US debt ceiling: Senate takes over as House plans fail


Frantic US political attempts to avert a federal debt default have pivoted back to the Senate after plans in the House of Representatives collapsed.

Upper chamber leaders were said to be working through the night on a deal to raise the US borrowing limit and end a partial government shutdown.

Amid the congressional disarray, a top ratings agency warned of a possible downgrade in US creditworthiness.

The US must raise its $16.7tn (£10.5tn) debt limit by Thursday or risk default.

Politicians, bankers and economists have warned of global economic consequences unless an agreement can be reached.

The Democratic-controlled Senate took control on Tuesday night, working on a bipartisan deal that aides said would extend the federal borrowing authority until 7 February and fund the government through to mid-January.

‘Deadbeat nation’

Senate Democratic leader Harry Reid and his Republican counterpart, Mitch McConnell, were expected to brief their colleagues on Wednesday.

But even if a Senate compromise can overcome procedural hurdles in that chamber, it remains unclear if it would attract enough votes from Democrats and pragmatic Republicans in the House to pass before the 17 October deadline.

Democratic Senator Barbara Mikulski warned her colleagues in the chamber that the US was “hours away from becoming a deadbeat nation, not paying its bills to its own people and other creditors”.

The Senate’s negotiations had been put on hold to give House Republicans a chance to come up with a deal on Tuesday.

But the lower chamber’s efforts ended in chaos after two proposals floated in the space of a few hours were torpedoed from right and left, forcing the leadership to shelve plans for a vote.

Embattled House Speaker John Boehner failed to rally fractious rank-and-file Republicans behind either plan.

Amid the legislative turmoil, the Fitch credit agency warned it could downgrade the US government’s AAA rating, while the New York Stock Exchange ended the day down 133 points.

On Tuesday afternoon, President Barack Obama told a local ABC broadcaster he expected the debt ceiling impasse to be resolved eventually.

But he added: “I think the House Republicans still believe they can get concessions for doing their job.”

Hardcore conservatives in the lower chamber triggered the budget warfare 16 days ago, forcing the first government shutdown in 17 years by demanding that Mr Obama gut his signature healthcare overhaul.

By Tuesday afternoon, the House leadership was left touting a relatively meagre proposal to deny discounts for lawmakers and their staff members on health insurance policies.

In the Senate plan currently under negotiation, according to aides, Republicans may only emerge with a sop in the form of language tightening income verification for anyone seeking subsidies on medical coverage.

Although both parties have fared badly in opinion polls during the fiscal standoff, Republicans have taken the brunt of the blame from voters.

‘That’s it?’

And with fears that any fallout could damage the party’s prospects in next year’s midterm elections, the political recriminations have already begun.

Moderate Republican congressman Peter King told the Huffington Post: “After shutting down the government for two and a half weeks, laying off 800,000 people, all the damage we caused, all we would end up doing was taking away health insurance from congressional employees. That’s it? That’s what you go to war for?”

Senator John McCain, who was the Republican 2008 presidential nominee, was quoted by the New York Times as saying: “Republicans have to understand we have lost this battle, as I predicted weeks ago, that we would not be able to win because we were demanding something that was not achievable.”

The White House has refused to negotiate over its healthcare law, pointing out that it passed in 2010, was subsequently validated by the Supreme Court, and was a central issue in the 2012 presidential election, which Mr Obama won handily.



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