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United States debt-ceiling crisis
The House of Representatives has passed an increase in the US government’s debt limit, after the Republicans gave up on their attempt to win concessions from the Democrats in return.
The House voted 221-201 to waive the $17.2 trillion debt limit for just over a year, with only 28 Republicans joining most of the Democrats.
Officials had said the US could breach the debt limit by the end of February.
The White House and others had warned of calamity if the US defaulted.
The bill, when signed into law by President Barack Obama, will enable the US government to borrow money to fund its budget obligations and debt service.
The US government will run a budget deficit of about $514 billion in its 2014 fiscal year.
The House of Representatives has passed an increase in the US government’s debt limit
The Republicans hold a majority in the House, and many had hoped to leverage their ability to block an increase in the government’s borrowing limit to win policy concessions from Barack Obama and the Democrats who control the Senate.
In the current and past debt limit fights, the Republican Party’s wish-list has included extensive budget cuts, measures that would repeal or undermine Barack Obama’s signature healthcare reform, a proposal to force the president to approve the Keystone XL oil pipeline from Canada, a repeal of recent cuts to pensions for working-age military retirees, and more.
“He will not engage in our long-term spending problem,” Republican House Speaker John Boehner told reporters earlier on Tuesday.
“So let his party gives him the debt ceiling increase that he wants.”
As in the last major Washington DC budget brawl, in September and October, Barack Obama and the Democrats said they would refuse to negotiate over the borrowing limit, arguing raising the limit amounted to the US government making good on spending it had already undertaken.
They demanded a “clean” bill that would raise the debt ceiling without enacting additional policy measures.
The Republican House leadership, often at odds with its restive caucus, floated a plan on Monday that would tie the debt limit increase to restoring a cut in pensions for working-age military retirees that was enacted as a money-saving measure in a recent budget.
But they found they lacked the Republican votes to pass that, as conservative members balked.
A separate vote is planned on that issue. The Senate has already passed a bill to restore the cuts.
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Treasury Secretary Jack Lew has warned the US may default on its debt by the end of the month if Congress does not raise its borrowing limit.
Jack Lew said he could rely on emergency measures to pay US debts after the limit is reinstated on February 7.
But he anticipated the treasury’s reserves would quickly be exhausted as it issues annual income tax refunds.
Congress suspended the debt limit in October as part of a deal to reopen the federal government after a shutdown.
The $16.7 trillion cap will be reinstated on Friday.
“Without borrowing authority, at some point very soon, it would not be possible to meet all of the obligations of the federal government,” Jack Lew said at the Bipartisan Policy Center in Washington on Monday.
Treasury Secretary Jack Lew has warned the US may default on its debt by the end of the month if Congress does not raise its borrowing limit
The treasury secretary said the US treasury department could resort to accounting mechanisms to avoid breaching the limit until the end of February.
But soon after, the US will only be able to pay its debt and other obligations with cash on hand.
And in the spring, Jack Lew noted, the US issues tax refunds to Americans who overpaid income taxes last year, straining its cash reserves.
While Republicans have in the past demanded budget cuts in return for agreeing an increase in the borrowing limit, the party’s leaders have signaled reluctance to do so this time around.
In any case, the White House has said it will not negotiate budget policy in exchange for raising the debt limit.
Jack Lew argued that dramatically cutting back on the federal government’s spending was unnecessary for the moment.
“I’m not sure this is the year for the long-term fiscal challenge to be dealt with,” he said, adding the US deficit had been declining.
“I actually believe that we’ve made so much progress in the short and medium term, we have a little time to deal with the longer term.”
During the partial government shutdown in October, Republican lawmakers threatened to block a rise in the debt limit unless the Democrats agreed to undermine or repeal President Barack Obama’s signature healthcare reform law.
President Barack Obama has signed into law a bill to re-open the government and extend the debt ceiling, just hours after the House and Senate passed the measure with broad bipartisan support.
Barack Obama said the measure would immediately restart federal programs that had been put on hold during the funding lapse.
