Stalemate continues over US debt deal

Republicans promise to present new proposal after White House and Senate Democrats reject their earlier plan.

Credit ratings agency, Fitch, has warned it could cut the sovereign credit rating of the US from AAA [Reuters]
Credit ratings agency, Fitch, has warned it could cut the sovereign credit rating of the US from AAA [Reuters]

Republican lawmakers in the US House of Representatives will present a new fiscal compromise bill after the White House and Senate Democrats quickly rejected their earlier draft proposal as not workable, according to a Republican legislator.

The new proposal promises to extend the federal debt limit until February 7 with a “hard cut-off,” and provide government funding through December 15, Devin Nunes, a Republican from California, said on Tuesday.

Nunes told reporters that the latest House plan would not include previous efforts to delay a tax on medical devices, but would include new changes to the healthcare reforms for Congress and high-ranking Obama administration officials.

Earlier, the Senate halted discussions on its own plan, as it waited for the fractious Republican-controlled House of Representatives to come up with an alternative proposal ahead of the October 17 deadline, when the US Treasury says the government will reach its borrowing limit.

The President Barack Obama administration says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt limit by then.

Senate leaders had been close to a deal that would reopen the government and raise the debt limit until early 2014, while the initial alternative plan proposed by House Republican leaders failed to gain enough support in a closed-door meeting for the House to proceed.

“There are a lot of opinions about what direction to go. There have been no decisions about exactly what we will do,” House Speaker John Boehner told reporters after the meeting.

“We’re going to continue to work with our members on both sides of the aisle to try to make sure that there is no issue of default, and to get our government reopened,” he said.

Partisan attempt

Senate Democratic Leader Harry Reid said the Republican plan was “partisan attempt to appease a small group of Tea Party Republicans who forced the government to shut down in the first place”.

“I am very disappointed with John Boehner who once again tried to preserve his role at the expense of the country,” Reid said.

But Republican Senator John McCain of Arizona, who has blamed House Republicans for the shutdown, blasted the White House and Senate Democrats for promptly rejecting Boehner’s latest plan.

Conservative House members, driven by support from Tea Party small-government activists, have demanded changes to Obama’s signature healthcare law as part of any budget deal.

Those demands sparked the shutdown that began with the dawn of the new fiscal year on October 1, temporarily throwing hundreds of thousands of government employees out of work.

If Congress fails to reach a deal by Thursday, checks would likely go out on time for a short while for everyone from bondholders to workers who are owed unemployment benefits.

But analysts warn that a default on government obligations could quickly follow, potentially causing the US financial sector to freeze up and threatening the global economy.

Markets have got increasingly nervous about the prospects of a last-minute deal.

The Dow Jones Industrial Average was down 0.55 percent in late afternoon trade. The Standard & Poor’s 500 Index was trading down 0.4 percent.

Meanwhile, credit ratings agency, Fitch, warned on Tuesday it could cut the sovereign credit rating of the US from AAA citing the political brinkmanship over raising the federal debt ceiling.

Source : News Agencies

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