U.S. Fiscal Crisis House Speaker Tells G.O.P He Won’t Allow U.S. to Default ‘Reckless’ Shutdown Must End, Obama Says, Faulting G.O.P.

House Speaker Tells G.O.P He Won’t Allow U.S. to Default

By ASHLEY PARKER and ANNIE LOWREY
A House Republican said Thursday that Speaker John A. Boehner told colleagues in a meeting that he was determined to prevent a federal default.

Boehner Tells Republicans He Won’t Let the Nation Default

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Published: October 3, 2013 

WASHINGTON — With a budget deal still elusive and a deadline approaching on raising the debt ceiling, Speaker John A. Boehner has told colleagues that he is determined to prevent a federal default and is willing to pass a measure through a combination of Republican and Democratic votes, according to one House Republican.
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Representative John A. Boehner, the House speaker, arrived at the Capitol on Thursday with his security personnel on the third day of the government shutdown.
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The lawmaker, who spoke on the condition of anonymity, said Mr. Boehner had indicated he would be willing to violate the so-called Hastert Rule if necessary to pass a debt-limit increase. The informal rule refers to a policy of not bringing to the floor any measure that does not have a majority of Republican votes.
A spokesman for Mr. Boehner pushed back on the idea that the speaker would try to pass a debt-limit increase mainly with Democratic votes, but acknowledged that the speaker understood the need to head off a default.
“The speaker always, always prefers to pass legislation with a strong Republican majority,” said Michael Steel, a spokesman for Mr. Boehner.
“The speaker has always been clear that a default would be disastrous for our economy,” Mr. Steel said. “He’s also been clear that a ‘clean’ debt hike cannot pass the House. That’s why the president and Senate Democrats should drop their ‘no negotiations’ stance, and work with us on a plan to raise the debt limit in a responsible way, with spending cuts and reforms to get our economy moving again and create jobs.”
It is conceivable that Mr. Boehner could pass a debt-limit increase with a slim majority of Republican votes, and Democrats making up the difference, as he has in the past on budget measures. In meetings with Republican lawmakers, the speaker appeared to be offering reassurances that he would not allow a default to take place.
Other Republicans also said Thursday that they got the sense that Mr. Boehner would do whatever was necessary to ensure that the country did not default on its debt.
Representative Michael G. Fitzpatrick, Republican of Pennsylvania, who was one of just 22 House Republicans this year who helped Mr. Boehner pass three crucial bills — to avert a fiscal showdown, to provide relief for the victims of Hurricane Sandy, and to pass the Violence Against Women Act — with a majority of Democratic support, said he expected that he may be asked to do so again.
“Hurricane Sandy, the fiscal cliff, all of the big votes require reasonable Republicans and Democrats to come together in order to pass it and get it to the president’s desk,” he said. “This will be no different.”
And, Mr. Fitzpatrick added, “I’ve been there in the past, and I’m prepared to be there again.”
Representative Leonard Lance of New Jersey, one of the moderate Republicans who met privately with Mr. Boehner on Wednesday, would not provide details of the meeting, but said, “The speaker of the House does not want to default on the debt on the United States, and I believe he believes in Congress as an institution, and I certainly believe he is working for the best interests of the American people.”
Passing a measure with a majority of Democratic votes could cause trouble for Mr. Boehner from his right flank. He has so far refused to bring to the floor a measure that could halt the federal government shutdown but would require significant support from Democrats.
But the consequences of a default would be much more severe.
A Treasury Department report released on Thursday said the debt-limit impasse could cause credit markets to freeze, the dollar to plummet and interest rates to rise precipitously. A default might prove catastrophic, the report said, and could potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”
