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| US government shutdown: Congress in disarray as deal collapses | |
| (about 4 hours later) | |
| Republicans in the House of Representatives pushed the US economy to the brink on Tuesday night when they turned against a proposal by their party leadership that would have reopened the government and lifted the debt ceiling, just over 24 hours before the country’s borrowing limit expires. | Republicans in the House of Representatives pushed the US economy to the brink on Tuesday night when they turned against a proposal by their party leadership that would have reopened the government and lifted the debt ceiling, just over 24 hours before the country’s borrowing limit expires. |
| The failure by John Boehner, the House speaker, to persuade elements within his own Republican caucus to back a bill designed to placate conservatives underscored the severity of the political crisis facing Washington. | The failure by John Boehner, the House speaker, to persuade elements within his own Republican caucus to back a bill designed to placate conservatives underscored the severity of the political crisis facing Washington. |
| Boehner’s bill, which was drafted after Tea Party-backed members of the House voiced their opposition to a deal forged between Democrats and Republicans in the Senate, had been expected to be put to a vote on Tuesday night. But it was pulled at the last minute after the House GOP leadership realised that the bill, opposed by Democrats, did not even have the support of sufficient Republicans to pass. | Boehner’s bill, which was drafted after Tea Party-backed members of the House voiced their opposition to a deal forged between Democrats and Republicans in the Senate, had been expected to be put to a vote on Tuesday night. But it was pulled at the last minute after the House GOP leadership realised that the bill, opposed by Democrats, did not even have the support of sufficient Republicans to pass. |
| The news capped a day of confusion and setbacks on Capitol Hill that left Congress back where it had started. The ratings agency Fitch put the US on notice of a downgrade in its triple-A status, warning that the turmoil in Washington "risks undermining confidence in the role of the US dollar as the pre-eminent global reserve currency”. | The news capped a day of confusion and setbacks on Capitol Hill that left Congress back where it had started. The ratings agency Fitch put the US on notice of a downgrade in its triple-A status, warning that the turmoil in Washington "risks undermining confidence in the role of the US dollar as the pre-eminent global reserve currency”. |
| The White House seized on that announcement, saying it demonstrated the urgency of reaching a deal. But momentum had all but evaporated on Tuesday night when Republican leaders, realising that support for their proposed legislation had collapsed, gathered in Boehner’s office for crisis talks over pizza. | The White House seized on that announcement, saying it demonstrated the urgency of reaching a deal. But momentum had all but evaporated on Tuesday night when Republican leaders, realising that support for their proposed legislation had collapsed, gathered in Boehner’s office for crisis talks over pizza. |
| Congressman Pete Sessions, who chairs the rules committee, emerged briefly to tell reporters that the leadership’s bill had stalled. “There will be no action tonight, no votes,” he said. “What we’re going to do is allow us to take the night and make sure all our members know what is going on.” He was unable to elaborate on what was, in his words, “going on”. | Congressman Pete Sessions, who chairs the rules committee, emerged briefly to tell reporters that the leadership’s bill had stalled. “There will be no action tonight, no votes,” he said. “What we’re going to do is allow us to take the night and make sure all our members know what is going on.” He was unable to elaborate on what was, in his words, “going on”. |
| Late on Tuesday night focus returned to the Senate, where Harry Reid, the Democrats’ majority leader, revived talks with his Republican counterpart, Mitch McConnell. | Late on Tuesday night focus returned to the Senate, where Harry Reid, the Democrats’ majority leader, revived talks with his Republican counterpart, Mitch McConnell. |
| The day had begun with a hope that these negotiations could provide the basis of a breakthrough. Their deal was a stopgap measure that would have extended the debt limit until early February and authorised government spending until mid-January, with one token concession over the Affordable Care Act, the healthcare reforms passed by both houses of Congress in 2010 that hardline Republicans are now attempting to unpick. | The day had begun with a hope that these negotiations could provide the basis of a breakthrough. Their deal was a stopgap measure that would have extended the debt limit until early February and authorised government spending until mid-January, with one token concession over the Affordable Care Act, the healthcare reforms passed by both houses of Congress in 2010 that hardline Republicans are now attempting to unpick. |
