Washington: Washington’s risky game of political brinkmanship neared crisis point Tuesday, with no deal yet nailed down to avoid a catastrophic US debt default, just 36 hours before a crucial deadline.
Despite global fears that the US government could run out of money to pay its bills on Thursday, the rift cleaving US politics and a fight for the soul of the Republican Party thwarted compromise.
Hopes a nascent deal between Republicans and Democrats in the Senate would open the way to resolve a fight over raising the US borrowing limit and reopening government proved over optimistic.
House Republican leaders, seeking to appease the conservative Tea Party faction, decided to try to pass their own bill, seeking to impose constraints on President Barack Obama’s health care law.
The White House immediately struck back, rejecting the gambit as tantamount to demanding a “ransom” and renewed Obama’s demand that the $16.7 trillion debt cap be raised without conditions.
The maneuvering left the way out of the deepest political crisis of the Obama era murky at best.
If no deal is reached by midnight on Wednesday, the US Treasury will find itself unable to borrow more money, and since its obligations will outweigh tax revenue, could begin to default on its obligations.
This would send economic shockwaves around the world.
Major powers like China and Japan are already alarmed at the implications if US Treasuries — seen as the safest bedrock investment in the world — lose their luster.
The House Republican plan is similar to a Senate escape bill in that it would fund government through January 15 while extending the debt ceiling to February 7, according to Congressman Darrell Issa.
But the House will include provisions to delay medical device tax that helps fund Obamacare and would remove health care subsidies for congressional aides and politicians.
“We’re talking to our members on both sides of the aisle to try to find a way to move forward today,” Republican House Speaker John Boehner said.
But the White House rejected the House move, signaling that if it comes to a vote minority Democrats would vote against, leaving Boehner with the long-shot task of uniting almost his entire caucus — including the restive Tea Party — behind the plan.
Democrats are likely banking on a plan with fewer conditions being passed by the Senate ahead of the debt default deadline before climbing on board a compromise.
“The President has said repeatedly that Members of Congress don’t get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation’s bills,” said Amy Brundage, a White House spokeswoman.
“Unfortunately, the latest proposal from House Republicans does just that in a partisan attempt to appease a small group of Tea Party Republicans who forced the government shutdown in the first place.”
Senate Democratic Majority leader Harry Reid vented fury at the latest House maneuver, saying they undermined the Senate compromise bid.
“Let’s be clear: the House legislation will not pass the Senate,” Reid said.
And, in an unusually public attack on Boehner, he accused the House speaker of appeasing a small fringe of radical conservatives at the expense of America’s interests, and all just to keep his job.
“I am very disappointed with John Boehner who would once again try to preserve his role at the expense of the country,” he said.
Senate Republicans were to convene to review a compromise plan being hammered out between Senate Democratic Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell.
Investors endured a roller coaster day on the markets due to the fast moving political developments.
The Dow Jones Industrial Average was down nearly 100 points at one point, but recouped its losses by mid-morning trade, only to head on a downward track again.
China and Japan — which between them hold more than $2.4 trillion of US debt — have urged Washington to get its house in order.
Japan’s Finance Minister Taro Aso said many US politicians “don’t seem to understand well the magnitude of the international impact this problem could have”.
“We demand,” said China’s Vice Finance Minister Zhu Guangyao in Beijing, “that the US side, as the issuing country of the major reserve currency and the largest economy in the world . . . should undertake its due responsibility. That is to uphold and develop the stability of international financial markets.”
China and Japan between them hold more than $2.4 trillion in US debt.
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