The administration has made increasingly strong public warnings about the potential economic consequences of not increasing the debt limit.
“As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse,” Mr. Obama said on Thursday, speaking to construction workers at M. Luis Construction in Rockville, Md., a suburb north of Washington.
He said that a default would be “the height of irresponsibility,” adding that “there will be no negotiations over this.”
“The United States is the center of the world economy,” Mr. Obama said, “so if we screw up, everybody gets screwed up — the whole world will have problems.”
Many market participants interpret the White House’s public statements as an effort to get Wall Street to pay attention, even to provoke a market reaction that might spur Congress to act.
With the shutdown continuing and concerns about the debt ceiling growing, stocks slid on Thursday morning, with the Dow Jones industrial average down about 1 percent.
“As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” Treasury Secretary Jacob J. Lew said in a statement urging lawmakers to act. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need — a self-inflicted wound harming families and businesses.”
The Treasury report shows that the Congressional debt-limit standoff in 2011 hurt consumer confidence, small-business confidence, household wealth and the stock market, with ramifications for lending and the economic recovery.
“A precise estimate of the effects is impossible,” the report says, “and the current situation is different than that of late 2011, yet economic theory and empirical evidence is clear about the direction of the effect: a large, adverse, and persistent financial shock like the one that began in late 2011 would result in a slower economy with less hiring and a higher unemployment rate than would otherwise be the case.”
Reports from a variety of economists and investment banks have come to the same conclusion. The government’s running out of money would be unprecedented, and thus the fallout remains unknowable. But there is the potential for a market calamity that could have global ramifications.
“The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse,” Christine Lagarde, the managing director of the International Monetary Fund, said in a speech on Thursday morning. “It is mission-critical that this be resolved as soon as possible.”
Economic officials have privately indicated that they are worried Washington’s repeated flirtations with budgetary and financial crises have inured the markets to the real possibility of missed or delayed payments, or even default. By mid-October, the Treasury expects to have only $30 billion in cash on hand, meaning that on any given day it might have too little money to pay all the government’s bills.
The Dow Jones industrial average is about 1 percent higher than it was a month ago, and up about 15 percent this year. But the stock market has slid for the past two weeks. One-month Treasury yields have jumped to their highest level in nearly a year.
Right now, Democrats and Republicans remain at loggerheads over financing the federal government. Some Republicans have suggested that a broader bargain, including changes to entitlement programs, might be one path forward. But the White House has insisted that Republicans not include the debt ceiling in any negotiations.
Nearly 190 Democrats, including all members of the party’s House leadership team, have signed a letter circulated by Representative Peter Welch of Vermont supporting a “clean” debt-ceiling extension.
Republicans “view the health care bill as an existential threat to the country, and they are willing to use all tactics, including blowing up the economy, to get rid of Obamacare,” Mr. Welch said in an interview. “If shutdown and default become legitimate tactics, any Congress in the future could use those tactics to get their way.”
Wall Street “should be concerned,” President Obama told CNBC on Wednesday. “When you have a situation in which a faction is willing to potentially default on U.S. government obligations, then we’re in trouble.”
He added that it was “important” for Wall Street “to recognize that this is going to have a profound impact on our economy and their bottom lines, their employees and their shareholders.”