| But in the face of trenchant opposition from Tea Party Republicans, voiced at a meeting of the House caucus in the morning, Boehner floated an alternative proposal that would have, in addition, delayed a new tax on medical devices designed to help pay for the Affordable Care Act and deprive lawmakers and their staff of personal health insurance subsidies. | But in the face of trenchant opposition from Tea Party Republicans, voiced at a meeting of the House caucus in the morning, Boehner floated an alternative proposal that would have, in addition, delayed a new tax on medical devices designed to help pay for the Affordable Care Act and deprive lawmakers and their staff of personal health insurance subsidies. |
| That succeeded only in inflaming conservatives who regarded the House and Senate compromises as surrender – and Democrats, who accused Boehner of scuppering progress by inserting new "ransom demands". | That succeeded only in inflaming conservatives who regarded the House and Senate compromises as surrender – and Democrats, who accused Boehner of scuppering progress by inserting new "ransom demands". |
| The Republican leadership came up with various versions of the legislation through the day as they tried to settle on a formula that would satisfy conservatives. Boehner acceded to rightwing demands to drop the medical device tax provision, which was seen as benefiting only health equipment manufacturers, and retained the proposal to cut healthcare subsidies from congressional and White House staff, which amounted to an $18,000-a-year pay cut for most employees. The resolution got as far as being published on the House rules committee website. | The Republican leadership came up with various versions of the legislation through the day as they tried to settle on a formula that would satisfy conservatives. Boehner acceded to rightwing demands to drop the medical device tax provision, which was seen as benefiting only health equipment manufacturers, and retained the proposal to cut healthcare subsidies from congressional and White House staff, which amounted to an $18,000-a-year pay cut for most employees. The resolution got as far as being published on the House rules committee website. |
| But the plan collapsed in the face of sustained conservative opposition. Heritage Action, a conservative group that holds Republican candidates accountable to Tea Party-backed causes, announced that it would mark down Republicans who voted in favour of the resolution. Support from House Republicans melted away and Boehner postponed the vote. | But the plan collapsed in the face of sustained conservative opposition. Heritage Action, a conservative group that holds Republican candidates accountable to Tea Party-backed causes, announced that it would mark down Republicans who voted in favour of the resolution. Support from House Republicans melted away and Boehner postponed the vote. |
| By then, senior Democrats had lined up to condemn the Republicans in the House for blocking what appeared to be route forward. “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. | By then, senior Democrats had lined up to condemn the Republicans in the House for blocking what appeared to be route forward. “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. |
| "Democrats and Republicans in the Senate have been working in a bipartisan, good-faith effort to end the manufactured crises that have already harmed American families and business owners." | "Democrats and Republicans in the Senate have been working in a bipartisan, good-faith effort to end the manufactured crises that have already harmed American families and business owners." |
| Chuck Schumer, the third-ranking Democrat in the Senate, looked angry after he emerged from a Senate meeting to discover that the bipartisan deal, which he had helped forge, had been put on ice while Boehner sought an alternative solution among Republicans in the House. "We're at the 11th hour,” he said. "The train to avoid default was smoothly heading down the tracks and picking up speed, and at the last minute speaker Boehner decides to throw a log on those tracks." | Chuck Schumer, the third-ranking Democrat in the Senate, looked angry after he emerged from a Senate meeting to discover that the bipartisan deal, which he had helped forge, had been put on ice while Boehner sought an alternative solution among Republicans in the House. "We're at the 11th hour,” he said. "The train to avoid default was smoothly heading down the tracks and picking up speed, and at the last minute speaker Boehner decides to throw a log on those tracks." |
