WASHINGTON Oct 17 U.S. lawmakers launched an
effort to resolve budget differences in a less confrontational
fashion on Thursday as Washington picked up the pieces from a
political crisis that has slowed the economy and undermined the
country's international standing.
As hundreds of thousands of federal employees returned to
work, Republican and Democratic negotiators held their first
meeting to tackle tax and spending issues that have led to
repeated rounds of brinkmanship over the past three years.
But one day after Congress ended a 16-day government
shutdown and stepped back from the edge of an unprecedented debt
default, many feared that they have only set the stage for
another standoff in the months to come.
"I just hope we don't have to go through this again in two
months," said Sandria Coombs, a contractor at the Environmental
Protection Agency who was furloughed.
The last minute budget deal, signed into law by President
Barack Obama just after midnight, restores government funding
through Jan. 15 and extends its borrowing authority through Feb.
7, though the Treasury Department might be able to stave off a
default for several weeks past that point.
Speaking at the White House, Obama urged lawmakers to turn
to more productive work. He suggested an ambitious agenda
including an overhaul the country's immigration program by the
end of the year and resolution of long-term budget issues. He
also called for final work on a farm bill that had been
sidelined by the fiscal confrontation.
"Let's work together to make government work better instead
of treating it like an enemy," he said.
On Capitol Hill, budget negotiators pledged to bridge the
vast gulf between Republican and Democratic fiscal priorities.
The panel is supposed to reach agreement by Dec. 13, but there
are no guarantees it will succeed where similar efforts have
The standoff ended with a clear defeat for Republicans, who
had sought to tie government funding to measures that would
undercut Obama's signature Affordable Care Act.
That effort failed, and the standoff diverted public
attention away from the administration's sloppy rollout of the
health law's online insurance exchanges.
The fight split business-friendly Republicans from
grassroots Tea Party conservatives and left the party on the
wrong side of public opinion. Though Obama's approval rating
fell during the crisis, polls showed that most voters blamed
Republicans for the standoff.
A Pew Research Center poll found that 49 percent of
Americans now have a negative view of the Tea Party, a new low.
But Tea Party groups remained unbowed: several on Thursday
endorsed a conservative primary challenger to Mississippi
Republican Senator Thad Cochran, who is up for reelection next
Republican Representative Tom Cole from Oklahoma, who sits
on the budget panel, said it is time to move on. "We've had the
fight," he said on MSNBC. "Now it's time to get down and
identify the things we can agree on."
U.S. stocks gained on Thursday with the S&P 500 index
hitting a record intraday high. The index fell as much as 4
percent during the standoff but recovered as a deal emerged.
Hundreds of thousands of federal workers who had been idled
by the standoff returned to work. Vice President Joe Biden
brought muffins to returning workers at the Environmental
Protection Agency, while Agriculture Secretary Tom Vilsack
greeted workers returning to the agency's headquarters on the
Though federal workers will get back pay, the standoff is
likely to slow economic growth in the fourth quarter from 2.5
percent to 2.3 percent with a high risk that it could slow even
further, according a Reuters survey of 70 economists.
"The insanity in Washington is affecting consumer and
business confidence. That's the huge restraint to growth," said
Joel Naroff, chief economist at Naroff Economic Advisors in
The standoff has elevated borrowing costs, caused
private-sector furloughs and delayed mortgage applications and
construction permits. Mark Zandi, chief economist of Moody's
Analytics, estimates that it will cost the economy $20 billion.
The last debt-ceiling fight in 2011 depressed consumer
confidence for months and raised the United States' borrowing
costs by $19 billion over 10 years.
The United States' once-perfect credit rating has been
dented by the repeated confrontations. Standard and Poor's
downgraded U.S. debt following the 2011 crisis, while Fitch
warned on Tuesday that it may cut its assessment as well.
The third major rating agency, Moody's, said on Thursday it
would maintain its AAA rating.
One possible upside: the turbulence could prompt the Federal
Reserve to keep its massive monetary stimulus in place through
next year. One Fed official said the deadlock has undermined the
central bank's ability to fight high unemployment.
"Kicking the can down the road for a few months will not
solve the pathology of fiscal misfeasance that undermines our
economy and threatens our future," Dallas Fed President Richard
Fisher told the Economic Club of New York.
Economists say the spending cuts and tax hikes approved by
Congress over the past several years have elevated the
unemployment rate even as they have helped the country narrow
The deal approved Wednesday is likely to cause more
short-term pain by keeping the across-the-board "sequester" cuts
in place. Officials at the Pentagon and other federal agencies
that have been able to minimize the impact of the cuts so far
say they will slice deeper in the months to come.