‘Reckless’ Shutdown Must End, Obama Says, Faulting G.O.P.

By JACKIE CALMES and ASHLEY PARKER
President Obama spoke to workers on Thursday at M. Luis Construction in Rockville, Md.
President Obama on Thursday said the only thing keeping the government at a halt was Speaker John A. Boehner’s refusal to allow a vote on a spending bill.
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    ‘Reckless’ Shutdown Must End, Obama Says, Faulting G.O.P.


    Stephen Crowley/The New York Times
    President Obama spoke to workers on Thursday at M. Luis Construction in Rockville, Md.
    By and
    Published: October 3, 2013

    WASHINGTON — An impassioned President Obama on Thursday kept up the pressure on House Republicans to end the three-day-old government shutdown, appearing at a small construction company outside the capital to challenge Speaker John A. Boehner to quit blocking a vote on federal spending.
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    Lawmakers Speak Out After Obama Meeting
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    “This isn’t happening because of some financial crisis. It’s happening because of a reckless Republican shutdown in Washington,” he said, to cheers and calls of “That’s right!” from the assembled construction workers at M. Luis Construction, a company formed by Portuguese immigrants in Rockville, Md., a suburb north of Washington.
    “Remember, it was just five years ago that our economy was in a free fall,” Mr. Obama said, speaking on the fifth anniversary of Congress’s vote to bail out the nearly collapsed financial system. Since then, he said, businesses have added more than 7.5 million jobs, an improving housing market has helped construction companies recover, and auto sales have continued to grow. “We can’t afford to threaten that progress right now.”
    Mr. Obama’s appearance came just after the Treasury Department released a report arguing that a default could provoke a recession “comparable to or worse” than the one deepened by the financial crisis of 2008, which was the worst since the Depression.
    Besides the well-publicized disruption of the shutdown for tourists, veterans, older people and children in Head Start, Mr. Obama added, “Companies like this one worry that their businesses are going to be disrupted.” The federal government provides $1 billion a month in loans to small businesses that now cannot be processed, he said.
    “The longer this goes on, the worse it will be,” he said. “And it makes no sense. The American people elected their representatives to make their lives easier, not harder.”
    He told his audience what even House Republicans have acknowledged: that if Mr. Boehner let the Republican-controlled House vote on a measure passed by the Democratic-controlled Senate to continue spending at current levels for two months, it would pass with support from most Democrats and some Republicans. But Republican leaders insist that Mr. Obama must agree to defund or delay his Affordable Care Act.
    “Speaker John Boehner won’t even let the bill get a yes-or-no vote because he doesn’t want to anger the extremists in his party,” the president said. If the speaker allows a vote, Mr. Obama added, within minutes “we can get back to the business of helping the American people.”
    On Wednesday night, after a private meeting among President Obama and four Congressional leaders ended without a break in the budget standoff, House Republicans on Thursday were expected to continue their attempts to pass piecemeal spending bills that would reopen sections of the government, one program at a time.
    But Democrats in the Senate have made it clear that they are unlikely to approve any House proposal unless it is a spending bill that would keep money flowing to the government with no strings attached. And since the Republicans have not abandoned their insistence that any budget measure include language defunding the president’s health care law, the government shutdown continues.
    The White House meeting on Wednesday — which included Mr. Boehner; Senator Mitch McConnell, the Senate’s top Republican; Representative Nancy Pelosi, the House minority leader; and Senator Harry Reid, the majority leader — was described by the Republicans as “polite” but ultimately unproductive.
    In an interview earlier on CNBC, Mr. Obama said he would not back down. “As soon as we get a clean piece of legislation that reopens the government — and there is a majority for that right now in the House of Representatives — until we get that done, until we make sure that Congress allows Treasury to pay for things that Congress itself already authorized, we are not going to engage in a series of negotiations.”
    Mr. Boehner, under pressure from Republican conservatives and outside Tea Party groups, has declined to bring such a continuing resolution to the House for a vote because it would pass mostly with Democratic votes — with some Republicans voting yes — and probably prompt a conservative backlash that could cost him his leadership office.
    But frustrations in Congress have grown stronger.
    Representatives Charlie Dent, Republican of Pennsylvania, and Ron Kind, Democrat of Wisconsin, have been quietly readying a clean spending bill to finance the government for six months that they hope will get bipartisan support. Their proposal includes the repeal of a tax on medical devices, which is unpopular with both parties but which helps pay for the health care law.
    Mr. Dent and Mr. Kind, according to an aide, have been talking with moderate House Republicans, hoping to bring them on board. If they are able to get enough Republican support, the aide said, they plan to announce with their bill in a news conference that could come as soon as Thursday.
    Some Republicans have urged Mr. Boehner to find a way to reopen the government, and lawmakers who have talked with the speaker said that he broached the idea of a comprehensive deficit-reduction deal that could put to rest three years of gridlock and turmoil in the Republican-led House.
    That has all been behind the scenes. In public, there has been no change. That includes Republican efforts to try to finance certain programs — many of them popular — and at the same time embarrass to Democrats who promise to defeat those attempts in the Senate.
    On Wednesday, House Republicans successfully passed measures to reopen the national parks, memorials and federal-funded museums; to finance the National Institutes of Health; and to allow the District of Columbia to use local revenue to finance basic services. Democrats signaled that they would reject the measures when they reached the Senate.
    The Republicans ran out of time for two other bills — one to restart veterans’ programs and another to pay the National Guard and Reserves — but expect to pass them on Thursday.
    House Republican aides said that barring any breakthrough, they plan to continue with that strategy and are likely to offer an additional batch of small funding bills on Thursday. One proposal under discussion was a measure to reopen the Head Start programs that serve preschoolers from low-income homes. 
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