October 16, 2013

Shutdown: Day 16 and Default Looming

By Christy Gullion

Negotiations broke down (again) yesterday as the House GOP leadership failed to find enough support among their caucus to move forward two separate proposals to end the shutdown and raise the nation’s debt limit. All eyes are on the Senate as they resume negotiations. The tentative deal under discussion in the Senate would reopen the government by extending current funding levels of $986 billion through January 15th, lift the debt ceiling until February 7th, and start a budget conference with instructions that it report a broader budget deal by December 13th. The December date is significant because it would give Congress time between now and then to negotiate a broader budget agreement to potentially modify or end sequestration before the next round of cuts are scheduled to hit in January.

The deal being discussed is expected to contain a single change in the 2010 health care law: stricter efforts to verify the income of individuals who apply for subsidies under the Affordable Care Act. The proposal would also allow the Treasury Department to use extraordinary measures when approaching a future debt limit. And finally there is support in both parties for a provision that would give agencies more flexibility to implement future sequestration cuts rather than just applying those cuts across-the-board.

Meanwhile, financial markets and credit ratings agencies are monitoring the action on Capitol Hill for any signs of a standoff that could lead to default. There is great uncertainty over when exactly the Treasury Department would run out of money if there is a default. Treasury Secretary Jacob Lew has said the government would only have $30 billion in cash on hand beyond Thursday to meet obligations.

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