House of Representatives Speaker John Boehner said yesterday he would give US President Barack Obama a proposal temporarily extending the government's ability to borrow money and averting a potential default - but only if he agrees to negotiate over ending a partial government shutdown and a longer-term increase in the debt ceiling.
Though the Republican proposal could avert an unprecedented federal default that the Obama administration has warned could occur as early as Thursday, it would not necessarily bring a quick end to the separate partial federal shutdown. Obama has insisted that Congress reopen the government without condition.
A White House official said Obama would be willing to negotiate over the budget "once Republicans in Congress act to remove the threat of default and end this harmful government shutdown". Boehner said the measure to allow the US to borrow money would advance if Obama agreed to negotiate over reopening the government and to "start to deal with America's pressing problems". Republicans said the extension would last until November 22.
"It's time for leadership," Boehner said. "It's time for these negotiations and this conversation to begin."
Boehner also said he would appoint House negotiators to try to sort out differences between vastly different House- and Senate-passed budget blueprints.
Boehner and other Republicans who control the House were travelling to the White House later yesterday to discuss their budget battle with Obama.
Under Boehner's offer, the House would also appoint negotiators to bargain with the Democratic-led Senate over a budget compromise. Those talks have been on hold for months and the two chambers have deep differences over taxes and cuts in benefit programmes.
International Monetary Fund chief Christine Lagarde warned yesterday that US failure to raise its debt ceiling because of a political impasse would do serious damage to both the American and global economies. Some Republicans have downplayed the harm a default would cause.
The US government risks its first ever-default on Thursday if Congress does not approve a bill increasing the government's borrowing authority, required so Treasury can borrow more money to pay the government's bills in full and on time.
Separately, a shutdown of the federal government entered its tenth day, as Congress has failed to pass a bill to temporarily fund it. Both measures are normally routine, but have become entangled in Republican demands for delaying or altering Obama's health care overhaul and reducing government spending.
Obama has said he would sign a short-term debt limit extension, but not if it contained other language that he opposes, and wants Congress to send him a bill unconditionally ending the partial government shutdown as well.
Financial markets began rebounding yesterday on news of a possible breakthrough.
At Congress, Treasury Secretary Jacob Lew warned the Senate Finance Committee that failure to renew the government's ability to borrow money "could be deeply damaging" to financial markets and threaten Americans' jobs and savings. It would also leave the government unsure of when it could make payments ranging from food aid to reimbursements to doctors, he said.
"The United States should not be put in a position of making such perilous choices for our economy and our citizens," the secretary said. "There is no way of knowing the irrevocable damage such an approach would have."
Lew confronted Republicans who said the bigger problem was the soaring costs of benefit programmes like Social Security pensions and Medicare health entitlements and the long-term budget deficits the US faces. Many expressed doubt about Lew's description of the consequences of default.
The senior Republican on the panel, Senator Orrin Hatch, accused the Obama administration of "an apparent effort to whip up uncertainty in the markets."