The world reaction to the debt deal was one of relief Thursday, but there were signs the drawn-out process has undermined confidence in America’s global standing in both finance and politics. The International Monetary Fund (IMF) urged Washington to build a more stable management of U.S. finances, mindful that Wednesday night’s deal only suspends the debt limit until February 7, 2014.
Asian money markets rose after the deal, but key European markets fell in early trading, Reuters reported.
After weeks of stalemate that shuttered the government for 16 days, the standoff is finally over
The GOP-dominated House passed the measure 285-144, with 87 Republicans joining all Democrats in support. The Senate passed it 81-18. In both chambers, only Republicans voted against the measure.
Office of Management and Budget director Sylvia Mathews Burwell told federal employees to expect to return to work on Thursday morning.
Federal employees who were furloughed as a result of the shutdown will receive back pay “as soon as practicable,” according to the bill’s text.
The bill will fund the federal government through January 15 and extend the government’s borrowing power through February 7. It also calls for a congressional agreement by mid-December on a long-term budget plan.
After more than two weeks of standoff over the government shutdown, Republicans -faced with Thursday’s debt ceiling deadline – were forced to accept a deal with only minor concessions from Democrats.
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The US government is to reopen after Congress has passed a bill to raise the federal debt limit, with hours to spare before the nation risked default.
The Democratic-controlled Senate passed the measure by 81 votes to 18, and the Republican-controlled House of Representatives by 285 votes to 144.
Despite reluctant support from the House Republican leadership, most of the party’s lawmakers voted against it.
It came hours before the deadline to raise the $16.7 trillion limit.
The bill yanked the US back from the brink of a budgetary abyss by extending the treasury’s borrowing authority until February 7.
It also funds the government to January 15, reopening closed federal agencies after 16 days of partial government shutdown and bringing hundreds of thousands of employees back to work.
President Barack Obama signed the bill into law early on Thursday morning.
The US government is to reopen after Congress has passed a bill to raise the federal debt limit, with hours to spare before the nation risked default
The White House budget office said federal workers should return to work on Thursday.
The deal, however, offers only a temporary solution and does not resolve the budgetary issues that fiercely divide Republicans and Democrats.
President Barack Obama warned that US lawmakers must “earn back the trust of the American people”.
“We’ve got to get out of the habit of governing by crisis,” Democratic Barack Obama added, speaking after the Senate vote on Wednesday evening.
“My hope and expectation is everybody has learned there’s no reason why we can’t work on the issues at hand, why we can’t disagree between the parties without still being agreeable and make sure that we’re not inflicting harm on the American people when we do have disagreements.”
Also speaking after the first vote, Senate Democratic Majority leader Harry Reid said: “Let’s be honest, this is pain inflicted on a nation for no good reason and we cannot, cannot make the same mistake again.”
The US Treasury has been using what it called “extraordinary measures” to pay its bills since the nation reached its current debt limit in May.
It said those methods would be exhausted by October 17, leaving the US unable to meet all of its debt and other fiscal obligations.
Politicians, bankers and economists had warned of dire global economic consequences unless an agreement to raise the US government’s borrowing limit was reached.
Meanwhile, ratings firm Standard & Poor’s said on Wednesday that the partial US government shutdown, the first in 17 years, had already shaved $24 billion from the American economy and would cut growth significantly in the fourth quarter.
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Democrats have rejected a proposal from House of Representatives Republicans to extend the debt limit and reopen the federal government.
The White House criticized what it called an attempt to appease a small group of conservatives, but praised a parallel bipartisan Senate plan.
The White House balked at the House’s proposed amendments to President Barack Obama’s signature healthcare law.
The US must raise its $16.7 trillion debt limit by Thursday or risk default.
It remains unclear whether Congress can agree a deal in time to avert the economic calamity in the US and across the world that economists say could result.
The House of Representatives would vote on Tuesday night on its bill to reopen the government and avoid default, said Republicans.
Meanwhile, Fitch credit agency placed the US AAA rating under review for a downgrade.
