase while cutting spending by $917 billion. It would allow Obama to seek a second, $1.6 trillion installment of borrowing authority if Congress enacted a law by Christmas to slash deficits by $1.8 trillion. That would set up yet another debt-limit showdown early next year if lawmakers were unable to agree to such a plan.
Obama has called such an approach unacceptable, saying it could lead to a downgrade of U.S. credit and continued economic uncertainty. Democrats are trying to hatch an alternative set of triggers — delinked from the debt-limit increase — to break the impasse.
The U.S. Treasury will give priority to making interest payments to holders of government bonds if lawmakers fail to raise the debt-ceiling, according to an administration official who requested anonymity because no announcement has been made. The Treasury has said about $90 billion in debt matures on Aug. 4, more than $30 billion comes due Aug. 15 and more than $500 billion matures in all of August.
Plan Overlap
There is already overlap between Boehner’s plan and Reid’s. Reid dropped Democrats’ insistence on tax increases. Both proposals take as their starting points a cut of close to $1 trillion in discretionary spending over 10 years, and both establish bipartisan congressional committees to recommend future savings leading to a guaranteed up-or-down vote by year’s end.
Senator Scott Brown, a Massachusetts Republican, said his staff has been working with Reid’s staff to put “more teeth” in the joint committee.
If the House measure passes, Reid said he will immediately move to kill it. Under Senate procedures, Reid then could substitute his measure into the bill and use it as a vehicle to start the process for bringing it to a vote.
Senate procedures would allow an initial vote on Reid’s substitute at about 1 a.m. July 31, and the measure could be altered any time before that vote. A Senate vote on passage then could be held at about 7 a.m. Aug. 1, allowing the measure to return to the House for a vote in that chamber.
By Julie Hirschfeld Davis and James Rowley – Jul 29, 2011 Bloomberg