Congress has stumbled closer to the precipice of US default as House Republicans withdrew their latest bill to raise the debt ceiling and reopen the government, and Fitch, the ratings agency, threatened to downgrade the nation’s creditworthiness.
Markets will open on Wednesday with no firm plan from Washington on raising the $16.7 trillion debt ceiling less than 24 hours before the Treasury Department’s deadline for a possible default.
House GOP leaders canceled a planned vote because of objections from rank-and-file conservatives just hours after Fitch criticized “political brinkmanship” in warning of a possible downgrade for the US credit rating.
The stunning developments in the House shift the focus back to the Senate, where leaders had been crafting a bipartisan plan to raise the debt ceiling until Feb. 7 and fund the government through Jan. 15.
Senate leaders suspended their talks on Tuesday to give Speaker John Boehner (R-Ohio) room to maneuver, but they could move forward with a deal on Wednesday.
After the House pulled its plans for a vote, a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said their talks would resume.
“Senator Reid and Senator McConnell have re-engaged in negotiations and are optimistic that an agreement is within reach,” Reid spokesman Adam Jentleson said in a statement.
House GOP leaders said they would determine their next move Wednesday.
“We are going to be prepared tomorrow to make some decisions,” House Rules Committee Chairman Pete Sessions (R-Texas) told reporters, adding that leadership would “take the night and make sure all of our members know what’s going on.”
Asked if it was a concern that Thursday’s deadline was approaching with no congressional action, Sessions replied, “Of course it is.”
A GOP aide, however, suggested House Republican efforts to move their own bill were now over.
“I don’t know that there’s any tweaking that can be done to this plan to make it more viable,” a GOP leadership aide said.
All of that suggests Tuesday amounted largely to a wasted day by Congress despite the imminent debt-ceiling deadline.
In its announcement, Fitch said it believed the debt ceiling could be raised but criticized Washington politics for undermining international confidence in the US system.
“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 rater said in a statement.
“The US risks being forced to incur widespread delays of payments to suppliers and employees, as well as Social Security payments to citizens – all of which would damage the perception of US sovereign creditworthiness and the economy.”
Investors on Tuesday showed tepid interest in a weekly offering of Treasury bonds amid growing concern about the reliability of US debt. Citigroup reportedly told analysts it was getting rid of any Treasury debt due to mature around the end of the month.
Outside experts believe the government could be in danger of a default anytime between Oct. 22 and Nov. 1.
The stock market has yet to show any dramatic swings, but markets closed before the House canceled its plans for a vote. The Dow Jones Industrial Average ended the day down 135 points.
A spokesman for Standard & Poor’s, which downgraded the nation in the aftermath of the 2011 debt limit fight, said that rater still expects a last-minute deal to emerge. And Moody’s Investors Service said earlier this month it sees no risk of a default even if the debt limit is not raised, saying the Treasury would ensure interest payments on debts were made above all others.
But the new downgrade threat put an acute face on growing concern over Congress’s ability to raise the borrowing cap before disaster strikes.
Boehner on Tuesday pitched a new plan to the GOP conference that would have raised the debt limit until Feb. 7 and funded the government through Dec. 15, as House leadership sought to avoid being jammed by an emerging Senate deal.
But the House’s conservative flank, prodded by groups like Heritage Action, thought it wasn’t strong enough after they spent weeks seeking to use government funding as leverage to roll back President Obama’s healthcare law.
Rep. Steve King (R-Iowa) Boehner would have a tough decision on whether to take up a Senate deal, saying that “generally, yes” he still supports Boehner’s leadership.
“And so that means then that if the Senate -put this in quotes – jams the House and sends a bill over that rolls in the CR and debt ceiling together, then the Speaker has to make a decision on whether he will take that up or refuse to take that up,” King said Wednesday morning on CNN.
King added that he is unlikely to support any agreement that comes out of the Senate before the country hits Thursday’s borrowing limit deadline.
The House’s pulling of the bill is just the latest example of leadership failing to muscle a major fiscal deal through the chamber.
But the bottom also fell out even quicker than usual for the chamber this time around, with leadership delaying votes just a couple of hours after they had revised the measure to try to bolster support among the rank and file.
In an effort to line up enough support, House leaders dropped a proposal to delay a medical device tax, which has opponents in both parties, and expanded a provision ending employer contributions lawmakers get for health insurance under ObamaCare to also apply to staff members.
GOP leaders also dropped a demand that the Health and Human Services Department employ stricter income verification for recipients of ObamaCare subsidies.
While Senate Republicans looked to back Boehner’s efforts to take the lead in talks, the White House and Senate Democrats quickly charged that the newest House GOP plan was a nonstarter that wasted critical time.
“We believe after Boehner finishes his antics we can very well continue to move along well,” Sen. Charles Schumer (N.Y.), the No. 3 Democrat in the chamber.
Democrats also fumed over the House’s proposal to bar the Treasury Department from deploying “extraordinary measures” to buy more time under its borrowing cap.
By moving money around, the Treasury can sometimes buy months of extra time under the borrowing cap, but some Republicans have complained that the measures allow the administration to be unclear on exactly how long Congress can debate a debt-limit boost before a damaging default.
The Treasury contends it is impossible to predict the exact day the government would default, but the House plan would ensure the department could not continue paying bills on time beyond Feb. 7.
Treasury has said it would only have $30 billion left on Oct. 17, and that it does not have the ability to prioritize payments. The Hill