Shutdown: Day 16 and Default Looming

Posted on October 16, 2013October 16, 2013

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 15^th, lift the debt ceiling until February 7^th, and start a budget conference with instructions that it report a broader budget deal by December 13^th. 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.

Shutdown & Debt Limit: Two Chambers, Two Competing Proposals

Posted on October 15, 2013

While discussions are happening and proposals are beginning to take shape, there still is not a clear solution that will reopen the government or raise the debt ceiling before we hit the current limit on Thursday.

Senate leaders have been negotiating a deal for the past couple of days and appeared to be somewhat close to bringing it to the floor for a vote. Harry Reid described Tuesday as a “bright day”. That process and optimism was abruptly halted today when the House GOP announced that they were introducing their own plan to reopen the government and raise the debt ceiling. Not surprisingly, the House and Senate plans are rumored to differ in some key ways which offers challenges in finding common ground with both chambers and getting something passed in the next 36 hours.

The Senate bill is thought to contain a short term plan to reopen the government and extend the debt limit while forcing bipartisan talks for a longer term solution. The House legislation includes a similar plan, but also tacks on certain Obamacare related provisions. The Senate has put their talks on hold to see what the House does next – although democrats and the White House have already openly dismissed the GOP plan. House Republicans are expected to bring their bill to the floor sometime this evening, although the latest news is that they are having trouble finding the votes in the their own part to pass the bill.

Shutdown Day 14: Days Before Debt Limit Deadline and No Deal in Sight

Posted on October 14, 2013

Senate leaders Harry Reid (D-NV) and Mitch McConnell (R-KY) continued negotiations over the weekend – searching for a deal that would raise the debt limit and reopen the government, but emerged with no deal in sight yet. A bipartisan group of 12 Senators are also currently in-closed door meetings this morning trying to work out the parameters of an agreement.

Some details about a potential plan from the Senate have emerged:

Funding to run the government for 6 months
Extend debt limit until Jan. 31, 2014
Delay of the medical-device tax for 2 years
More leeway provided to federal agencies to implement sequester cuts
Mandate House-Senate budget talks

The sticking points right now seem to be the exact length of any extension of government funding or a debt ceiling increase, and FY14 spending levels. Democrats have indicated that they are willing to accept the $986 billion first-year sequester cap that was previously agreed upon, while Republicans are pushing for a cut in government spending a cap of $967 billion to be put in place in January.

While no concrete deal has been released, there seems to be a bit more optimism emerging from both parties. However, even if the Senate can agree on a bipartisan deal, it is unclear what the reaction would be by the House. Boehner would have a few options – pass a House deal that would need to go to the Senate for unlikely approval, pass the Senate bill which would be a clear defeat for the House GOP, or amend and pass a version of the Senate bill with addition terms.

Shutdown: Day 12 and Progress!

Posted on October 12, 2013

Congressional leaders continue to work toward reopening government and extend the debt limit before the October 27^th deadline. While details are vague, it appears that the proposal would immediately end the shutdown and fund federal agencies for six months at current spending levels. It would maintain the automatic cuts, or sequester, but give agency officials more flexibility to decide where the cuts should fall rather than just mandating across-the-board cuts (although some agencies may ultimately decide to implement some uniform reductions). In addition, the proposal would raise the debt limit through January 31, 2014.

It is unclear at this point whether the proposal will also include directions to House and Senate budget committees to immediately enter negotiations over broader budget issues and to issue a report by January 15, 2014. If an agreement could be reached, it would clear a path for another increase in the debt limit later that month, without additional drama.

In exchange, Republicans may seek minor adjustments to health care reform. The first would delay for two years a 2.3 percent tax on medical devices that is unpopular in both parties. The second would require internal auditors to ensure that people who get tax subsidies to buy health insurance are in fact eligible.

House GOP leaders are meeting this morning to discuss their options. Both chambers are scheduled to meet today and could possible begin moving a compromise proposal forward to end the current fiscal crisis.

Shutdown: Day Eleven Brings a Glimmer of Hope

Posted on October 11, 2013

Negotiations to end the government shutdown and raise the debt limit continued into the night Thursday after House Republicans and President Obama failed to reach an agreement on ending the fiscal standoff during a White House meeting earlier in the day. The GOP favors a temporary increase in the debt ceiling through November 22^nd but would require an agreement from Democrats to negotiate on a broader deal that could include tax and entitlement reforms. They could add in a provision to also reopen government but that is not clear yet. Meanwhile, a plan by Senator Susan Collins (R-ME) would do both and also repeal or delay the health care law’s medical device tax and give federal agencies flexibility to deal with the decade-long automatic spending cuts under sequestration during the next two years. In addition to that proposal, Senate Majority Leader Harry Reid (D-NV) will bring up a bill that would just raise the debt limit, possibly requiring vote on Saturday.