Senator: Deal to Avoid Default and Open Government

Budget Battle (Senate Majority Leader Sen. Harry Reid, D-Nev., is surrounded by reporters after leaving the office of Senate Min
Evan Vucci/APSenate Majority Leader Harry Reid

WASHINGTON -- Senate leaders announced last-minute agreement Wednesday to avert a threatened Treasury default and reopen the government after a partial, 16-day shutdown. Congress raced to pass the measure by day's end.

The Dow Jones industrial average (^DJI) soared on the news that the threat of default was fading, flirting with a 200-point gain in morning trading.

"This is a time for reconciliation," said Senate Majority Leader Harry Reid of the agreement he had forged with the GOP leader, Sen. Mitch McConnell of Kentucky.

McConnell said that with the agreement, Republicans had sealed a deal to have spending in one area of the budget decline for two years in a row, adding, "we're not going back."

One prominent tea party lawmaker, Sen. Ted Cruz of Texas, said he would oppose the plan, but not seek to delay its passage.

That was a key concession that signaled a strong possibility that both houses could act by day's end. That, in turn, would allow President Barack Obama could sign the bill into law ahead of the Thursday deadline that Treasury Secretary Jack Lew had set for action to raise the $16.7 trillion debt limit.

Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government would reopen through Jan. 15.

There was no official comment from the White House, although congressional officials said administration aides had been kept fully informed of the negotiations.

While the emerging deal could well meet resistance from conservatives in the Republican-controlled House, the Democratic Leader, Rep. Nancy Pelosi of California, has signaled she will support the plan and her rank and file is expected to vote for it in overwhelming numbers.

That raised the possibility that more Democrats than Republicans would back it, potentially causing additional problems for House Speaker John Boehner as he struggles to manage his tea party-heavy majority.

Boehner and the House Republican leadership met in a different part of the Capitol to plan their next move. A spokesman, Michael Steel, said afterward that no decision had been made "about how or when a potential Senate agreement could be voted on in the House."

The developments came one day before the deadline Lew had set for Congress to raise the current $16.7 trillion debt limit. Without action by lawmakers, he said, Treasury could not be certain it had the ability to pay bills as they come due.

In addition to raising the debt limit, the proposal would give lawmakers a vote to disapprove the increase. Obama would have the right to veto their opposition, ensuring he would prevail.

House and Senate negotiators would be appointed to seek a deficit-reduction deal. At the last minute, Reid and McConnell jettisoned a plan to give federal agencies increased flexibility in coping with the effects of across-the-board cuts. Officials said that would be a topic for the negotiations expected to begin shortly.

Despite initial Republican demands for the defunding of the health care law known as Obamacare, the pending agreement makes only one modest change in the program. It requires individuals and families seeking subsidies to purchase coverage to verify their incomes before qualifying.

There were some dire warnings from the financial world a day after the Fitch credit rating agency said it was reviewing its AAA rating on U.S. government debt for possible downgrade.

John Chambers, chairman of Standard & Poor's Sovereign Debt Committee, told "CBS This Morning" on Wednesday that a U.S. government default on its debts would be "much worse than Lehman Brothers," the investment firm whose 2008 collapse led to the global financial crisis.

Billionaire investor Warren Buffett told CNBC he doesn't think the federal government will fail to pay its bills, but "if it does happen, it's a pure act of idiocy."

Rep. Steve King, R-Iowa, a tea party favorite, said he was not worried about the prospect of a U.S. default. "We are going to service our debt," he told CNN. "But I am concerned about all the rhetoric around this ... I'm concerned that it will scare the markets."

Aides to Reid and McConnell said the two men had resumed talks, including a Tuesday night conversation, and were hopeful about striking an agreement that could pass both houses.

It was expected to mirror a deal the leaders had neared Monday. That agreement was described as extending the debt limit through Feb. 7, immediately reopening the government fully and keeping agencies running until Jan. 15 -- leaving lawmakers clashing over the same disputes in the near future.

It also set a mid-December deadline for bipartisan budget negotiators to report on efforts to reach compromise on longer-term issues such as spending cuts. And it likely would require the Obama administration to certify that it can verify the income of people who qualify for federal subsidies for medical insurance under the 2010 health care law.

But that emerging Senate pact was put on hold Tuesday, an extraordinary day that highlighted how unruly rank-and-file House Republicans can be, even when the stakes are high. Facing solid Democratic opposition, Boehner tried in vain to write legislation that would satisfy GOP lawmakers, especially conservatives.

Boehner crafted two versions of the bill, but neither made it to a House vote because both faced certain defeat. Working against him was word during the day from the influential group Heritage Action for America that his legislation was not conservative enough -- a worrisome threat for many GOP lawmakers whose biggest electoral fears are of primary challenges from the right.

The last of Boehner's two bills had the same dates as the emerging Senate plan on the debt limit and shutdown.

But it also blocked federal payments for the president, members of Congress and other officials to help pay for their health care coverage. And it prevented the Obama administration from shifting funds among different accounts -- as past Treasury secretaries have done -- to let the government keep paying bills briefly after the federal debt limit has been reached.