The Senate plan, outlined on Monday evening, would fund the government through mid-January and raise the debt ceiling until February, creating room for negotiators to agree a longer-term budget.
Democrats have rejected a proposal from House of Representatives Republicans to extend the debt limit and reopen the federal government
The House plan largely mirrored the Senate timeline until Representative Devin Nunes said on Tuesday afternoon it had been amended to fund the government only until December 15.
The California Republican said the revised House plan also dropped earlier attempts to delay a medical device tax used to pay for healthcare subsidies under the Affordable Care Act.
The House plan would also eliminate healthcare subsidies for the president, vice-president, members of the president’s cabinet, and members of Congress and their staff.
The health law passed in 2010, was subsequently validated by the Supreme Court, and was a central issue in the 2012 presidential election, which Barack Obama won handily. Many key provisions have already taken effect, and more begin next year.
On Tuesday, Barack Obama rejected what an aide described as Republicans’ attempts to extort “ransom” while the government remained shut and the threat of a debt default loomed.
“Unfortunately, the latest proposal from House Republicans does just that in a partisan attempt to appease a small group of Tea Party Republicans who forced the government shutdown in the first place,” said White House spokeswoman Amy Brundage, referring to a faction of hardline conservatives who hold significant sway in the House.
Later, Republican House Speaker John Boehner said that both parties were trying to find a way forward and that Tuesday morning’s House plan was focused on “fairness for the American people under Obamacare”.
“There have been no decisions about exactly what we will do,” he told reporters on Tuesday.
“There are a lot of opinions about what direction to go.”
But following a meeting with John Boehner and GOP moderates on Tuesday Republican representative Charlie Dent told the media his “best estimate is that there aren’t the votes to pass it”.
House and Senate Democrats immediately joined Barack Obama in denouncing the House Republican proposal.
Senate Majority Leader Harry Reid said the plan was “an extreme piece of legislation and it’s nothing more than a blatant attack on bipartisanship”. He said it would never pass the Democratic-controlled Senate.
President Barack Obama is scheduled to meet House Democrats on Tuesday afternoon as the clock ticks to Thursday’s debt ceiling deadline.
Even if a deal is reached in the Senate, it is unclear whether Congress could act in time to pass legislation that would avert the October 17 default deadline.
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The White House has potsponed a meeting with Democrats and Republicans congressional leaders as lawmakers continue talks on raising the nation’s debt limit.
The talks were to take place between President Barack Obama, Vice-President Joe Biden and leaders of the Senate and House of Representatives.
The US government shutdown, also a result of the political deadlock, has now entered its third week.
Officials warn of economic calamity should the US default on its debt.
In a statement, the White House said Monday afternoon’s meeting had been postponed to “allow leaders in the Senate time to continue making important progress towards a solution that raises the debt limit and reopens the government”.
It is unclear when it will be rescheduled.
The White House has potsponed a meeting with Democrats and Republicans congressional leaders as lawmakers continue talks on raising the nation’s debt limit
President Barack Obama sounded his own warning as he toured a soup kitchen for the poor in Washington D.C. earlier on Monday.
“This week if we don’t start making some real progress, both the House and the Senate – and if Republicans aren’t willing to set aside their partisan concerns in order to do what’s right for the country – we stand a good chance of defaulting,” he said.
“And defaulting would have a potentially devastating effect on our economy.”
Barack Obama said he saw “some progress” in the talks, ahead of Thursday’s deadline for the US to raise its $16.7 trillion borrowing limit or risk default on its debt.
Expected to attend the White House meeting were Senate Democratic Majority Leader Harry Reid, Senate Republican Leader Mitch McConnell, Republican House Speaker John Boehner and House Democratic Minority Leader Nancy Pelosi.
On Monday, Harry Reid told the Senate he was “very optimistic we will reach an agreement”. Mr McConnell also expressed optimism, following what he described as “a couple of very useful discussions” with the Democratic leader.
Republican Senator Susan Collins acknowledged the Senate did not have a finished agreement, but said senators were “making very good progress”.
