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28 March 2024

Hope for debt deal, despite disputes, veto threat

Detail of the National Debt Clock, a billboard-size digital display showing the increasing US debt, near an office of the Internal Revenue Service on Sixth Avenue July 26, 2011 in New York. The White House said Tuesday it remained confident that Congress would reach a deal on raising the nation's debt ceiling as the clock ticks down to an August 2 deadline. (AFP)

Published
By AP
Republican leaders in the US House of Representatives shrugged off a White House veto threat and an outbreak of tensions within their own party as they built support for legislation to stave off a looming default threatened for next week. Worried Wall Street sent stocks plunging on fears that political gridlock would prevail.

With some politicians talking of economic Armageddon, Americans were suddenly focusing on debt and deficit matters that most would have dismissed as arcane until recently. Some lawmakers' offices were inundated with phone calls and emails, many urging some kind of deal to avert the possibility of calamity.

Without legislation in place by Aug. 2, administration officials say the Treasury will not be able to pay all the nation's bills, possibly triggering a default that could prove catastrophic for an economy still recovering from the worst recession since the Depression.

US financial markets posted big losses for the day as the nation's political leaders maneuvered. The Dow Jones industrial average fell nearly 200 points and appeared headed for its worst week in nearly a year.

"Confidence in our political system is beginning to fade," said Channing Smith, managing director of Capital Advisors Inc. "As hours pass and the uncertainty builds, I think the market is starting to price in the potential that we might not have a solution by Aug. 2."

Weary Washington pushed ahead, and there was even some hopeful talk.

"We're getting there," said House Speaker John Boehner, ahead of Thursday's scheduled vote on his Republican bill to cut trillions in federal spending in exchange for increasing the debt limit before the government ability to borrow expires on Tuesday. The bill was hastily rewritten to show deeper spending cuts than 24 hours earlier.

The White House disparaged the bill Republicans were working so hard to pass, and Senate Majority Leader Harry Reid in the Democratic-controlled upper chamber was even more emphatic. "A big wet kiss for the right wing," he called it.

The White House has threatened a veto, saying the bill does not meet President Barack Obama's demand for an increase in the debt limit large enough to prevent a rerun of the current crisis next year, in the heat of the 2012 election campaign.

Instead, Obama supports an alternative drafted by Reid that also cuts spending yet provides enough additional borrowing authority to tide the government over through 2012. The Senate measure does not include an increase in tax revenue, which had been a key Obama requirement until now.

For all the bluster, there were hints that a compromise might be near.

"Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid told reporters. Washington, the rival Republican and Democratic pieces of legislation underwent revisions to increase their prospects of passage.

While they differed in key details, they also shared similarities that underscored the concessions made by the two sides in recent days. Reid's concedes that higher tax revenues has no chance of getting past the Republicans. But neither does the House measure require both houses to approve a constitutional balanced budget amendment for state ratification, a step in the direction of Obama and the Democrats.

Boehner was blunt in the meeting with rank-and-file Republican lawmakers on Wednesday. "Get your ass in line," he told them. "I can't do this job unless you're behind me."

If House conservatives torpedo the bill, any follow-up would probably require Democratic votes to pass. That, in turn, would mean smaller spending cuts than Republicans are seeking in exchange for raising the nation's $14.3 trillion (Dh52.52tr) debt limit.

As Thursday's vote approached, some Republicans seemed to be swinging behind the legislation, however reluctantly. Strong opposition remained from some lawmakers, though.

"I don't know where the votes are today," said Rep. Jim Jordan, a leader of the Republican Study Committee, an organization of conservative Republican lawmakers who often have disagreed with the leadership. "I just know that I am against the bill."

If House conservatives torpedo the bill, the Republicans would probably then require Democratic votes to pass any legislation. That, in turn, would mean smaller spending cuts than Republicans are seeking.

Republicans control 240 seats in the House, compared with 193 for the Democrats.