| In the end Congress finished the day where it began. Hopes were again invested in the ability of Reid and McConnell, two experienced negotiators, to find a resolution. Aides for both the Senate leaders indicated they were working into the night to forge a deal capable of garnering agreement that might just get the necessary support ahead of Thursday. | In the end Congress finished the day where it began. Hopes were again invested in the ability of Reid and McConnell, two experienced negotiators, to find a resolution. Aides for both the Senate leaders indicated they were working into the night to forge a deal capable of garnering agreement that might just get the necessary support ahead of Thursday. |
| The significance of Thursday's deadline has been somewhat misunderstood; the precise implications of failing to raise the borrowing limit before then are unknown. The treasury secretary Jack Lew has said the country’s ability to borrow will be exhausted “no later” than 17 October, which in practice means it will have to rely upon its cash reserves, and incoming revenues, from 5pm on Thursday onwards. | The significance of Thursday's deadline has been somewhat misunderstood; the precise implications of failing to raise the borrowing limit before then are unknown. The treasury secretary Jack Lew has said the country’s ability to borrow will be exhausted “no later” than 17 October, which in practice means it will have to rely upon its cash reserves, and incoming revenues, from 5pm on Thursday onwards. |
| That will not necessarily mean an immediate default; instead there would be uncertainty, growing by the hour, over the Treasury’s ability to pay creditors. Technically, if no deal was reached, US would be susceptible to a default from 18 October onwards. | That will not necessarily mean an immediate default; instead there would be uncertainty, growing by the hour, over the Treasury’s ability to pay creditors. Technically, if no deal was reached, US would be susceptible to a default from 18 October onwards. |
| Shai Akabas, a senior policy analyst who has analysed the possible ramifications for the Bipartisan Policy Center, said there was no clarity on what would happen next – although he estimated that the Treasury may start failing to pay bills from 22 October. | Shai Akabas, a senior policy analyst who has analysed the possible ramifications for the Bipartisan Policy Center, said there was no clarity on what would happen next – although he estimated that the Treasury may start failing to pay bills from 22 October. |
| But Thursday could still be the crucial moment determining the response of markets, which until now have tolerated the chaos in Washington on the assumption it would be resolved in time. | But Thursday could still be the crucial moment determining the response of markets, which until now have tolerated the chaos in Washington on the assumption it would be resolved in time. |
| With the US 16 days into a government shutdown, and just 24 hours away from the point at which the Treasury no longer has authority to borrow, there were signs economists were running out of faith. | With the US 16 days into a government shutdown, and just 24 hours away from the point at which the Treasury no longer has authority to borrow, there were signs economists were running out of faith. |
| Fitch said it had reached its conclusion because of the increased possibility that the US would not reach a deal on its debt ceiling before Thursday. "Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," the agency said. | Fitch said it had reached its conclusion because of the increased possibility that the US would not reach a deal on its debt ceiling before Thursday. "Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," the agency said. |
| The Dow fell 133.25 points or 0.87% to end the day down after a brief rally when it appeared a breakthrough had been made. | The Dow fell 133.25 points or 0.87% to end the day down after a brief rally when it appeared a breakthrough had been made. |
| In 2011 Standard & Poor's downgraded US debt as Democrats and Republicans argued once more about the debt ceiling. The move came amid sharp selloffs on stock markets around the world. "The repeated brinkmanship over raising the debt ceiling also dents confidence in the effectiveness of the US government and political institutions, and in the coherence and credibility of economic policy. It will also have some detrimental effect on the US economy," said Fitch. | In 2011 Standard & Poor's downgraded US debt as Democrats and Republicans argued once more about the debt ceiling. The move came amid sharp selloffs on stock markets around the world. "The repeated brinkmanship over raising the debt ceiling also dents confidence in the effectiveness of the US government and political institutions, and in the coherence and credibility of economic policy. It will also have some detrimental effect on the US economy," said Fitch. |
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