A separate bipartisan group led by Susan Collins also met for several hours earlier in the day to discuss possible solutions, the Associated Press news agency reported.
Congressional Democrats are now said to be using the looming debt ceiling deadline as leverage to push back against previously enacted cuts to the US government budget.
Those deep military and domestic spending cuts, known as the “sequester”, went into effect in January 2013 after Democrats and Republicans failed to reach a budget compromise.
World Bank’s President Jim Yong Kim has warned that the US is just “days away from a very dangerous moment” because of the government’s borrowing crisis.
Jim Yong Kim urged US policymakers to reach a deal to raise the government’s debt ceiling before Thursday’s deadline.
The US Treasury will start to run short of funds if no agreement is reached for it to borrow on financial markets.
Jim Yong Kim urged US policymakers to reach a deal to raise the government’s debt ceiling before Thursday’s deadline
Jim Yong Kim warned this could be a “disastrous event” for the world.
“The closer we get to the deadline the greater the impact will be for the developing world.
“Inaction could result in interest rates rising, confidence falling and growth slowing,” he said speaking at the World Bank’s annual meeting in Washington.
“If this comes to pass it could be a disastrous event for the developing world and that will in turn greatly hurt the developed economies as well,” Jim Yong Kim added.
The US shutdown negotiations have been shifted to the Senate.
The Democratic and Republican leaders in the Senate held direct talks for the first time in weeks, but there is little sign of any breakthrough, correspondents say.
The shutdown began when Congress missed the October 1st deadline to pass a budget.
The US faces another deadline on Thursday to raise its debt limit.
If a deal is not reached by then, the US faces potential default, a prospect which has caused alarm both domestically and abroad.
Senator Dick Durbin, a Democrat, said the aim was to reach a deal on extending the debt limit before markets reopen on Monday.
The talks between Senate Majority Leader Harry Reid and Senate Republican leader Mitch McConnell earlier on Saturday represented the first face-to-face meeting between the two since July, the New York Times reported.
“The conversations were extremely cordial but very preliminary of course – nothing conclusive, but I hope that our talking is some solace to the American people and to the world,” said Harry Reid.
The US shutdown negotiations have been shifted to the Senate
“We had a good meeting,” said Mitch McConnell, without elaborating.
Harry Reid then went to the White House for talks with President Barack Obama.
But he rejected a plan put forward by Republican Senator Susan Collins to allow the government to increase its debt limit until January 31st, 2014.
Democrats have a majority in the Senate, but could not muster enough support to advance a proposal to lift the debt ceiling there.
Talks between House Republicans and the White House had collapsed earlier.
Republicans have refused to pass a new budget unless President Barack Obama agrees to delay or eliminate the funding of the healthcare reform law of 2010.
Hundreds of thousands of federal employees have been sent home as a result of the shutdown.
The White House has repeatedly said it would not undermine the law, known as Obamacare, nor negotiate over larger budget matters, until Republicans vote to end the threat of default.
It has also rejected a short-term deal over the debt limit.
“It wouldn’t be wise, as some suggest, to just kick the debt ceiling can down the road for a couple of months, and flirt with a first-ever intentional default right in the middle of the holiday shopping season,” President Barack Obama said.
President Barack Obama has announced he is willing to sign a “clean” short-term increase to the US borrowing limit that is free from Republican budget and policy demands.
Barack Obama’s announcement came as the US is in the 11th day of a partial government shutdown.
However, the Statue of Liberty, the Grand Canyon and Mount Rushmore, closed by the shutdown, will now re-open.
Barack Obama has announced he is willing to sign a “clean” short-term increase to the US borrowing limit that is free from Republican budget and policy demands
The funding will be provided by the states of New York, Arizona and South Dakota, however, with other national parks and monuments remaining closed due to the deadlock in Washington.
As the well as the shutdown, the US is heading towards default if it does not raise its debt limit by October 17.
The partial government shutdown, which has sent home hundreds of thousands of government workers on unpaid leave, began on 1 October after Republicans refused to pass a new budget unless Barack Obama and the Democrats agreed to delay Obama’s signature healthcare reform law of 2010 or eliminate its funding.
