* Obama shows some signs of flexibility
* Senator Portman floats proposal
* Still no sign of a breakthrough
* Stocks and dollar fall
By Richard Cowan and Mark Felsenthal
WASHINGTON, Oct 7 A few faint glimmers of hope
surfaced on Monday in the U.S. fiscal standoff, both in Congress
and at the White House, with President Barack Obama saying he
would accept a short-term increase in the nation's borrowing
authority to avoid a default.
Separately, a Senate aide said Republican Senator Rob
Portman, an Ohioan influential on budget issues, was floating a
plan to cut federal spending and reform the U.S. tax code as
part of a broader deal to reopen shuttered government agencies
and raise the government's debt ceiling.
While Portman's initiative may or may not gain traction,
most lawmakers believe that a budget deal like it will be
necessary to end the current stalemate.
But seven days into a government shutdown and only 10 days
from a critical need to raise the nation's debt limit, nothing
amounting to a breakthrough was in sight.
Democrats, and Obama, stepped up their criticism of House of
Representatives Speaker John Boehner for refusing to schedule a
vote on a no-strings-attached measure to fund the government and
end the shutdown. They believe it would pass with most Democrats
in the House voting for it along with a handful of Republicans.
Boehner said Sunday that it would fail.
"If Republicans and Speaker Boehner is saying there are not
enough votes, then they should prove it," said Obama.
Obama's press secretary, Jay Carney, told reporters the
president would be willing to accept a short-term debt ceiling
increase in order to get past the potential crisis date of Oct.
17 when the government hits the $16.7 trillion borrowing limit.
Carney said that while the White House would prefer raising
the ceiling enough to last a year, "we have never stated and
we're not saying today that the debt ceiling ought to be or can
be any particular length of time."
A short-term increase would give Republicans and Democrats
some breathing room, but by itself would not address the
substantive issues preventing an agreement.
The last big confrontation over the debt ceiling, in August
2011, ended with an 11th-hour agreement under pressure from
shaken markets and warnings of an economic catastrophe if there
was a default.
OBAMA OPEN TO TALKS, AFTERWARDS
Obama said he is open to negotiations over his healthcare
plan, a slight change of tone, but only after Congress approves
measures to end a week-long government shutdown and raise the
U.S. debt ceiling.
"As soon as that happens I am eager and ready to negotiate
with Republicans on a whole range of issues: how do we create
more jobs, how do we build the economy, how do we boost
manufacturing," said Obama, in a visit to the Federal Emergency
Management Agency on Monday to spotlight the loss of government
services because of the shutdown.
"I'm happy to talk about healthcare. I'm happy to talk about
energy policy, how do we deal with our long-term fiscal
situation," he said.
Obama has been particularly resistant to any tampering with
his healthcare law, which has experienced a series of problems
in the initial rollout. Any negotiations over it would be aimed
at tinkering with it to improve it, not gut funding for it as
Republicans want, White House aides have said.
Conservative Republicans in the House of Representatives
have resisted funding the government for the current fiscal year
until they extract concessions from Obama that would delay or
defund his signature healthcare law.
Many conservative Republicans, particularly in the House,
want a similar condition placed on raising the debt ceiling, as
well as measures aimed at cutting deficits.
More moderate Senate Republicans disapproved of using
Obamacare as a bargaining chip from the start, arguing that it
because it is non-negotiable for Democrats, it would inevitably
lead to a shutdown and sour voters on the Republican Party.
The latest polling is bolstering their concerns. In the
latest survey, by the Washington Post and ABC News, 70 percent
disapproved of the way Republicans in Congress are handling the
conflict versus 61 percent who disapproved of congressional
Obama came off the best, with 51 percent disapproving of his
handling of the crisis. The margin of error was plus or minus
3.5 percentage points.
A Senate Republican aide, who asked not to be identified,
said that Portman's proposals were in an early stage, but it
contained elements that could be acceptable to both sides.
Under the proposal, Obama would win a full year of
government funding, instead of a short-term spending bill
lasting several weeks that would have to be renegotiated in
November or December, the aide said.
Republicans would get the strict across-the-board spending
cuts that currently are in place, which many liberal Democrats,
and some more centrist Republicans, want to scrap.
In addition, the fiscal package would contain $600 billion
in savings over 10 years that already have been proposed by
President Barack Obama in his budget submissions to Congress.
The aide said the savings would come mainly from "mandatory"
programs. Those generally refer to Social Security, Medicare and
Medicaid, the benefit programs for retirees and for the elderly
and poor to receive healthcare.
The remaining piece of the puzzle would be instructions to
tax-writing committees in Congress to write legislation by next
year to reform the tax code in a way that would help further
grow the U.S. economy.
The aide said that Portman has floated the idea to other
Republican senators, including Senate Republican leader Mitch
McConnell, as well as some Democrats.
Obama has limited room to negotiate on Social Security and
Medicare thanks to his own Democrats, who have in the past
resisted cuts to those programs.
Boehner vowed on Sunday not to raise the U.S. debt ceiling
without a "serious conversation" about what is driving the debt,
while Democrats said it was irresponsible and reckless to raise
the possibility of a U.S. default.
Financial markets showed signs of growing anxiety on Monday
over the dispute. The dollar and global equity markets fell on
Monday with the Standard & Poor's 500 Index closing down
0.9 percent and the Nasdaq Composite Index dropping 1
The three main credit rating agencies have all warned that
the United States rating could be cut should it hit an expected
Oct. 17 deadline when Washington is set to run out of cash,
endangering its ability to pay its debt.
The Pentagon said over the weekend that it would recall
around 350,000 of its furloughed civilian workers. The rest of
the 800,000 or so federal employees idled by the shutdown faced
another week off the job.