WASHINGTON (Reuters) - U.S. Senate Democrats plan to introduce a bill this week to raise the government’s borrowing authority by enough to last through 2014 in an effort to avoid a fiscal default that could have a disastrous economic impact.
The measure, which must be discussed among Senate Democrats at a luncheon meeting on Tuesday, would not contain any of the deficit reductions that Republicans have demanded, a Senate Democratic aide said.
Both sides are searching for a way to resolve a fiscal standoff that has shut down the federal government for eight days, with a critical date for raising the country’s $16.7 trillion borrowing limit approaching in nine days.
House of Representatives Speaker John Boehner, a Republican, renewed his call for deficit-reduction talks with President Barack Obama, saying he was not “drawing any lines in the sand.”
“It’s time for us to sit down and have a conversation,” Boehner told reporters after meeting with Republican House members. “There are no boundaries here. There’s nothing on the table, there is nothing off the table.”
Republicans emerged from the House meeting saying they would insist that deficit-reduction talks with Obama as a condition for raising the federal debt limit.
A senior House aide said Republicans are considering legislation to create a new panel to find deficit reductions similar to a failed 2011 “supercommittee” of Republicans and Democrats from the House and Senate that was asked to find trillions of new budget savings.
House Democrats, speaking to reporters, said they would reject the creation of such a panel. They want the government to reopen and the debt limit raised before entering any deficit-reduction negotiations.
The chief economist at the International Monetary Fund said on Tuesday a default by the United States would likely lead to a recession, dramatic cuts in government spending, and a “a lot of financial turmoil.”
“I think what could be said is if there was a problem lifting the debt ceiling, it could well be that what is now a recovery would turn into a recession or even worse,” IMF chief economist Olivier Blanchard said.
The Senate Democratic aide said Democrats were hopeful they could get the 60 votes needed to overcome procedural hurdles in the 100-member Senate and pass a debt ceiling bill with no strings attached.
The measure would likely run into opposition from Senate Republicans such as Ted Cruz of Texas, who has been leading the drive to make delaying Obama’s healthcare law a condition for raising the debt ceiling.
Considering the procedural roadblocks it could face, aides said they need to begin work on the legislation well before October 17, when Treasury Secretary Jack Lew has said the government will run out of borrowing authority.
Obama and his fellow Democrats have stepped up their criticism of Boehner for refusing to schedule a House vote on a separate unencumbered 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.
Writing by John Whitesides; Editing by Vicki Allen