The White House has repeatedly said it would not undermine the law, known as Obamacare, nor negotiate over larger budget matters, until Republicans vote to end the threat of default and reopen the government.
Asian markets have risen on hopes the US will reach a deal on raising its debt ceiling, tracking overnight gains on Wall Street.
This was after Republicans from House of Representatives offered President Barack Obama a short-term increase in the debt limit to stave off default.
Stock indexes in Japan, Australia, China and Hong Kong all gained.
There have been concerns that a failure to agree a deal to raise the limit may see the US default on its payments and hurt the global economy.
Analysts said the offer by the Republicans had raised hopes that such a scenario was likely to be avoided.
Asian markets have risen on hopes the US will reach a deal on raising its debt ceiling, tracking overnight gains on Wall Street
“What this is, is opening the door to discussion and negotiation when before we had two sides just finger pointing,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC.
“We don’t know if in six weeks we’ll be in the same place, but at least this opens the possibility [of a deal]”, he said.
Japan’s Nikkei 225 index rose 1.5%, Hong Kong’s Hang Seng gained 1.3%, Australia’s ASX 200 added 1.6% and South Korea’s Kospi was up 1.2%.
On Thursday, the US markets had their best day since January 2013, buoyed by the proposal. The Dow Jones, S&P 500, and Nasdaq indexes all closed up by more than 2%.
The US needs to agree on raising the nation’s $16.69 trillion debt ceiling by October 17.
A failure to do so could see the US government default, as it runs out of money to pay its bills and service its national debt.
President Barack Obama has announced he is willing to hold budget talks with Republicans, but not until they agree to lift “threats” against the economy.
Republicans “don’t get to demand ransom in exchange for doing their jobs”, Barack Obama said, by demanding concessions in policy before reopening government.
The US government shut down last week when Congress failed to agree a budget.
Republican leaders on Tuesday renewed their calls for Barack Obama to open negotiations over ending the impasses.
Republican House Speaker John Boehner told reporters he was “disappointed that the president refuses to negotiate”.
He said the president’s position not to talk with Republicans “until [they] surrender” was not sustainable, and any discussions regarding the debt ceiling must address how the nation is “living beyond its means”.
At the White House, Barack Obama said he had spoken to John Boehner and was “happy to talk with him and other Republicans about anything”.
But Barack Obama said any negotiations on the ongoing government shutdown or the debt limit “shouldn’t require hanging the threats of a shutdown or economic chaos over the heads of the American people”.
Barack Obama has announced he is willing to hold budget talks with Republicans, but not until they agree to lift “threats” against the economy
“We can’t make extortion routine as part of our democracy,” Barack Obama said.
“Democracy doesn’t function this way. And this is not just for me. It’s also for my successors in office, whatever party they’re from.”
He also warned of the repercussions of defaulting on the government’s debt should Congress fail to raise the borrowing limit, currently set to be reached on October 17.
Barack Obama said breaching the borrowing limit could disrupt capital markets, undermine international confidence in America, permanently increase the nation’s borrowing costs, add to its deficits and debt, and pose the “significant risk of a very deep recession”.
The US government partially shut down operations on October 1st after Republicans who control the House of Representatives refused to approve a budget, saying they would only do so if Barack Obama’s healthcare reform law were delayed or stripped of funding.
Barack Obama and the Democrats have thus far refused, noting the law was passed in 2010, subsequently approved by the Supreme Court, and was a central issue in the 2012 election which Obama won.
At the same time, the Republicans have refused to approve an increase in the US debt limit unless it is accompanied by significant spending cuts and other policy concessions.
Barack Obama maintains John Boehner could end the current government showdown by allowing the House to vote on a “clean” budget bill that does not alter the health law, because that could pass with votes from both Democrats and moderate Republicans.
But doing so would risk damaging his standing with the most conservative elements of his caucus, analysts say.
US and foreign officials and economists have warned of severe economic consequences if the US defaults on its debt because the government is unable to borrow money to fund its obligations.