Boehner's inability to produce a bill that could pass his own chamber likely means he will have to let the House vote on a Senate compromise, even if that means it would pass with strong Democratic and weak GOP support. House Republican leaders have tried to avoid that scenario for fear that it would threaten their leadership, and some Republicans worried openly about that.

"Of all the damage to be done politically here, one of the greatest concerns I have is that somehow John Boehner gets compromised," said Sen. Lindsey Graham, R-S.C., a former House member and a Boehner supporter.

With the default clock ticking ever louder, it was possible the House might vote first on a plan produced by Senate leaders. For procedural reasons, that could speed the measure's trip through Congress by removing some parliamentary barriers Senate opponents might erect.

The strains of the confrontation were showing among GOP lawmakers.

"It's time to reopen the government and ensure we don't default on our debt," Rep. Jaime Herrera Beutler, R-Wash., said in a written statement. "I will not vote for poison pills that have no chance of passing the Senate or being signed into law."

-Associated Press writers David Espo, Andrew Taylor, Charles Babington, Stephen Ohlemacher, Henry C. Jackson and Donna Cassata contributed to this report.

Increase your money and finance knowledge from home

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Introduction to ETFs

The basics of Exchange Traded Funds and why ETFs are hot.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

The whole thing was just a show. I know a federal employee who is a supervisor with the USDA. When he was sent home 2 weeks ago, he was told then he'd be furloughed until Oct. 17 and hopefully with pay..

October 16 2013 at 10:27 PM Report abuse rate up rate down Reply

The most recent Republican idea was to use the full faith and credit of the U.S. as extortion. That idea excites very few people in the country. It certainly doesn't excite me. When I see how Boehner has conducted himself, I say to myself, "Now here's a man that is willing to disregard the good of millions in order to advance his own political gains."

October 16 2013 at 9:55 PM Report abuse +2 rate up rate down Reply


October 16 2013 at 8:47 PM Report abuse -2 rate up rate down Reply
1 reply to teapotparty11's comment

Does every post have to go thru a stupid filter?

October 16 2013 at 9:02 PM Report abuse +4 rate up rate down Reply

Business is bailing out on the GOP - Forbes:

October 16 2013 at 4:34 PM Report abuse +6 rate up rate down Reply

Maybe instead of submitting 50 resolutions to shut it down, Congress could try submiting 50 resolutions to fix the bugs?

I look at it this way. A month ago there was nowhere for people with lower incomes to buy affordable insurance. Now there's somewhere. It may be pretty lousy right now, but it's something. Let's fix it and get it working.

October 16 2013 at 4:20 PM Report abuse +6 rate up rate down Reply

let's wait and see what happens with obamacare......if it is as bad as many say, the public will know soon enough...the gov't doesn't have enough $$$ to give subsidies to everyone who will be disappointed....then we will see.

October 16 2013 at 3:46 PM Report abuse rate up rate down Reply
1 reply to flagag's comment

The government is subsidizing all the poor and indigent people who use the emergency room for every caugh and ache. It is very expensive. Under the ACA, the same money that is now wasted on those who have no insurance, will be used to subsidize their preventative care. It is MUCH CHEAPER to do this than to wait until the health has deteriorated to the point where they need to go to the emergency room. The ER should be used for real emergencies, and should be paid for by individuals who HAVE insurance. No more freeloaders!

October 16 2013 at 4:12 PM Report abuse +4 rate up rate down Reply
Uncle Sam

So very few people watching his are actually real entrepreneurs and I can tell you every statistic will tell you that that chances of success are less than one in five - how many automobile brands disappeared, how many computer brands disappeared, the man whio started GM actually ended up in a rented room in Florida. What we have here is the moderately intelligent desk jockey, the well salaried IT geek, the $100M a year police officer with details and the restaurant manager with a steady clientel. Take the risk, guys - for every lucky hard working self made millionaires there are five who actually came up with half the stuff you take for granted and may be on food stamps at this moment. I\'ve been there. May God have mercy on you when you have your share of bad luck.

October 16 2013 at 2:58 PM Report abuse -1 rate up rate down Reply
Ben Holliday

Not increasing the debt limit doesn't stop the goverment from metting the dept on loans.
We won't default because the dept limt in not increased or the goverment remains closed.
It's what the repulicracts and democans want the pulic to believe so they keep playing the
same cards and winning. I have not seen any news agency bring in anyone that will or can
set the facts straight.

October 16 2013 at 2:54 PM Report abuse -1 rate up rate down Reply

2010 saw a wave of Tea people come into Congress with nothing behind them but idealism and zealotry, and they never matured beyond that. And they pushed out a lot of experienced politicians who knew how the world worked and how to get things done. And these people have made up their own minds that they don't need to learn anything. So they'll keep banging on nails with screw drivers and blaming everyone else when it doesn't work.

October 16 2013 at 1:22 PM Report abuse +7 rate up rate down Reply

Be Mindful of what you do...Voters are not Dumb,they will see the Truth by the End of the Year...My Investors are very Happy about today's Outcome.

October 16 2013 at 11:49 AM Report abuse +2 rate up rate down Reply