Obama, Congress search for way out as pressure rises in fiscal stalemate
WASHINGTON (Reuters) - With pressure rising and no clear path forward for breaking their fiscal impasse, President Barack Obama launched a series of White House meetings with lawmakers on Wednesday to search for a way to end a government shutdown and raise the debt limit.
House Democrats journeyed to the White House to discuss the fiscal stalemate, and Senate Democrats and Republican leaders in the House of Representatives will make separate treks on Thursday amid rising worries about the potential for economic havoc in the crisis.
The depth of the dispute was evident, however, in the failure of Obama and House Speaker John Boehner to even agree on a guest list for their Thursday session.
The White House invited all House Republicans, but Boehner limited the visitors to 18 party leaders and prominent committee chairs, lessening Obama's exposure to Republicans who might dissent from the leadership's hard-line strategy and to rank-and-file Tea Party members who inspired it.
White House spokesman Jay Carney said Obama was "disappointed" at the truncated guest list because "the president thought it was important to talk directly with the members who forced this economic crisis on the country."
The impasse has shut the government for nine days and rattled financial markets with the threat that the country's $16.7 trillion borrowing limit will not be raised before an October 17 deadline identified by Treasury Secretary Jack Lew.
There were no tangible signs of progress on Wednesday, although some members of both parties floated the possibility of a short-term increase in the debt limit to allow time for broader negotiations on the budget.
A House Republican leadership aide confirmed that a short-term debt limit increase was under discussion. House Republican leaders plan to make remarks to reporters on Thursday at around 11 a.m. EDT, but it was not clear whether they would unveil a plan then. It also was unclear whether any Republican short-term debt limit increase would contain new deficit-reduction or other policy proposals that Obama has warned against attaching to any such measure.
Republican Tea Party fiscal conservatives precipitated the crisis by demanding that Obama's healthcare reform law be delayed or curtailed in exchange for approving the funding of government operations and raising the debt ceiling.
But in a shift some Republicans hope will strengthen their hand in the fight, the party's House leaders have played down demands to weaken the healthcare law and focused instead on calls to rein in deficits.
House Majority Leader Eric Cantor and Paul Ryan, the House Budget Committee chairman and former vice presidential candidate, both published opinion pieces focused on tackling long-term debt and deficits instead of the healthcare law.
Republicans and Congress in general have taken a public beating in the showdown, with an Associated Press-Gfk survey on Wednesday showing Congress as a whole at a rock-bottom 5 percent approval rating. More than six of every 10 Americans blamed Republicans for the impasse.
The White House meeting with House Republicans will be the first face-to-face talks between Obama and his political adversaries since last week, although lawmakers have informally been exploring possible compromises and ways to resolve the stalemate.
Republican senators on Wednesday were considering a proposal by Senator Susan Collins of Maine that would reopen the government and increase the borrowing authority while repealing an unpopular medical device tax designed to finance subsidies under the healthcare law.
Collins' plan also would give federal agencies flexibility in dealing with across-the-board spending cuts that kicked in earlier this year and are opposed by many members of Congress.
After a meeting of Republican senators, John McCain of Arizona called her initiative "a pretty good proposal that some of us like," and a Senate Republican aide said there are discussions about possibly incorporating a short-term debt limit increase into the measure.
"We continue to talk. No progress, but there never is until you reach a breakthrough," McCain told reporters "I'm not saying that we will ever reach a breakthrough. I'm saying conversations are going on. I hope that they reach some conclusion. I'm not sure whether they will or not."
'THEY'RE NOT GETTING ANYTHING'
All 200 House Democrats were invited to the afternoon session at the White House, and Democratic leaders said most made the trek. They said Obama was resolute about not negotiating with Republicans until they drop their demands.
Democratic House Leader Nancy Pelosi said House Democrats had not seen a short-term proposal for funding the government and lifting the debt ceiling from Republicans and would not make any concessions to get one.
"The debt ceiling needs to be lifted. They're not getting anything for that. And we haven't seen an offer on that," she said.
Obama scolded Republicans on Tuesday for demanding negotiations, but said he would talk about anything including the healthcare law if Republicans re-opened the government and lifted the debt ceiling even for the short term.
Boehner rejected Obama's demands as "unconditional surrender," but other Republicans have showed a willingness to consider a short-term deal if there was a framework in place for negotiations.
Those hopes were fueled by the opinion columns on Wednesday, particularly Ryan's column urging a negotiated end to the stalemate but did not mention Republican demands for linking changes in the federal healthcare law with government funding.
"I am beginning, by the way, to be a little hopeful regarding our current situation. It looks like the House is beginning to focus on the right things," Republican Senator Bob Corker of Tennessee said on CNBC, pointing to Ryan's column.
But Boehner took to the House floor on Wednesday to reiterate Republican demands that the healthcare law be part of the broader discussions.
"Our message in the House has been pretty clear. We want to reopen our government and provide fairness to all Americans under the president's healthcare law," Boehner said.
World Bank President Jim Yong Kim added his voice to a chorus of experts warning about the impact of the stalemate, saying on Wednesday that even the threat of a U.S. default could hurt emerging markets and the world's most vulnerable people.
"We're very concerned. Because right now there's so many headwinds as it is for emerging markets and the developing world, that that kind of impact really could be devastating," Kim told CNN.
Global stocks could plunge and long-term interest rates rise, dealing a severe blow to the global economy, if U.S. politicians do not reach a deal to raise their debt ceiling by mid-month, Bank of Japan Deputy Governor Hiroshi Nakaso said.
The warning followed similar comments by the finance minister on Tuesday, signaling Tokyo's worries about the impact on its holdings of more than $1 trillion of U.S. Treasury bonds if the political deadlock is not resolved soon.
U.S. stocks climbed on Wednesday in anticipation of the nomination of Janet Yellen as central bank chairman, after the S&P 500 dropped 1.2 percent on Tuesday, its worst decline since August 27, and hit its lowest level since September 6.
Senate Majority Leader Harry Reid reminded senators of the hit Wall Street took during the last major fight over the debt limit and government spending.
"Two years ago, the last time Republicans flirted with this terrible idea, America's credit rating was downgraded for the first time in the history of this great country," Reid said. "The stock market dropped 2,000 points (last time). It's already dropped 7 or 8 percent over the last few weeks."
Plenty of roadblocks remain in the way of a deal. Senate Democrats have begun advancing legislation that would increase the debt limit through 2014 without any conditions.
A first procedural vote is on track for this week. A senior Senate Democratic aide said the intention is to send the House a one-year debt limit increase without any add-ons.
Defense Secretary Chuck Hagel said on Wednesday families of troops who die during the government shutdown will receive a death benefit payment, despite legal restrictions on the Pentagon, thanks to a deal reached with a private charity.
Hagel made the announcement in a statement after attending a ceremony honoring the return to the United States of the bodies of four soldiers killed by insurgents in Afghanistan on Sunday. The Pentagon was unable to pay the $100,000 "death gratuity" to those families during the shutdown.
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